We, as people, should not shy away from seeking a silver lining in financial and macro-economic terms, be it the 2008 global financial crisis or the latest COVID-19 pandemic. Angel and seed investments saw a rise of 34 per cent during the 2008 recession, with a comparable increase in the sum of the offer, showing that investors are still open to opportunities. They are always on the lookout for creative minds, especially in times of great fear. In the beginning, the atmosphere around the COVID-19 pandemic was one of confusion, speculation, particularly with the entrepreneurs, was rife during the lockdown time. The response varied with some resorting to downsizing, laying off over a thousand workers, to some trend towards survival pivoting towards frugality, such as Ola, Zomato and Oyo.
Generally, an economic downturn is not inherently a micro-level deterioration of an economy. It can also be interpreted as a sky reset as the boundary of possibilities, serving as a booster for several secret thoughts as they brainstorm ways to solve the crisis. Each organisation focuses on engaging with the masses, whether it is education, food, entertainment or health. Several start-ups have started to harness the power of ‘online’ to reach the masses and provide them with services and goods that individuals will need when locked inside their homes and working remotely. When entrepreneurs take advantage of the slowdown, it’s time for investors to help the projects of these adventurous entrepreneurs.
There is ample evidence in history that some of the most innovative entrepreneurial innovations have arisen (Read Airbnb and Uber) from the most crippling economic downturns. During the lockdown, industries such as e-commerce, edtech, health tech, gaming, grocery and OTT are already witnessing a meteoric increase in the number of customers, making the Indian economy more resilient. During the lockdown, a number of start-ups in these sectors have earned funding, as investors see them as a major opportunity and believe in their innovations and technologies. In their Series A and B rounds, Milkbasket, a leading grocery start-up recently backed by Inflection Point Ventures (IPV), had almost the same panel of investors. Likewise, during the lockdown, BigBasket raised a bridge funding round from its previous investor at the same valuation as it did last year. This illustrates how investors are willing to invest, and in these markets, they see an opportunity. Once in a lifetime, this pandemic may be an opportunity for them, not just for VC funds with dry powder available, but also for angel investors who have the foresight to bet on a great company and founding team.
Although the pandemic provides investors with a considerable opportunity, it is critical that they be equally optimistic about their investments. By expressing the positive side of this pandemic, investment firms need to maintain this confidence. Through comprehensive investor education and deeply connected networks, investor confidence needs to be established. In the last five years, start-up investment has emerged as a lucrative asset class with real estate and capital markets not performing well. It is important to educate this new group of investors wisely, to make them understand that this is the right time for them to invest.