Startup Street: After A Milestone Year, India’s Venture Capitalists Ready With Record Cash Pile For 2020
This week on Startup Street, a report by Bain & Company shows how cash reserves of venture capitalists are at an all-time high in a positive sign for fund deployment in 2020. Oyo Hotels is laying off staff in the U.S., China and India as the unicorn tries to find its way to profitability in turbulent times. And a Bengaluru-based education startup has offered free online classes to schools and colleges as some of them shut down amid the coronavirus outbreak.
For India's venture capital industry, 2019 was a milestone year with $10 billion deployed into startups, a 55 percent jump from 2018, according to Bain & Company, highlighting how the industry grew amid global economic uncertainty.
But despite the capital deployment, investors still have a record cash reserve, the report showed, the Bain & Company India Venture Capital Report 2020 said.
“Dry powder availability for VC investing in India was at an all-time high of $7 billion at the end of 2019, indicating likely continued investment activity in 2020,” it said. Moreover, of the nearly 80,000 startups, only 8 percent are appropriately funded, indicating the need for more investments.
The question, however, is where these funds will be deployed, given the current economic environment.
India’s GDP growth slowed to 4.7 percent in the quarter ended December amid a liquidity crisis, slower credit offtake and geopolitical uncertainties. To add to that, the coronavirus outbreak has emerged as a new threat to the global economy and Indian manufacturing. As of this morning, total cases across the world stand at 105,000 and total deaths exceeded 3,500. India so far has registered 39 positive cases with no fatalities.
The report, however, does not see this affecting investments in India. “Despite the global economic climate, India’s startup and VC ecosystems continue to thrive as investors take a long-term view based on the country’s growth potential,” the report said. The subcontinent’s slowdown is cyclical rather than structural, it said.
“We go into 2020 with record-high levels of dry powder, counter-balanced with caution and an underlying optimism in the long-term potential for the ecosystem.”
According to the report, deal volumes rose 30 percent in 2019 while average deal size rose by 20 percent. About 80 percent of all investments were focused on four sectors—consumer tech, software/Saas, fintech and B2B commerce and tech.
However, deals earmarked only for India-centric startups fell from $2.7 billion in 2018 to $2.1 billion in 2019.
Oyo To Cut About 5,000 Jobs Globally
OYO Hotels & Homes is cutting its global workforce by about 5,000 to 25,000 people with the worst layoffs in China, as the coronavirus outbreak eats into all businesses. The world’s largest hospitality startup will also reduce its staff in the U.S. and India as it continues to seek profitability.
Oyo expanded rapidly after its founding in 2013 and reached a valuation of $10 billion, but investors have soured on money-losing businesses after WeWork’s meltdown and SoftBank has pushed portfolio companies to prioritise profitability.
“In our previous phase, we added a lot of properties to our platform and built the brand and mindshare,” said Founder and Chief Executive Officer Ritesh Agarwal in an interview. “Our first focus of 2020 is growth with profitability.”
“By the time our restructuring process is complete, Oyo will have over 25,000 employees worldwide,” he said.
Startup Offers Online Lessons To Students Amid Virus Shutdowns
Bangalore-based Impartus has offered to provide live virtual classes to schools and colleges as many of them shut amid a coronavirus outbreak across the world.
The initiative is to ensure that no student is deprived of a live and interactive access to teachers and teaching, the company said in a statement.
A number of schools and colleges, especially in New Delhi and Gurugram, have closed to limit the outbreak in India. That came after the government called for maintaining social distances to contain the spread of virus in India.
“With exams around the corner, Impartus wishes to ensure that the education of each and every Indian student is continuing and unaffected in these challenging times,” Amit Mahensaria, co-founder and chief executive officer at Impartus, said.
The teachers will be able to conduct unlimited live and interactive online classes for up to 500 students in each session on the startup's virtual classroom platform, the statement said. Students can also watch the on-demand recordings of these classes on Impartus platform, the statement said.