Coronavirus: Indian start-ups switch to masks, booze delivery to stay afloat as Chinese cash dries up

Venture capital and private equity investment in India are expected to fall by about 45-60 per cent this year, according to one estimate

The turnaround has left start-ups which had been plotting expansion and fundraising considering anything and everything to keep themselves from going under

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Venture capitalists say only the best firms from their existing portfolios will be able to secure further funding in the current climate. Photo: EPA-EFE

Published: 6:00pm, 11 May 2020Updated: 12:05pm, 12 May 2020

Samik Sarkar was eking out a profit from his online apparel store before the coronavirus crisis hit India and forced the 36-year-old to reinvent his business overnight.

“I started selling masks because that’s all I could sell,” Sarkar said. “I have salaries to pay.”

The rapid global economic slowdown, India’s coronavirus lockdown of 1.3 billion people and an exodus of venture capital are testing a start-up community that has quickly become one of the world’s biggest, raising a record US$14.9 billion last year.

The success of Indian e-tailer Flipkart, sold for US$16 billion to Walmart in 2018, helped draw in billions of dollars in funding from global venture capital firms, while US and Chinese tech giants stalked promising prospects.

But in just a few months much of that cash has vanished, with venture capital and private equity investment in India expected to fall by 45-60 per cent this year, Ernst & Young estimated.

A group of the top venture firms, including US groups Sequoia and Accel, this month warned start-ups it will be “very difficult” to raise financing any time soon.

Five venture capitalists said only a few of the best companies from their existing portfolios would be able to secure further funding, while most new ventures will likely be locked out for the foreseeable future.