This Pandemic Is an Opportunity For Investors There is enough evidence in history that some of the most disrupting business ideas have emerged from the most devastating economic downturns

By Ankur Mittal

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Charles Darwin's theory of "Survival of the Fittest' holds relevance today more than ever before especially for businesses and startups. In financial and macro-economy terms, be it the global financial crisis of 2008 or the current COVID-19 pandemic, we, as humans, don't shy away from finding a silver lining. Angel and seed investments witnessed a growth of 34 per cent during the 2008 crisis, with similar increase in the deal amount, proving that the investors always keep themselves open to opportunities. They are always on a look-out for innovative brains, especially in times when fear is high.

The air around COVID-19 pandemic in the beginning was that of uncertainty, speculations were rife during the lockdown period, especially with the entrepreneurs. The response was varied with some like Ola, Zomato and Oyo resorted to downsizing, laying off over a thousand employees, to some trending towards frugality pivoting towards survival.

Generally, an economic downturn isn't necessarily a degradation for an economy on a micro level. It can also be perceived as a reset with sky as the limit with opportunities, acting as a booster for many hidden ideas as they devise solutions to overcome the crisis. Every business focuses on connecting with the masses, be it education, grocery, entertainment or fitness. Many startups have begun leveraging the power of "online' to reach the masses and provide them services and products that people would need while being locked inside their houses, along with working remotely. As entrepreneurs leverage the downturn, it's time investors to back these daring entrepreneurs' initiatives.

There is enough evidence in history that some of the most disrupting business ideas have emerged from the most devastating economic downturns (Read Airbnb and Uber). Sectors such as e-commerce, edtech, healthtech, gaming, grocery and OTT are already experiencing a meteoric rise in the number of customers during the lockdown making Indian economy more resilient. A number of startups in these sectors have received funding during the lockdown, as the investors see a huge opportunity in them and believe in their ideas and technology. Milkbasket, a leading grocery startup, recently funded by Inflection Point Ventures (IPV) had almost the same panel of investors in their Series A and B rounds. Similarly, BigBasket raised a bridge funding round from its previous investor during the lockdown at the same valuation as it did last year. This shows how the investors are ready to invest, for they see an opportunity in these sectors. This pandemic might be once in a lifetime opportunity for them, not only for VC funds having dry powder available, but also for angel investors who have the foresightedness to bet on a great business and founding team.

Also, with falling valuations, most investors look forward to invest particularly during this lockdown.

Though the pandemic offers a significant opportunity for the investors, it's important for them to be equally confident about their investments. Investment firms need to repose this confidence by sharing the optimistic side of this pandemic. Investor confidence needs to developed by thorough investor education and deeply connected network. Angel investment platforms like IPV ensure extensive due diligence of startups led by industry experts, towards earning the trust of their investors. More importantly, the firms need to proactively utilise this lockdown period towards detailed engagement with the investors. Also, the market has been witnessing a huge addition of angel investors annually. With real estate and stock market not delivering well in the last five years, startup investing has emerged as a lucrative asset class. This new set of investors need to be wisely educated, to make them understand why this is the best time for them to invest.

While many VCs are in a wait and watch mode to resume their funding in startups, it's time that the key investment platforms rather diligently identify startups with high opportunities and fair valuation. During COVID, the investors need to bet on good founder driven startups building their businesses in a cost-controlled environment, so they get liquidity for the next 12-18 months. Though the pandemic has upended many global organizations with huge capital, the Indian startup ecosystem seems to have a grip on the situation now. With more ideas floating in, the investment sector ensures it doesn't lose its pace and continues to keep its eye open for few startups which might go on to become the leading organisations in the future. The sense of urgency that this lockdown has brought us, has only helped the entrepreneurs stay on top of their game, building more ideas and products, helping the nation as a whole, and reinstating the confidence in the investors. The growing number of funding rounds during the lockdown period is a testament of the confidence investors have in the Indian startup ecosystem, strengthening the idea of the pandemic being an opportunity for them.

Wavy Line
Ankur Mittal

Co-founder, Inflection Point Ventures

Ankur Mittal joined TTS in 2009 and is based out of India, where he focuses on the expansion of TTS’s operations in the Asia-Pacific region. He started his investment banking career at Citigroup’s Strategy and M&A group where he focused on identifying growth opportunities in the North America and EMEA regions. He then worked for the Citigroup Pension Investments Group as part of the team responsible for building the Emerging Markets Long Only Equity portfolio for Citigroup’s U.S. Defined Benefit Plan. Ankur’s passion for M&A and dynamism of the EMEA region then spurred a move to Credit Suisse’s M&A group in London where he worked as a generalist, covering in particular FIG (emerging markets banking and alternative investments), spirits, media, telecom, airlines and white goods.

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