The year 2020 has been the most tumultuous of all in recent history. The Covid-19 pandemic has compelled a business slowdown as no other incident had ever done. And the profound impact it has on the Indian startup ecosystem, especially the much-coveted unicorns with billion-dollar valuations, has been both elevating and heart-stopping.
When a startup finally achieves the unicorn status, one of the most significant milestones in its journey, after years of chasing many expectations, managing teams, raising funds, winning the trust of customers and meeting many other challenges, it heaves a big sigh of relief. But this year, most of the unicorns were back to their struggling days, working on survival strategies all over again and reimagining growth.
India is home to 42 unicorns, including Shopclues, which is no longer in this group. And this year alone, 11 startups, including Firstcry, Unacademy, Postman, Zerodha, Pine Labs and Razorpay among others, have joined the coveted list.
In this year-ender article, we are looking at eight of these companies striving to become stronger in a new normal when innovation becomes a necessity and risk-aversion no longer works as a survival strategy.
Flipkart: Riding The Ecommerce Wave
The year came full circle for Walmart-owned Flipkart. It started with celebrating the previous year’s record sales, followed by lockdowns, strategising for the new normal, coming back strongly through festive sales and now looking forward to an initial public offering (IPO) next year.
At the beginning of the year, the ecommerce giant had reasons to celebrate as it led Walmart’s overall ecommerce sales between November 2019 and January 2020. Then came two unprecedented incidents. One of these plagued Flipkart alone as the company saw an exodus of its top talent. Next came the three-week total lockdown in March when it had to suspend all operations and services temporarily.
As the ‘unlock’ days started, the company’s focus shifted to mitigating the impact by telling partner brands to stock up and planning for online sales as there was a resurgence in the number of orders for non-essential items after the lull.
Flipkart spent the next few months revisiting its business models and strategies. It forayed into the hyperlocal delivery services through Flipkart Quick to enable the delivery of grocery, fresh vegetables, meat and mobile phones in 90 minutes, set up dark stores, which are traditional retail stores converted into fulfilment centres, reportedly piloted a social commerce platform and launched its digital B2B marketplace called Flipkart Wholesale.
By the middle of the year, the ecommerce giant started focussing on investments, acquisitions and partnerships. It also entered new territories by acquiring mobile gaming startup Mech Mocha and partnering with Nepalese ecommerce company Sastodeal and epharmacy startup 1mg to facilitate medicine sales on its platform. It is reportedly looking to re-enter the mobile phone segment after the company’s in-house brand MarQ got approval from the Bureau of Indian Standards (BIS).
But as expected, the biggest business boost post-lockdowns came from online sales, including the Big Savings Day sale in August (held for five days), the Big Billion Days in October (held for six days) and the festive season sale spread over a month or so. Its IPO plans are back on the radar and it is looking at a more sustainable future.
BYJU’S: Yet Another Favourable Year
If there is one sector in the startup ecosystem that has won hands down during the pandemic, it is edtech. BYJU’S, the eponymous brand that ticked the unicorn status in 2019, quickly seized the opportunity to grow exponentially by announcing free access to its learning app till April 2020 and then forayed into coaching classes for K-12 and competitive exams.
The edtech giant also continued its acquisition spree from last year and purchased WhiteHat Jr, an 18-month-old online platform that teaches kids to code. Ever since the acquisition, a 300 Mn all-cash deal, the target company has hit the headlines more frequently than BYJU’s albeit for all the wrong reasons. BYJU’s has also acquired LabInApp, a lab-like virtual simulation platform based in Hubli, Karnataka.
Overall, the year has gone smoothly for the edtech giant except for a GST (goods and services tax) evasion probe by the director-general of GST Intelligence (DGGSTI). BYJU’S has been accused of evading GST on books or printed material being supplied by the company by misdeclaring such supplies under an exempted category. A team of officers from DGGSTI also raided its premises in Bengaluru between 27 and 29 Oct for the same. No further development on the case has been reported yet.
Finally, the unicorn is reportedly in the final leg of closing a $200 Mn funding round from its existing investors.
Paytm: Capitalising On Digital Payments Wave
Paytm’s Gurugram and Noida offices had to be shut down as early as 4 March as an employee who returned from Italy tested positive for novel coronavirus. As of now, India has recorded around 9 Mn Covid-19 cases, but Paytm was the first startup that had to face the challenge and took immediate measures to control the situation.
In spite of these early shocks, the fintech major’s business has soared as the pandemic drives people to online transactions and digital payments. Not only did it register 3.5x growth in transactions in July but Paytm’s investment platform Paytm Money also claimed to have achieved a customer base of 6.6 Mn by volume in September. Paytm Money has launched a stockbroking feature for all in the same month and aims to onboard 10 lakh investors in FY21.
Next came Paytm Insider that leveraged the ongoing ‘remote’ culture and claimed to have grown its online event inventory from 0 to 9K between April and August. The company also said it had cut costs across verticals such as marketing and cloud usage and hired around 20 top executives for leadership roles.
But all was not well with Paytm as it got embroiled in a few controversies. To start with, the app was pulled out of Google Play Store for a few hours on 28 Sept for allegedly violating the global giant’s policy against ‘simulated gambling content’. Paytm protested against Google’s arm-twisting and also launched Android Mini App Store, which is a custom-built mobile website that gives users an app-like experience without requiring an actual download. It also moved the Delhi High Court, seeking damages from Airtel, Vodafone and Reliance Jio for their inaction against increasing phishing scams.
OYO: Looking For A Comeback
After many troubles such as hoteliers’ protests and massive layoffs in 2019 and early 2020, Oyo had its moment in the sun. The U.S. President, Donald Trump, praised the company and its 26-year-old founder and CEO, Ritesh Agarwal, was named the second-youngest billionaire in the world at the beginning of 2020. OYO also bagged $806.75 Mn in a Series F Funding From SoftBank and RA Holdings.
The jubilation did not last long. Soon enough, the hotel industry was looking at its worst enemy in the form of pandemic-induced lockdown and travel restrictions.
The unicorn’s expansion plans were severely hit; its layoff woes continued along with massive salary cuts and furloughs, and the company had to de-escalate its presence in India and abroad.
OYO is slowly recovering since July and also offering employee stock ownership plans (ESOPs) to its beleaguered workforce. Agarwal even said in September that OYO hotels and homes in India are back to 40% occupancy, barring a few states such as Himachal Pradesh. Overall, it has been the most challenging year for many businesses, especially those in the hospitality, travel and tourism space. But players like OYO are putting up a brave front and hoping to regain the lost traction within a year or so.
Ola: Hits A Speed Bump
The year started with a bang for Ola as people across India had travelled more than 20 Mn km on the New Year’s Eve using its mobility services. The ride-hailing company was also getting ready to standardise its drivers’ commissions instead of pursuing the incentive-driven model.
Then the virus struck, and it was pernicious. With the world coming to a shuddering halt when lockdowns were announced and people getting used to working from home, the obvious happened. The number of rides came down drastically, and even after the much-anticipated ‘opening up’, the company struggled to deal with uneven state policies.
By May this year, it was almost the same story at Ola, as it was with many other companies: Job cuts, salary cuts, high-profile exits and plummeting revenues. But it had to face an additional challenge as Ola drivers demanded better safety and hygiene norms, pre-Covid payments and extension of car loan moratoriums. Ola also lost its operating license in London due to safety issues.
The company has, however, doubled down on its electric vehicle play (Ola Electric). Ola has already acquired Amsterdam-based electric scooter OEM Etergo BV, launched its electric two-wheeler in New Zealand and is currently setting up an EV unit in Tamil Nadu. Additionally, in May this year, Ola Financial Services (OFS), which is the parent company of Ola’s fintech venture Ola Money, raised INR 205 Cr from Matrix Partners.
But will its ambitious plans for Ola Electric, Ola Money and Ola Foods make up for the revenue losses in the cab-sharing business?
Zomato: Back To Business
The year 2019 was all about dealing with the Twitter campaign #Logout, a movement started on 14 Aug, 2019, by 300 restaurants to delist themselves from platforms such as Zomato Gold and EazyDiner in protest against deep discounting. But 2020 is about gaining consumer trust (features such as displaying body temperature of food delivery partners helped), coming up with exclusive deals, facilitating food ordering via Instagram and focussing solely on the food delivery business.
Zomato started the year well. It acquired Uber Eats’ food delivery business in India in an all-stock transaction, entered the fintech space with a co-branded RBL Bank credit card and raised $5 Mn from Pacific Horizon, thus taking its valuation closer to Swiggy, its biggest competitor.
Then came the layoffs and pay cuts, an all-too-familiar saga by now. Plus, within a week of its liquor delivery launch, liquor merchants and alcohol retailers’ bodies on Zomato and Swiggy, started complaining about user data being monopolised. Then there was a competitive threat from Amazon as it launched food delivery services.
To battle the lockdown slump, Zomato raised $102.5 Mn from US-based investment firm Tiger Global Management. Finally, in its Mid-Covid report in September 2020, Zomato announced that the food delivery industry, as a whole, has recovered 85% of its pre-Covid GMV (gross merchandise value). The foodtech firm has recently raised $660 Mn at a post-money valuation of $3.9 Bn. And it is slowly heading towards its pre-Covid-level deliveries and planning for its 2021 IPO.
Unacademy: Becomes The Second Unicorn In Edtech
Unacademy broke into the unicorn club this year with $150 Mn funding from SoftBank and existing investors and disrupted BYJU’s status quo as the sole edtech unicorn in India.
Before the Covid-19 pandemic, edtech used to be a niche segment without much traction. Out of the 4,450-plus edtech companies, there was only one unicorn, BYJU’S, with a $5.7 Bn valuation. According to Inc42 Plus, between January 2014 and September 2019, the company grabbed 65% of the total funding that flowed into the edtech sector.
But the scenario has changed in a post-Covid world as most schools and colleges may remain shut until a vaccine is in and students need online tutoring to make up for the lost time. Undoubtedly, it is the best of times for edtech startups to thrive and grow, and Unacademy has done just that. Interestingly, the company was roped in by the Board of Control for Cricket in India (BCCI) as an official partner for the Indian Premier League (IPL) 2020 edition.
The brand new unicorn claims to have 30 Mn registered users and around 3,50,000 paying subscribers. It focusses on the K-12 segment and also offers online coaching for competitive exams. Of late, the company has come up with lessons on skills development and even on chess, a strategic game that helps develop intelligence and mental prowess. Much like BYJU’S, Unacademy has gone on a shopping spree and acquired edtech startups Mastree and PrepLadder and competitive programming platform CodeChef.
BigBasket: On Time, Once Again
Just like India’s other unicorns, the year started on a positive note for Bengaluru-based online grocery delivery platform BigBasket. At the time, the company was looking to go public by 2023 after raising a ‘last’ round of funding. It also acquired online milk delivery service DailyNinja in early March.
Next came the Covid-19 lockdowns and the company had to shut down its operations temporarily. By the time it was up and running, its operations were still limited. There were multiple challenges, including delayed orders due to supply chain breakdown, logistics issues, especially in areas like cross-border transportation and a shrinking workforce due to the migrants’ exodus. The company reportedly cancelled orders, and delivery executives faced police harassment although grocery services came under the essential category.
After a lot of back and forth, everything seemingly started to fall in place. By September, the company was reportedly in talks to raise $350-400 Mn funding from Singapore-based Temasek, hedge fund Tybourne Capital and former US vice-president Al Gore’s Generation Investment Management at a post-money valuation of $2 Bn. Currently, the Tata Group is reportedly in advanced talks to buy 80% stake in the company for $1.3 Bn.