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| Affect of COVID-19 Pandemic on Agri Start-ups | | | Dr. Anil Bhat & Dr. Jyoti Kachroo
All over the world, incubators were receiving attention for developing new enterprises in the fields of technology, service, business ideas etc. in research institutions and universities. The Government of India has also attempted to rejuvenate the technology and business development ecosystem in various sectors through its rejuvenated flagship programmes. The Agriculture sector which, as per the Indian Economic Survey 2019, employs over 42.1 per cent of the Indian workforce and contributes around 15-16 percent to the country’s GDP, has its own unique ecosystem and opportunities in the realm of business. Therefore, to specifically cater to the need and modalities for agribusiness promotion, a revamped “Rashtriya Krishi Vikas Yojana - Remunerative Approaches for Agriculture and Allied Sector Rejuvenation” (RKVY-RAFTAAR) was launched in 2017-18 with a component for innovation and agrientrepreneurship. Through this initiative, a thrust is given to promote agripreneurship and startups with an aim to strengthen infrastructure in agriculture and allied areas by providing financial support and nurturing the incubation ecosystem. Thought agribusiness incubation system has started long back in 2003 in India but still it is in its early stages in the Indian Agricultural system and is yet to gain momentum. Therefore, numbers of steps are taken by Ministry of Agriculture and Farmer’s Welfare, GoI for promotion of the agri start-ups. Before the outbreak of CoVID19 Pandemic, it was sure that the success rate of agri start-ups will rise and Government of India was very keen to support innovative agri start-ups with grant in aid under different categories and already GoI has funded many startups. More funding is in progress. But now what will be the future of agri start-ups during and post CoVID pandemic is a big question?
Two categories of agri start-ups are in dilemma because of CoVID-19 pandemic. Moreover we can say A virus has upset every aspect of business and agri start-ups are also one of them. First category, who established their start-ups newly and are penetrating their products in the market to acquire clients. Second category who are in a queue to receive grant in aid from GoI to establish their innovative start-ups or potential startups that have a minimum viable product (MVP) based on innovative solutions/ processes / products/ services/ business models in agriculture and allied sector which is ready for commercialization. This Grant-in-aid support which Govt. of India is committed to provide through incubators will assist the incubatees to launch their products/ services/ business platforms into the market and help them to scale up their operations as well as to attain business viability at a faster pace. This support will also facilitate them to attract investments from angel/venture capitalists or taking loans from banks /financial institutions for further scaling-up of their business operations.
Now to survive during and post COVID 19 pandemic; agri startups must have to work on main pillars and how to bring changes in the working of these pillars is a big challenge. Team work will play an important role during the situation and decision lies with the founder of the start-up whether he is having capacity to recover quickly from difficulties and toughness without temporary or permanent discharge of a worker or workers i.e., Layoffs and retaining all the employees in the company. He must have an ability to recover from or adjust easily to misfortune or change otherwise he will admit defeat. The decision will totally depend upon the revenue and profitability of the start-ups. Revenue is often referred to as the top line because it sits at the top of the income statement and Profitability is the ability of a business to earn a profit. Capital efficiency is very important part of another important pillar Business and Economics where in the relationship between expenses incurred by the company to money used to manufacture a good or service matter. Start-ups needs policy of Cost-cutting which refers to measures implemented by a company to reduce its expenses and improve profitability. This is the time when start-ups needs to frame policy for purchase order collections (PO) which is a commercial source document that is issued by a business' purchasing department when placing an order with the business' vendors. PO collections will play an important role in their survival. Research is needed about the product and new business opportunities as product manufactured by the start-ups needs to satisfy the demand of the customer in the market which is entirely changed due to pandemic. Many people interpret product/market fit as creating a so called minimum viable product that addresses and solves a problem or need that exists. Product research helps companies to understand what the customers really want, so that the product can be tailored to match the needs of the customer. Start-ups needs innovation to reach out to clients of CoVID19 period as it creates more effective processes, products, and ideas. For a business, it could mean implementing new ideas, improving services or creating dynamic products. Start-ups need to change their business model and making changes in the existing environment to deliver better products or services for acquiring new clients. Start-ups needs to synergize and shun the path of competition at this situation as synergy is most commonly used in the context of mergers and acquisitions (M& A). Mergers of two or more star-ups is the need of the hour for their survival. Currently start-ups are facing the problem of fund raising and in future it will rise because it is the process of seeking and gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies to run start-ups. Grants at this time of juncture are very limited and whatever Govt. is giving is for the start-ups working in the field of PPE (Personal Protective Equpiments). Therefore, venture capital funding is the option in startup and small- to medium-sized enterprises. These investments are generally characterized as high-risk/high-return opportunities. These contributions should come from wealthy individuals or companies, who give their money to a VC firm to manage their investment portfolio for them and to invest in high-risk start-ups in exchange for equity. Pro-rata investment rights is another opportunity for fund raising as this give an investor in a company the right to participate in a subsequent round of funding to maintain their level of percentage ownership in the company. This becomes a way for investors to continue to invest in companies that they want to put more into. Strategic merger of the start-ups is need of the hour. This type of Merger & Acquisitions process aims at creating synergies in the long run by increased market share, broad /customer base, and corporate strength of business.
As far as the economy is concerned, The global economy is looking at recession worse than 2008-09 financial crisis. CoVID 19 has already caused a loss of USD 2.7 trillion and still more loss is expected in coming days. Some of the worst affected sectors due to CoVID 19 pandemic includes travel, transportation, airlines, tourism, automobile, luxury goods, retail manufacturing and agriculture as well. Inspite of relaxation for supply of essential commodities, still it may reduce resulting in severe price increase and inflation. Controlled movement across national and international borders will result in loss of export and import of goods within and outside country. Lockdown and the fear of the pandemic will affect agri start-ups and companies having less manpower at physical office spaces and moreover for start-ups to work from home at initial stage is not feasible for their growth. With the announcement by the Prime Minster of India for extending the nationwide lockdown till 3 May to combat the covid-19 outbreak and flatten the curve, the report published by Barclays cut its growth forecast for the country to 0% for calendar year 2020 from its earlier projection of 2.5%, holding that the economic fallout will be worse than it had earlier estimated. As per the report, the economic loss is estimated to be close to $234.4 billion or 8.1% of GDP, assuming that India will remain under a partial lockdown at least until the end of May. This is much higher than the $120 billion which was estimated earlier for roughly the same time period previously.
To conclude, I must say that during this lockdown the agri startups will not be able to escalate the services and the need of the customer will change. Only one with essential items will be able to start in case they have already setup the network. Government within limited resources can help them to accelerate by providing them timely fund assistance which will help them to cope up with financial tough time. Post Lockdown and Covid 19 Pandemic will take more time to stable as customer will be more focused on conversation of resources than experimenting with something new. |
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