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Will the economic slowdown affect the start-ups - if yes, how would the situation get

Start-ups can exercise cautious optimism over the next quarter to see the impact or turnaround on the new measures and sops announced by the government.

September 11, 2019 / 09:41 PM IST

Sudarshan Rao


While the slowdown in India is visible in automotive & BFSI sectors with related job losses and loss of business to ancillary units, the cascading effect of these sectors does impact the larger consumer spending across other verticals. There is a general pullback on spending, which often is a knee-jerk in the first place by people, to preserve capital.

While start-ups dealing with sectors impacted directly by slowdown will have a large effect on their business growth, start-ups engaged in consumer retail and essential business will have a blip in their growth until a deeper sense of the impact is realized.

The question is, will this slowdown go away as a temporary blip of economic volatility, which is a good course correction, or will it go into a mid-term recession, which could last over a year or more.

Nevertheless, start-ups should brace up, preserve cash and re-look into their spend and priorities.


Start-ups can exercise cautious optimism over the next quarter to see the impact or turnaround on the new measures and sops announced by the government.

Start-ups focused on global markets with cross-border trade, typically B2B start-ups should leverage the opportunities in key international markets to offset the challenges in India.

It is also an opportunity to re-assess the business and seek new growth models, markets and new sources of funding during the slow down phase.

If the domestic economy slowdown extends to the New Year, then it is wise for India focused start-ups to drive into a sustenance mode until a turnaround is visible around the corner.

The negative impact on start-ups -

- New Sales, Leads & Opportunities take a hit

- Existing deals, renewals and pricing goes on hard bargain

- Payment delays throw cash flows out of gear

- Investors throw your ideas into deep freeze or bargain hunt on valuations

- Start-ups with less than sufficient funding pull-back on growth & market spend

The positive impact for start-ups –

  • Time to introspect what worked and what did not

  • Opportunity to iterate the product and pivot the business for the next phase of growth

  • Identify business problems which are masked during a high growth economy phase

  • Re-position their solutions to support the transformation phase of a corporate

  • Re-assess the team, re-organize resources and invest on training

But, what ‘slowdown’ gets the best out of Start-ups is reflected well by the founders / entrepreneurs of start-ups –

  • The best of an Entrepreneur’s resolve is seen during a slowdown when they hunker down

  • Gives the time for Entrepreneur’s to plan for the next round of funding

  • Techie founders will have a new love for finance and numbers

(The author is co-founder and CEO at Socxo, a two year old brand advocacy platform. Views of the author are his own.) 
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Moneycontrol Contributor
Tags: #Startup
first published: Sep 11, 2019 09:41 pm
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