VIEW: What makes a startup a potential Unicorn

The COVID-19 pandemic has put the global economy into a tailspin. Its impact on the business environment has been crippling, with startups and small businesses taking the worst hit. Disruptions in supply chains, labour shortage and changing consumption patterns triggered by the viral outbreak have led to a sharp fall in revenue, which in turn has resulted in a shortage of cash flow, rendering startups struggling. While the overall startup ecosystem is scrambling to tackle these unprecedented challenges, it can be a transformative time for startups that are disruptive, innovative and have something unique to offer. History shows us that crises often prove to be a blessing in a disguise for businesses.

Alibaba, for example, was just a small startup when the SARS epidemic had hit China. Even as the virus was spreading rapidly across the country, Alibaba employees continued to work from home. It was also during the SARS outbreak when the Chinese tech giant launched its first consumer-facing platform Taobao, which would later become the world’s largest retail online marketplace. Alibaba’s resilience in the face of adversity is a lesson for startups that challenges can be turned into opportunities if startups embrace agility, adaptability and innovation.

More recently, in 2008, the world witnessed the emergence of a new-breed of technology-centric startups following the collapse of Lehman Brothers and the subsequent recession. WhatsApp, Instagram, Pinterest, Slack, Uber, Groupon, Venmo, and Square—the list goes on. In India, too, a series of high-value startups including Flipkart, PolicyBaazar, Paytm, and Ola were launched during and after the global financial crisis of 2008. As we know, Flipkart, Paytm and Ola are all Unicorns with a valuation of more than $1 billion.

Behavioural changes brought in by the pandemic are generating new opportunities across every sphere for entrepreneurs to showcase their innovation and modify their offerings to find the right product-market fit in the current environment. With people forced to stay indoors and make drastic adjustments to their everyday life, there is an increased demand for tech-based entertainment solutions, online grocery delivery, video conferencing tools, and EdTech platforms.

Likewise, as customers become more cautious about their health, personal hygiene products such as hand sanitisers and disinfectant soaps are also witnessing soaring demand amidst the health emergency. In the healthcare segment, the supply-demand gap for personal protective equipment (PPE) kits is increasing. This is an opportunity for startups to capitalise and provide meaningful services that can help people adapt to the new normal, thereby creating a long-lasting impact on customers’ minds.

Thousands of startups come up every year, out of which only a few make it beyond the first three years of inception and a negligible percentage manage to gain the Unicorn status. Now, the question is—What makes a startup a potential Unicorn? Multiple parameters, both external and internal, come into play, including the economic setting, the demand for the product/service offered, and the founder’s ability to weather unprecedented crises. In the current landscape, startups that can find their way around the challenges posed by the COVID-19 pandemic and offer scalable solutions to those challenges, are poised for steady growth in the long-term. Focus on long-term growth instead of short-term opportunities—this is the key factor that will separate the wheat from the chaff—Unicorns from others.

The coronavirus crisis has necessitated that startups become agile, dynamic and swift in their action – characteristics of a Unicorn startup. While it is impossible to gauge the long-term impact of this pandemic, the future we visualise post-COVID is one where a group of startups will emerge stronger than they were before the pandemic struck. Whether it is in healthcare or deep-tech, these startups will lead the next wave of innovation and eventually make their way into the Unicorn club.