Indian start-ups get creative as coronavirus crisis fuels funding crunch

Samik Sarkar was managing to eke a profit out of his online apparel store before the coronavirus crisis hit India, forcing the 36-year old to reinvent his business overnight.

“I started selling masks because that’s all I could sell,” Sarkar said. “I have salaries to pay.”

The rapid global economic slowdown, India’s coronavirus lockdown of 1.3 billion people and an exodus of venture capital are testing a start-up community that has quickly become one of the world’s biggest, raising a record $14.9 billion last year.

The success of Indian e-tailer Flipkart, sold for $16 billion to Walmart in 2018, helped draw in billions of dollars in funding from global venture capital firms, while U.S. and Chinese tech giants stalked promising prospects.

But in just a few months much of that cash has vanished, with venture capital and private equity investment in India expected to fall by 45{b1ee4ac4d8d7b8e1af61a560a11ca52574b8103b547ccac8037ce0cdf9e7ba58}-60{b1ee4ac4d8d7b8e1af61a560a11ca52574b8103b547ccac8037ce0cdf9e7ba58} this year, EY estimates.

A group of the top venture firms, including U.S. groups Sequoia and Accel, warned start-ups this month that it will be “very difficult” to raise financing anytime soon.