Happy Wednesday!
The uncertainty wrought by the Covid-19 pandemic has turned venture capital investors picky about their future bets. VC firms, which invest across stages, are now increasingly focusing on very early-stage companies, more so in specific sectors such as health-tech, Software as a Service and edtech, as they believe these areas will largely remain unscathed as the virus outbreak pummels other businesses.
Sowing seeds
While the broader deal-making pace in the Indian startup ecosystem has come to a crawl, well-known venture capital firms that invest across stages have been seeing a steady inflow of seed funding transactions. WaterBridge Ventures, Chiratae Ventures, SAIF Partners and Orios Venture Partners—four venture capital firms that make early-to-growth-stage investments—have continued to pursue seed-stage deals over the last two months, when most investors put away their cheque books in the wake of the virus outbreak.
The uptick comes amid Series A investments dropping by at least 30%, depending on the sector, with consumer-facing investments bearing the brunt. Read more.
Living on credit
Retailers, online marketplaces and banks have reported a surge in financing on credit cards. As the lockdown across the country eased, consumers preferred to purchase even low-value goods on equated monthly instalment (EMI). Items like smartphones, mixer-grinders, kitchen utensils, speakers and headphones, household products and shoes as well as paying bills are lately being paid in instalments.
What’s the reason?
Liquidity crunch has forced consumers to avoid outright cash purchases due to stress in income across households, widespread salary cuts and poor sentiments triggered by fear of losing jobs were the reason for the shift in consumer behaviour, industry executives said.
In numbers
- Finance on cards has surged by 30-40% last month from pre-Covid days.
- As per Pine Labs point of sales data, average billing value of mobile phones via EMI transactions is down by 25% in May, which it attributed to consumers opting for EMI for even lower priced phones as compared to pre-Covid.
- Several credit card customers are looking to convert their monthly bill into EMIs for 6-24 months at 12-18% interest. Read more.
Lockdown hangover
Product selection continues to be limited on e-commerce marketplaces due to acute working capital, labour and raw material shortages, and unpredictable demand. While consumers continue to shop online, sales are largely being driven by FMCG essentials, masks, sanitizers, phones, books, and other products consumers need desperately.
By the numbers
- Walmart-owned Flipkart said while 90% of its sellers were active on its platform, the selection is back by 85%.
- Although 85% of sellers on Amazon India had become active one week after restrictions on e-commerce were relaxed, only 30% of SKUs were available. Read more.
Pinching pennies
At least five out of 10 urban consumers will continue to cut back on spending as economic recovery and market normalisation are unlikely before March next year, according to a report by Ernst & Young. Most consumers will trade down towards value brands, over-invest in health and safety products, and fundamentally change their buying patterns towards home delivery and e-commerce.
Flipkart, Amazon, Grofers and BigBasket have said that consumer buying patterns have gravitated towards affordable brands compared to months earlier, a trend that is unlikely to reverse as the lockdown gradually lifts. Read more.
Mahindra backs Hapramp
Mahindra Group chairman Anand Mahindra has ploughed $1 million into Gurugram-based startup Hapramp. Founded in 2018, Hapramp’s flagship product is a social media platform called GoSocial that allows artists and creators to take various creative challenges like photography, art, and writing among others to earn rewards.
Hapramp was earlier incubated by Gurugram-based sector-agnostic incubator Huddle which has also invested an undisclosed amount into the company. The startup is also working on 1Ramp.io, a social media platform powered by Steem Blockchain and Asteria Protocol that will help platforms to privately and securely treat public data. Read more.
(Illustrations and graphics by Rahul Awasthi)
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