In the Sci-fi novel, "The Naked Sun," Isaac Asimov brings to life, the unusual practices of Solarian society. Solaria is a planet hostile to Earth. In Solaria, there are more robots than humans.People are taught from birth to avoid personal contact. They communicate through holography and teleconference. Robots do most of the functions that humans do on earth, e.g., making coffee, driving cars, and dropping off groceries.
This may sound eerily familiar to our not-so-distant future, so it's worth pointing out Asimov wrote the novel in 1957. Even televisions were a novelty then. However, the point is not to marvel at Asimov's ability to see the future. Fiction writers have made the best futurists. But you do not need a storyteller's imagination to see that COVID-19 will have dire consequences for startups.
Let's start with Pathao, one of our best-known startups. Food delivery and ridesharing are two successful verticals. Foreign players like Food Panda and Uber ply in this space, as do local players like Shohoz.com. As ridesharing is banned, restaurants shut shops, and people cook at home amid the nationwide shutdown, both verticals have been hard hit.
Between Uber, Pathao, Food Panda, and Shohoz, there is quite a large gig economy in place. For instance, Pathao has 300,000 riders, captains, foodmen, and delivery agents. Moreover, 30,000 e-commerce merchants and 5,000 restaurants depend on its platform, not to mention 300 employees. Imagine the hit to livelihood from the unraveling of this growing gig economy.
Of course, the hits are not just local. According to the New York Times, American startups have begun to lay off workers, slashing Op Ex, and pivoting where possible. Since the end of January, European tech companies reportedly lost €400 billion in value. Deals are falling apart, and unlikely to recover very much in the next quarter, as investors scurry to safer assets. Startups are a high-risk and illiquid asset class, so, naturally, investing will take a huge hit, globally and in Bangladesh.
However, every crisis brings forth bright spots and opportunities. So, what are the opportunities COVID-19 has brought forth?
First, big tech is gaining new ground. Amazon is hiring 100,000 warehouse workers. Facebook's video-calling and messaging usage has gone through the roof. Microsoft's software for remote collaboration is going viral, no pun intended. Netflix and
YouTube have unprecedented viewership. Even Apple's performance has picked up, especially of its services. The pandemic has deepened our reliance on big tech, accelerating existing trends.
Beyond big tech, videoconferencing solutions like ZOOM are seeing sharp growth. Health tech, especially telemedicine, is also exploding, while Fintech and Robotics are gaining ground.
But what about Bangladeshi startups? What about bright spots in the local ecosystem?
There are certainly some that worth a mention. The online groceries sector has few large players, but Chaldal is seeing a sharp rise in demand. Reports suggest that demand for groceries has gone through the roof, and Chaldal was even considering capital investments at this time.
Tonic has seen an uptick of 30 percent in daily calls. Beyond telephone consultations, Tonic has also launched video-based consultations and a COVID-19 symptom checker.Sheba.XYZ has seen a rise in demand for deep cleaning services.
There have also been enterprising pivots and responsible social initiatives. Pathao, Uber and Shohoz have all launched services to enable on-demand delivery of groceries, foods and medicines from supermarkets and pharmacies, contactless.
Sheba.XYZ has manufactured hand sanitisers in partnership with chemists, to be distributed through emergency points. Other startups are contributing funds and technical knowledge to combat the pandemic.
Nonetheless, when it comes to business, the pandemic has hit Bangladeshi startups hard. This is a challenging time for founders, stakeholders and investors. To survive, founders need to introspect whether they have as much cash runway as they think.
A careful reconsideration of costs is required, on what are core to business, and what are not.
According to industry insiders, during the pre-COVID-19 period, Bangladeshi startups were looking at a fundraising pipeline of $50-100m in the next 12 months. This is surely taking a hit, not just in terms of delays, but also cancellations. In fact, entire verticals may fall out of favor, temporarily.
To speak of high-potential verticals in Bangladesh, post-COVID-19, there is likely be a greater concentration of investor dollars in:
• Contactless on-demand delivery of groceries, foods and medicines. For founders, now is the time to invest in a robust delivery infrastructure. This will be an instance of a pre-COVID-19 trend accelerating.
• E-commerce. Many top designers and retailers will continue to take orders online and invest more in digital marketing, leading up to the two Eids. However, e-commerce will be more successful for staples and essential items, barring the Eid months.
• Health tech. There is likely to be more investment in tele and video-consultations. We could certainly do with more investments in this space.
• Online education. Instead of trying to create a Coursera in Bengali, smart startups will create content that can partner with universities and schools to provide supplementary lecture content and opportunities for professional skilling. The market is much bigger at an institutional level and given our love affair with credible certifications.
• Mobile wallets and fintech. Although the mobile payments industry is growing and likely to experience innovations on their platform, beyond payments, it is hoped that the crisis will reinvigorate initiatives such as e-KYC which will enable fintech, and digital lending, in a contactless world.
• There is also a growing market for local streaming video and music
In the long run, discretionary e-commerce and freelancing ought to take-off. Car-sharing and ride-hailing will also take a bit of time to fully recover. Fintech beyond payments will depend on transactions picking up, and an enabling regulatory environment.
The virus has also exposed limitations of our IT and regulatory infrastructure and capacity to innovate at speed. Once the dust settles, it is hoped that there will be a fast-tracking of regulatory interventions to accelerate innovation, as well private sector impetus.
Globally, talks of consolidation are rife. In Bangladesh, among the larger tech startups, mergers have become likelier. Mergers can cut costs and allow each company to play to its strengths. When survival is at stake, fanciful valuations have less sway and mergers are easier.
For smaller startups, in order to grow in a post-COVID-19 world, we have to look beyond the mastery of a pitch deck and market projections. Founders need more patience with potential investors and proactively develop transparent relationships.
In sum, the virus will fundamentally alter how we do business. Certain business models will fall out of favor. New winners will be created, and new losers. Regulations will reset the competitive landscape. Therefore, while revenues will drop this year, many will be poised for superior performance.
From a macro point of view, if the virus serves the purpose of pushing us along the digitization curve, that would be a silver lining. That is one curve we do not want to flatten, but only steepen.
Projections for Bangladesh Startups (COVID-adjusted)
Sajid Amit is Associate Professor, ULAB, and Director, ULAB EMBA Program, and Senior Advisor, Tala.co. He is a Richard Hofstadter Faculty Fellow at Columbia University, 2005-2007. He can be reached via LinkedIn, Facebook and Twitter at @sajidamit75