Prior to this pandemic, startups had been positioned for rapid growth. However, currently, the ecosystem is struggling to survive due to challenges in raising capital in this outbreak. This has been attested by Nasscom’s recent survey which stated that majority of startups in India are soon going to heavily bear the brunt of this pandemic as 70% of them have less than three months of cash runway in the bank. Another 22% can barely make it to the end of 2020.
Earlier this year, major venture capital firms such as Accel, Lightspeed, Sequoia, Nexus Venture Partners, among others, cautioned startups in an open letter about the difficult times ahead in terms of funding. “Remember fundraising outcomes are not only dependent on your business and its metrics but also the macro environment,” the letter stated. “Even positive fundraising outcomes will take longer than usual in these times; be patient.”
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However, despite this pandemic crisis, analytics and artificial intelligence continue to capture the attention of VCs and other investors. With the growing interest of organisations utilising these advanced technologies to make more informed decisions to steer through the pandemic, many AI and analytics companies are coming at the forefront of this revolution and this, in turn, interests a lot of investors amid this crisis. Alongside, there is also heavy investment in analytics by government and intelligence (G&I) and the healthcare industry to manage the situation.
According to a recent report, it has been revealed that 49% of enterprises are either launching their analytics projects or advancing their previous analytics projects. In fact, the global advanced analytics market is on the rise and is expected to reach around $60.44 billion by the coming year.
As a matter of fact, earlier this month in recent news, a prominent Bangalore-based startup — Postman has announced its recent partnership with Insight Partners to raise $150 million to further accelerate its product development roadmap, making its valuation of $2 billion. The primary reason for this six-year-old startup to grasp VC’s interest amid this fund-crunching time is its enhanced development of API software signals, which is critical to driving software development.
Fintech is another industry that has seen massive traction during this outbreak. A lot of this could be attributed to the changing customer payment patterns, which created a remarkable growth for fintech companies with substantial investments. Visa has recently invested in an analytics company GoodData to focus more on analytics for continuing their business.
A lot of this could be attributed to data becoming the critical weapon for companies to navigate through this crisis, and thus, all of them are looking to get more business value from their company and customer data. To which, Ami Gal, the CEO and co-founder of SQream, a next-gen database startup, which has recently received a funding of $39.4 million has said to the media, “The commitment we have received from both new and existing investors in this round, and from our customers, even during such a challenging period, is a strong validation of our vision and market potential.” In another news, Drishti Technologies, a computer vision startup has also raised $25 million in series B funding to advance its products for the manufacturing industry.
And thus, we can easily say that despite disruption in global investments for startups, there has been a continued rise in investments for analytics and AI-based companies.
The Demand For Analytics Will Rise & So Is Its Funding
Coronavirus has created a significant negative impact on companies worldwide, including analytics and AI companies. Hence, businesses are continuing their work by strengthening their digital strategies, and technologies like AI and ML have proved to be immensely beneficial for streamlining their processes amid this tormenting time.
The pandemic has indeed affected the funding scenario in the startup ecosystem, where VCs are entirely resistant to spending their capital. However, on the other side, although many investors are currently wary about investing, they are looking for tacky opportunities for funding.
Explaining this Anil Joshi, managing director of Unicorn India Ventures has stated to the media that currently fresh investments through investors are based on three criteria that startups need to fulfil — “their short-term relevance during the ongoing crisis, ability to meet the needs of masses in the post-pandemic world, and ability to replace or digitise the pre-COVID-19 business models.” In fact, he believes that the opportunity lies in technology-led firms.
Priyanka Telang, AI Solutions Architect at IBM said, “So even though investors aren’t currently ready to put money upfront, I think there is a lot of interest invalidating or evaluating what the AI and analytics solution can really do amid and post this crisis.”
She believes that although there would be a money crunch right now for a lot of investors, AI and analytics companies have the potential to be at the forefront, as people are looking for AI and analytics-based solutions and that could bring in the future funding.”
Even Bastin Robin, Head of Data Science and AI at CleverInsight also believes that this is an excellent time for technological companies, especially the ones working with AI and analytics, to get funding in this time. He said, “Right now most companies and organisations of any kind are heavily dependent on technology, so the companies that provide advanced technology-based solutions using analytics, AI and ML will be highly in demand.”
For instance, educational institutes are facing significant challenges in conducting examinations with proper monitoring of students, businesses are struggling to detect frauds security issues in their companies, or healthcare providers scrambling to provide treatments and necessary information to patients, and for all these cases, companies are using AI and ML-based solutions to solve their business problems. And therefore the demand for these technologies continued to rise amid COVID.
Robin further stated that ML had been the solution to most of the problems businesses are currently facing, although not entirely accurate it’s slowly learning, and therefore, “funding for companies working with AI, ML and analytics will continue as investors are looking for solutions that can solve a volume of problem, specifically in critical domains of the industry.”
“So if you have the right solution for the market, the money will come, no matter what crisis is in hand,” said Robin.
Survival has been the first instance for companies right now. Ratan Tata once said to the media that “2020 is the year of survival.” Consequently, every business is currently trying to grasp the pandemic fact and trying to survive at this point. However, on the other hand, this unprecedented time has brought in a volume of data that has the potential to empower leaders and therefore integrating this in the business is becoming a mission-critical objective for businesses.
“Nonetheless, the process of investing as well as the term sheet conditions have majorly changed for investors amid this crisis,” believes Srinivas Atreya, Chief Data Scientist at RoundSqr.
He said, “Due to the current market situation amid the pandemic outbreak, the valuation number of companies would differ, and as the valuation number would change, the term sheet condition would also change for the companies. This, in turn, would result in either the money will come down, or the valuation will decrease.”
Alongside the change in VC strategies for funding, many are looking for AI and analytics companies with a distinct difference in quality and a unique selling proposition. “There has been a gold rush that a lot of companies have formed, where the majority of them call themselves AI-powered companies without little to no relation to AI. And those companies are going to die sooner or later, despite the pandemic strike,” said Atreya.
Atreya further added, “In fact, since the last two-three years, there has been a lot of AI understanding out there in VC communities as well, many even have an AI expert as a part of their investment strategy. And that’s why companies need to show deep tech in the end, to raise any sort of investment in the current era.”
The COVID pandemic has indeed affected the analytics startup ecosystem. However, it has also provided analytics and AI startups with opportunities to adapt to the current evolving landscape. The companies that are working with AI and analytics are grasping the eyes of VCs and angel investors. Although it is too early to predict the overall impact of this pandemic, it indeed created a silver lining for analytics companies.