Medicircle Rendezvous: with Siddharth Chopra, Founder & Consultant, Valuepedia

▴ Siddharth Chopra, Founder & Consultant, Valuepedia

Siddharth Chopra is an experienced business consultant with a demonstrated history of working in financial services. He is skilled in Equity Research, Financial Modelling, Corporate Finance, Investment Banking and Value Investing.

As the world goes through  difficult times due to COVID 19 outbreak,as a News portal,it is our duty to keep the morales high by reporting on how some people are working round the clock so your health and job are secured. In this initiative, we catch up with top investors and entrepreneurs of India on how they are managing their resources to stay afloat.We hope our series will help the entrepreneurs and SME's who are trying to beat the pandemic and do best for their business.So read on to understand the mistakes,spot the opportunities and overall correct your course so the business heads to the right direction.

Here is a short interview with Siddharth Chopra, Founder & Consultant, Valuepedia:

1. In this COVID19 pandemic how can your portfolio companies better manage resources?

The months ahead will probably be quite volatile and dynamic. Portfolio startups we are working with, can better manage resources with a very clear focus, first and foremost importance is safe guarding employees health and make sure they are connected, support customers and de-risk financial exposure in the phase of contraction of business, this can be done by stabilizing the operations, adjusting and preserving cashflows, liquidity & managing payables for a runway of another 4-6 Months. Remote staff support should be adequate and specific actions are needed to keep the business operating for instance supply chain stabilization, which has seen large disruption. Companies and startups that depends extensively on import led tech are more vulnerable since dollar & inflation will be hitting hard on china & India so importing cost of components / tech are putting stress on financials, such as a case is with one of our portfolio startups in electric vehicle whereas, they are importing body Invite components (40%) from china to achieve economies of scale, as a result, localizing products is their short-term change in strategy. Another case of an insurance startup we are working with, have made a short-term change in strategy to align with market sentiments whereby they shifted focus to group health insurance and fire policies for SME, retail health, shopkeeper policy and critical illness policy for tier-2 cities, and then return business to scale with more insurance products to offers. One more case of a last mile delivery startup which has now more focused on inside sales and reaching out to more customers & on-boarding new available suppliers by creating a temporary B2C tech platform and developments being closely monitored.

2. In your view how can startups cope with economic slowdown due to lock down?

Startups need to think and act across different horizons, firstly they have to address the immediate challenges with employees, customers, technology and business partners. Secondly, they have to address the near-term cash management challenges, re-assess the business plan, cap fixed and variable expenses plays a vital role for next 6 Months. Making / projecting different scenarios and allocation of cash runway efficiently as business will get impacted by new sales figures, receivables will get delayed, credit cycle and potential bad debts, during the lockdown period. Thirdly, create detailed plan to return business to scale quickly as situation evolves and be clear about how regulatory and competitive environment in industry may shift in particular sector.  

3. An entrepreneur's journey is always considered as a roller coaster ride, still what measures/controls they should take while struggling with this uncertainty? 

As the COVID-19 continues its disruption, the livelihood of many entrepreneurs and small business owners has been threatened. According to a recent survey, 50% of business owners that were surveyed said they didn’t think they could continue business operations for more than three months. Approx. ~ 30% of business expect the virus to have a moderate to high impact on their revenue and supply chain. So, for the startups, the priorities should be employee safety, business continuity and liquidity. COVID–19 is an unprecedented event that is leaving a deep impact on the overall mental health across all levels of employees. Uncertainty and lack of control have given rise to high levels of anxiety. In times of crisis, however, the focus must shift to surviving the lean times than finding new market opportunities. With entrepreneurs working remotely, implement a remote work structure that covers the deliverables each team member is responsible for completing since communication with the team will be key in realigning goals. Plan for short & long term as the spread will create a ripple effect that will impact us for some time. Speak to your suppliers, investors, partners and local officials on a daily basis as startups run exceptionally lean and generally on fairly tight timelines. Startups should consider holding weekly meetings to discuss cash burn and runway with the core team. Companies that were in the process of raising new money are likely to be hit especially hard so rationalize the expectations. 

4. Action COVID19 Team (ACT), which is a first-of-its-kind initiative by Top VCs and entrepreneurs with INR 100 CR grant, is launched to provide resources and guidance to startup founders and employees. What’s your take?

 Great initiative, with the number of cases of coronavirus are increasing in India, the initiative is to build collective effort in helping fight the long-term effects of this pandemic on the society. Action COVID19 Team (ACT) will not only provide a grant to the startups which are working on the critical pain points such as inhibit spread, disease testing and management, medical devices, healthcare support to hospitals and doctors, but ACT team will bring its networks, resources, mentoring to startup founders and team to help these initiatives make rapid progress and create large-scale impact in the fight against COVID-19. 

5. The market has fallen down with this financial tsunami of ‘COVID19’; does it offer a best buying opportunity for investors?

In the past few years, investment activity has been touching record highs, and grew 28 per cent to $48 billion in 2019. Majority of the VC’s and seed funds are continuing, though at a slower pace, to evaluate the investment proposals and continue to be active. The focus has shifted partially towards focusing on existing portfolio companies for crisis management. While there will be great economic dislocation that affects small and large businesses, there are still some opportunities, especially for direct-to-consumer businesses. Sectors that may attract Investments are companies in the technology, consumer goods (packaged essentials, personal and healthcare, food processing, hygiene products & Sanitation), pharmaceuticals as well as sub-sectors like medical supply and services (Telemedicine), biotech, health & fitness apps and entertainment like mobile gaming, which is witnessing a skyrocketing increase in user engagement and the season of gaming startups appears to be at its peak. Some investors believe that by 2021, everything will be back to normal while some are expecting a longer-term impact somewhere in between 18–24 months. Dry powder availability for VC investing in India was at an all-time high at the end of 2019, indicating likely continued investment activity in 2020. We may expect small rounds of funding at lower valuation and for a runway of 12 months should be considered appropriate in the present circumstances. Valuations will be squeezed due to the increased macroeconomic risk since investors will be conservative and not bullish on the potential growth, we can expect an adjustment and correction of ~25% on average to valuations across. 

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Smita Kumar

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