Startup funding down by 75% in Q1,’23. Is the Indian startup bubble going to burst this year?
The Indian startup industry is facing an unprecedented crisis due to the drastic drop in funding in the first quarter of this year. With a 75 percent reduction in funding and 24,250 techies in 84 startups losing their jobs, it’s hard not to wonder if the ‘startup bubble’ is about to burst.[1] [2]The Indian startup scene is facing a crisis at the moment, with many startups struggling to stay afloat. However, there is still plenty of hope – this crisis is only temporary and with a bit of effort, India’s startup ecosystem could be back to its former glory. It’s important to understand the causes of this crisis and how to tackle them head-on so that we can create more jobs and profits. With the right mindset and measures in place, Indian startups can once again be a powerhouse of innovation and success.
Why did funding winter got extended?
The recent global landscape has presented an array of challenges to startups looking to secure funding. The ongoing Russia-Ukraine war, energy supply, depreciating GBP/EUR, and rising inflation are just a few of the issues that have contributed to an increasingly risk-averse investment environment. As a result, investors have become more cautious and the cost of capital has risen, making it harder for startups to secure the funding they need. This has been reflected in the data over the last couple of quarters, with a marked decrease in both the number and size of investments for startups. The situation has been particularly dire for early and late-stage startups, who often rely on external funding to expand their operations and reach their goals. With the current financial markets being so unpredictable, the future of startups in terms of funding is uncertain. However, there are still ways for startups to secure the funding they need, such as seeking support from private investors or venture capital firms. It is also important for startups to stay abreast of the latest developments in the financial markets and adjust their strategies accordingly.
How to survive another year of funding winter?
As a startup, surviving the difficult funding environment can seem daunting. However, with the right strategies and an entrepreneurial mindset, it is possible to make it through the funding winter. Here are five ways to survive the funding winter as a startup:
- Raise money from private investors:
Private investors can be a great source of funding for startups. The process of seeking investments from private investors can be time consuming and painstaking, but it can also be more rewarding than other sources of funding.
- Utilize existing resources:
It is important to maximize existing resources and find creative ways to generate cash flow. This may involve cutting down on non-essential expenses, utilizing existing partnerships, or exploring new sources of income.
- 3. Seek venture capital: Venture capital firms can provide significant amounts of funding for startups with potential. In order to be successful in securing venture capital, it is important to have a well-crafted business model, a strong team, and a clear long-term vision.
- Create a compelling pitch: It is essential to have a well-crafted pitch that clearly explains the value proposition of the startup. This should include a description of the business model, the target market, the financial projections, and the team.
- Stay abreast of the latest developments: It is important to stay up to date on the latest developments in the financial markets. This will help startups to adjust their strategies accordingly and make the most of opportunities that arise.
The Way Forward
Startup success stories in India have proven time and time again that even in the toughest of times, our entrepreneurs can persevere. Even during the recession of 2008 or the drying up of funds in 2016, our unicorns and other startups have continued to thrive. In these trying times, venture capitalists will be even more stringent in their evaluation of startups. But for those who make the cut, the rewards will be immense. With a hard-earned reputation for quality, these startups will be well-equipped to handle anything the future throws their way.
(The author is Prashant Gupta, Founder & CEO, Caerus3 Advisors, and Think-Tank, and the views expressed in this article are his own)
