No Funding Winter For Early-Stage Startups

In the HBO medieval fantasy television series Game of Thrones, a famous saying is,“Winter is coming”, which means something terrible will happen.

- Dhianu Das

The phrase ‘funding winter’ refers to when there is a decrease in capital inflow from the top. Hence there is a lower probability of startups achieving high valuations in the short to middle term. Such a situation is bad news for startups which focus on acquiring more customers without a clear path to profitability, as investors tend to shun such startups because they are wary of investing in them. Hence, a funding winter does not mean that funding for startups has dried up but that it is more difficult for startups to raise funds. During a funding winter, VCs may have dry powder with them, but they are more selective before loosening their purse strings.

There has been a lot of talk about a funding winter in startup circles. 2020 and 2021 were great years for startups as far as raising funds were concerned. Despite the devastating second wave of Covid, the startups did not face any challenges while raising funds.

It is essential to understand that public and private financial markets go through cycles. Many factors like the Russia-Ukraine war, rising inflation and interest rates in the US and severe supply chain disruptions have resulted in fears of a recession. Naturally, it has had its impact on startup funding too.

Steep Fall in Funding