WATCHING EVERY PENNY

WITH VCs GROWING WEARY OF CASH-BURNING START-UPS AND FOUNDERS WATCHING EVERY PENNY THEY SPEND, LAY-OFFS, HIRING FREEZE AND COST-CUTTING ARE BACK ON CENTRE STAGE

- BINU PAUL

“INDIA IS NOW home to 75,000 start-ups in the 75th year of Independence and this is only the beginning,” Union Minister Piyush Goyal tweeted on Wednesday, August 3. The growth of India’s start-up landscape over the past decade has been outstanding and impressive. The third largest start-up ecosystem in the world smashed all previous records of funding volumes and unicorn creation in 2021.

Come 2022, the growth machine has slowed to a grinding halt. Entrepreneurs are waking up to the virtue of frugality once again, as easy money dries up and venture capital tumbles. This July, Unacademy Cofounder and CEO Gaurav Munjal said the company must “embrace frugality” as a core value to become cash-flow positive. “Until now we have never had frugality as one of our core values. Honestly, since we were focussed on growth and the fact that we had raised millions of dollars of capital it [frugality] wasn’t a priority,” he wrote.

Munjal isn’t alone. The call for frugality is now heard echoing across the start-up landscape. Most start-ups are unprofitable. In a growth market, investors fund them to scale up first before aiming for profitability. However, a combination of global macro events including rising inflation, supply chain disruptions due to Covid-19 and the Ukraine conflict, and the ongoing correction in public markets have brought a degree of caution. Consequently, investors are reminding companies that ‘cash is king’ and it’s time they conserve cash and extend the runway as far as possible.