START-UPS REWORK PLANS TO BEAT FUNDING BLUES

Profitability over growth is the new mantra as start-ups course-correct to keep the funding tap on.

- ASMITA DEY

TODAY, WE HAD TO make the difficult decision of parting ways with 20% of our talented teammates. We want to ensure that we help the impacted people in this transition respectfully,” Ankush Sachdeva, co-founder & CEO of ShareChat and Moj said in a Linkedin post in January. This was the company’s second round of layoffs after December (that had impacted 5% of the workforce) as parent Mohalla Tech joined a battery of start-ups scurrying to cut costs to survive in what is turning out to be a long funding winter triggered by rising interest rates and looming recession. Data from market research firm Tracxn shows funding for start-ups declined 37% from a record $42.4 billion in 2021 to $26.6 billion in 2022. In January this year, startups raised $944.2 million, 78% less than $4.3 billion in January 2022. “Even good companies may die in this downturn as investors are not willing to bet only on a company’s potential,” says Ritesh Banglani, partner, Stellaris Venture Partners.

This does not mean investors are not scouting for deals. More than $20 billion raised for India is yet to be deployed, but as Vinay Singh, partner at Fireside Ventures, points out, “The bar on investing big bucks has been raised.” The pandemic-led spurt in digital adoption had attracted massive funds to start-ups. But the trend has been short-lived. The narrative has shifted from growth at all costs to positive unit economics and path to profitability. “The year 2023 will be hard, inflation will be stubborn, series C+ (growth stage start-ups) will still get investments but bar for quality in terms of margins and profitability will be very high,” says Singh.