Is Funding Winter Coming To an End? Startup funding winter to pass in 6-12 months, says Redseer survey
By S Shanthi •
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There is always light at the end of the tunnel. Strategy consultancy firm Redseer's latest study has come as a piece of good news to scores of entrepreneurs. In a survey of investors conducted in June 2023, the firm has found out that 50% of investors expect the funding spring to return over the next 6-12 months.
The report reveals that the expectation with funding patterns so far is that 2023 will revert to the long-term trends in line with the years CY17 to CY20, and hover between $12 to $15 Bn, beyond which it is expected to be bullish into CY24 and touch $15-20 Bn. "The number of funding deals that dropped early in CY23 to 700-900 deals from 1,519 deals in CY22 is also expected to shoot back in CY24 to 1,000-1,200 deals," it says.
We at Entrepreneur India had also reached out to many VCs in March this year asking them to share their thoughts on how close we are to funding summer. And, here is what they had to say.
"Until the VCs get exit from big startups they will not be able to fund B+ series for other growing startups," said Dixit. "2023 will be another year of tight money, and startups that can cockroach (streamline processes, reach profitability and generate positive cash flow) will become the new unicorns when the macro environment improves," said Jinesh Shah, managing partner, Omnivore.
They also said that while it's hard to predict when funding for growth-stage startups will return to normal, there is surely dry powder and investors will use it diligently. According to global alternative assets data specialist Preqin, VCs globally are sitting on a record $534 billion of dry powder, that is, capital available with VCs but not deployed yet.
"Investors know that we are past the bottom of startup funding. Hence, it's a good time to enter into startups, especially in the early stages, which will form the bedrock for the next wave of unicorns in the coming decade. Early-stage funding has been on the path to resurgence, as we see that a lot of deals have happened in the past 6–8 weeks. Meanwhile, late-stage rounds have also started to pick up recently," said Kavit Sutariya, general partner, Capfort Ventures, in an interview in April this year.
Anup Jain, managing partner, Orios told us in March that early-stage will continue to see a positive trend. "This is because valuations have turned more realistic and funds can take more bets at lower risk than in 2021. In the growth stage, I am of the opinion that we will see more M&As or consolidation before we see the new entities getting funded again," he said.
The Redseer report also reveals that VCs today have more dry powder than ever and also signaling a positive outlook are the total number of deals this year, 90% of which are likely to be seed or early-stage deals similar in trend with what was seen since CY17.
