A New Roadmap
Are VCs changing their narrative from growth to profitability
Back in 2015, there were roughly 142 unicorns in the world and in 2022, India got its 100th unicorn. In the first quarter of 2022, global venture funding totaled an estimated $195 billion. The investments in startups last year were in the north of $42 billion in India. If an idea is a foundation, then VC investments are the pillar for a startup. However, we are seeing a real-step change toward VCs investing in seeking out startups with a clear mission and ROI mindset. Effective articulating everything from product roadmap to brand identity and clear growth objectives with a profitability mindset and opinion on key issues like sustainability are key to raising VC funds in 2022 and beyond. For the time being it looks like the startup's time of burning money and chasing huge valuations has ended. It's not enough to simply have a good story; it's critical that the company's leadership can both tell it and back it up.
Reports have come in that the funds raised by overall Indian startups as well as growth-stage startups fell to their lowest in May 2022 during the year. 'Funding Winter', as many are dubbing it suggests that deal speed could be slow with post-pandemic open-ups, recessionary trends, VC investors conducting more due diligence related to potential deals, and a renewed focus on late-stage deals that could create challenges for startups looking to attract seed and early-stage investments. It implies competition for funding will be at an all-time high. Fintech, AI and D2C were three of the biggest standouts in 2021-22 but the next 12 months open the door for a host of new companies and funds to ride the wave of Web3 and climate tech. On the other hand, the hard-hit sector in this phase is the edtech environs, where companies have had to substantially shed down their workforce to keep going. A deeper study, however, suggests that correction in valuation is not the only thing that requires rectification in the edtech environs. On the basis of multiple consumer accounts, reports and a government advisory as well, we have been able to track down the various issues that plague the rapidly growing industry, further, we interact with the big companies in edtech to understand how the industry as a unit is trying to overcome these issues.
Also, the current 'funding winter' has witnessed startups laying off as many as 10,000 employees so far. However, the reception of layoffs has been different across companies. While the lays at American mortgage firm Better were met with a lot of noise and criticism, it wasn't the same at Indian edtech giant Vedantu. This is despite the fact that both laid off the same number of employees. What could be the reason? Is there a right way to hand over the pink slip? You could read that in this edition.
The edition also looks into how tech giants are betting big on metaverse hardware. In May 2022, Meta opened its first hardware store to showcase its hardware projects like Quest 2. The brick-and-mortar store has set the wheel in motion. It's a billion-dollar opportunity. Are Indian players ready to seize it?
(This article was first published in the July 2022 issue of Entrepreneur Magazine. To subscribe, click here)