No Dearth of Capital, But Entrepreneurs Need to Factor in Reality Investors give a peek into the reality of funding this year
By Deepa Vaidya •
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
While it is not openly recognised as one, all are agreeing on an 'off-the-record' recession. Investors and entrepreneurs cannot help, but reminisce on the year 2021, the year that saw 44 unicorns and when valuations were high. Going by the current situation, it will be some time before we see the next unicorn. Here is what investors have to say about funding this year.
Says Siddharth Pai, Managing Partner, 3one4 Capital says, "I think it's going to be a slow boil for this year. We are going to go back to a more steady state growth. I think it's important that everyone accepts and internalises that, starts creating business plans/models as well as revenue models that adhere to this, rather than actually holding on to something that is not going to come into reality anytime in the near future."
On how 2023 is shaping up in terms of start-up investment, says Vinod Murali, Managing Partner, Alteria Capital, "Viewing from a venture debt's perspective, it's a great time, apart from what's happened in the global markets. There's a lot more discipline, a lot more hygiene in companies and everybody's looking at balance sheets right now. The base foundation, the quality of start-ups/founders, the strength of the market, the most capital we have ever had all of that is here. However, rounds will take more time this year, there will be fewer unicorns this year, we have got to learn to be a little bit more patient. Once we embrace that, I think things get a lot more sane, which is happening today."
Adds Vikram Gupta, Founder & Managing Partner, IvyCap Ventures, "We are long term investors, looking at a 6-7 year holding period. So for us, it is the best opportunity actually when the mindset is now subdued in terms of valuations."
On how is it impacting the profitability of their startups in their portfolio, says Vaibhav Domkundwar, Founder, Better Capital, "I think at scale, because of what has happened, and the choices that we made, the founders we partnered with, it wasn't as hard to just kind of readjust to the new reality. I think that process essentially helps you focus on building the right business and profitability is a part of it."
Adds Gupta, "Founders' mindsets have changed quite substantially. There's a rationality that has kicked in and this is a very healthy correction. Eventually there is going to be an overall positive impact on the system. So, I think there is a profitability mindset, which is important, as compared to the profitability itself."
What can founders expect now? Says Ashish Sharma, Managing Partner, Innoven Capital, "I think you need to understand what space you are in, what is the size of the price in terms of the market opportunity. So every company doesn't need to become a unicorn."
Says Murali, "We look for clarity of thought, in strategy and most importantly if they are built for this journey."
As for Pai, "An entrepreneur's unique ability is to create new companies and add value. But they should not fail to see the inherent flaws of their model."
Domkundwar opines, "They have to be super-prepared when going in for fund-raising and assess if they are the best team working on the best idea right now."
Adds Gupta, "Be genuinely passionate about the problem you are solving."
The above discussion was part of the panel which took place at the Entrepreneur Tech & Innovation Summit in Bangalore.
