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Startup Ecosystem Has Changed For Good But VCs Need to Stop Pushing for Marketless Unicorns India saw a blossoming and over-optimistic series of funding take place in 2021. However, since late 2022, the number of funding rounds and the number of unicorns made have declined. So, what is the way ahead?

By Paromita Gupta

Opinions expressed by Entrepreneur contributors are their own.

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Rajesh Raju, MD, Kalaari Capital; Akshay Chaturvedi, Founder and CEO, Leverage Edu; Deepthi Ravula, CEO, WE Hub; and Punita Sabharwal, Deputy Editor, Entrepreneur India

On an average day in the 1960s, if expressed their desire to start a business of their own, they'd be ridiculed and dismissed. The same response would have been received in 2006 as well, but not anymore. In 2023, the world, particularly India, has become more evolved and welcoming to the idea of becoming an entrepreneur and starting your own venture.

India boasts of having 1,12,718 DPIIT-recognized startups across 763 districts as of October 3rd 2023. And these young founders and their startups are set to play an essential role in fulfilling India's vision of becoming a USD 5 trillion economy.

Aligning with the country vision, Indian School of Business (ISB) hosted its fifth edition of the Abhyudaya, an annual flagship event of ISB PGPpro, which aims to bring together industry leaders, academicians, peers, and alums under one roof to share insights on the everchanging indsutry trends, challenges, and opportunities. This edition which took place on October 21-22 was centered on the theme "Redefining Possibilities: Embracing Disruption and Embracing Sustainability."

During a panel discussion on 'The Future of Startup Ecosystem in India' at ISB's Abhyudaya 23, the panellists discussed what is working for the players, what are the challenges in the startup world, and the way ahead.

The panel was moderated by Punita Sabharwal, Deputy Editor, Entrepreneur India and comprised of Rajesh Raju, MD, Kalaari Capital; Akshay Chaturvedi, Founder and CEO, Leverage Edu; and Deepthi Ravula, CEO, WE Hub.

The entrepreneur mindset

Deepthi Ravula, CEO, WE Hub feels that if someone wants to be in the limelight, they should not become an entrepreneur. "Because that is the biggest challenge we in the government always feel. As a government, we work with all kinds of entrepreneurs. When somebody comes to us, we are always happy to help. But if the intention is not to build a company which will become a brand in itself, but to just be there, be a part of the ride for a little bit of time, I think that is the first challenge we see on this side," shares Ravula.

The second biggest challenge faced is entrepreneurs having a tunnel vision of what they are building, "They do not notice what is around them." She feels that entrepreneurship, innovation and profit don't have a gender.

Funding: then and now

India saw a blossoming and over-optimistic series of funding take place in 2021. However, since late 2022, the number of funding rounds and the number of unicorns made have declined. On answering whether his and Kalaari's investment thesis has changed, Rajesh Raju, MD, Kalaari Capital answers with a no. "We look at all these down cycles as great opportunities because we get fundamentally solid valuations, what we think are the right valuations. Series A valuations used to be between USD 7 to 15 million. Now they've gone to USD 20- 30 million. They are extremely risky investments, they do fail and it's okay. But if you are going to have some winners, you need to have a decent stake as VC for backing all these risky assets. I think the valuation range is much more reasonable today," he notes.

Views on Edtech

The overall funding has dipped drastically when compared to previous quarters and years. But edtech has been slammed in the face with the Byju's crisis. Akshay Chaturvedi's Leverage Edu was one of the lucky players to have raised funds in 2021.

"We raised our Series B when we were called an edtech when it was very hot. We raised funds in 15-20 days. I never raised money so easily in life in 2021. And there was a series C which we raised which took a while. Where I had to meet 4x the number of investors and talk very fundamentally about the business. We were among the few companies who were able to raise money in 2023 because people had segregated us in a category where they thought whether the next round in the category will happen or not," shares Akshay Chaturvedi, Founder and CEO, Leverage Edu.

The unicorn phenomenon

2021 saw the creation of 45 unicorns alone. 2023 has seen just one so far. Is the race to become a unicorn halted for good? Market sentiments and investors feel that funding winter is a blessing in disguise for the Indian startup ecosystem. "Making mistakes is not a problem but trying to push an entrepreneur to create their unicorns when there is no true market is a mistake. And VCs do it all the time. And that brings down the entire ecosystem," adds Raju.

"We don't believe in being a unicorn. Being a unicorn does not benefit anybody" be it employees or investors," backs Chaturvedi.

Paromita Gupta

Features Writer with Entrepreneur India

Covering news and trends in AI and Metaverse segments. An avid book reader running her personal blog on the side. You may reach me at 
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