As the Indian startup ecosystem saw a 72 percent (USD 19.7 billion) fall in investment during the first half of 2023 as compared to 2022 in the same period, entrepreneurs are finding it increasingly difficult to get the funding they need for growth and development.
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Due to the funding crisis, this year's startup pitching has undergone a major shift, with a stronger emphasis now being placed on cost structures, profitability, and unit economics.
The startup environment has recently slowed down, which has resulted in fewer VC funding and slower growth, creating a vicious cycle. Unfortunately, the first casualties of this crisis have been layoffs across various sectors. However, it's important to keep in mind that a similar or worse situation existed at the height of the Covid-19 outbreak, and the resilient business models survived that time unharmed.
The era of easy and abundant capital is over so it is essential for startups to exhibit strong fundamentals and sound strategy during this funding winter.
In this current environment, traditional sources of financing are less willing to invest, leaving entrepreneurs in need of assistance. Venture debt provides a viable alternative that enables startups to receive finance without reducing their ownership equity.
The funding winter has given domestic venture capital firms a rare chance to demonstrate their adaptability and resilience. During these difficult times, new strategies and crucial maxims have emerged, changing the financial landscape.
In 2023, investments in early-stage businesses have increased significantly. This is a result of tier-I venture capitalists taking a more cautious approach in their search for businesses with good unit economics and the potential to become profitable in the upcoming years.
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, says Kavit Sutariya, general partner, Capfort Ventures
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Each funding round comes at different stages of a startup's growth, with different conditions and expectations
These investors have nestled themselves between accelerators, incubators, and the larger VC ecosystem, says BlackSoil's Ankur Bansal
Pitching ideas is an important skill that an entrepreneur should have, be it to investors or to potential employees