Chai stalls to unicorns: Revolution brewing in startups as funding winter dissipates

Fog on investments dissipating: India's vibrant and resilient startup ecosystem has weared many storms in last few years. recent one was funding winter as funds for ecosystem declined by a whopping 72 per cent to $7 billion in 2023, as per data intelligence platform Tracxn.  After braving many storms, re is a piece of good news for sector as prolonged funding winter for startups is slowly dissipating owing to a resilient spirit of innovation and support from policymakers.
 

India has over one lakh startups recognised by government. As per official data, Department for Promotion of Industry and Internal Tre (DPIIT) has recognised 92,683 entities as startups as on 28th February 2023. number presently is over 1.14 lakhs.

Notably, number has doubled year-on-year since launch of Startup India initiative in 2016. Startups saw a 207 per cent jump in 2022, with 26,542 startups recognised by government in contrast to 8,635 startups recognised in 2018.

Celebrating grassroots innovation

Veer Mishra, founder of jewellery savings app Plus feels day is for celebrating innovation in legacy as well as grassroot business forays.

"From chai stalls to unicorns, India's startup spirit is brewing a revolution. Celebrating National Startup Day is not just about applauding past giants, but igniting new sparks in every village, college, and garage.”

startup ecosystem in India was marred by a ‘winter wave’ from 2022, but is now seeing an uptick after a season of layoffs and scarce funding.

A Startup20 summit was also part of G20 Summit in July last year, highlighting importance of emerging startup ecosystem in India. But governance issues, slower funding flow in late-stage startups and rampant layoffs in ecosystem dwindled perception, and acted as a deceleration.

Resilient Growth

Vikram Gupta, Founder and Managing Partner, IvyCap Ventures said a substantial boost in liquidity and valuations is expected in late-stage startups.

“After overcoming challenges of 2023, resilient startups are well-positioned for success. Anticipating political stability and policy continuity from upcoming elections, a substantial boost in liquidity and valuations is expected, dressing funding gaps, particularly in late-stage funding (Series B, C, and D),” he said.

outlook for 2024 includes a hopeful increase in FDI, with promising sectors for investment encompassing healthtech, generative AI, fintech, B2B SaaS, and late Series opportunities in consumer sector. With numerous IPOs in preparation, startup ecosystem appears optimistic for year ahe, Gupta ded.

onset of cold wave in Norrn part of country presents a stark contrast to receding funding winter in India’s startup ecosystem, according to Rahul Gupta, Founder and Managing Partner of venture debt fund ValuAble.

“Despite a drastic drop in funding numbers, past year saw a shift in strategy, with existing and new funds raising fresh capital for to tune of 5 billion, leing to a surplus of $20 billion lying rey for deployment in early-stage ecosystem,” he said.

Amid dip in equity funding across all three stages – seed, growth and late, demand for venture debt funding has gone up tremendously to $1.2billion, he ded.

Policy Play and New Categories

Shashank Randev of 100X.VC said heartbeat of Indian innovation echoes resounding potential of startups, with ability to disrupt and offer transformative solutions for vast market.

“Just as data fuels engine of progress, in last dece alone - Indian startups have burgeoned, creating new category leers in an untapped market with Freshworks, Swiggy, Paytm, Veeba, Nykaa and so on,” he said.

Notably, several venture capitalists have turned investors to support ecosystem.

Shreedha Singh, Founder and CEO, TAC- Ayurveda Co, who is also an angel investor on Jio Cinema’s Indian Angels feels youth and government is taking charge of fostering a conductive environment for innovation.

“ increasing role of youth and government in taking charge and fostering a conducive environment for innovation… is crucial in nurturing a new generation of entrepreneurs and turning startups into engines of economic growth and job creation,” she said.

Our startups are not just local success stories; y are setting global benchmarks, she ded.

Highs and Lows

Fintech is holding pulse of investors in terms of startup investments for 2024, with Reserve Bank of India paving way for onboarding merchants on Business-to-Business fintech enablers Razorpay, Cashfree Payments, Paymate, EnKash among ors.

Nitya Sharma, founder and CEO of checkout network Simpl said, "In era of unbundling of e-commerce, startups play a vital role in creating a level playing field and bringing market access to millions for small businesses led by MSMEs and D2C merchants in country."

National Startup Day should set tone for growth of this ecosystem over next 10 years where governments, industry and acemia pool ir knowledge and resources for a digital-first nation, she ded.

Anand Agrawal, Co-Founder and CPTO of debt collection and resolution platform Credgenics said startup ecosystem is primed for a positive resurgence in 2024 despite a challenging 2023.

“Anticipated vancements in technology, increased investment opportunities, and a global economic recovery are likely to contribute to a more optimistic outlook," he said.

Challenges and Pivots

Startups in emerging categories like gaming saw policy regulations impact services, and employability. But resilience in sector has paved way for pivots.

Ashwin Suresh, founder of homegrown game streaming platform Loco said industry's forward-looking approach, coupled with a commitment to staying at forefront of technological vancements, sets stage for sustained success, making India a key player in global gaming arena.

Sudeep Kulkarni, founder of Game ory said startups suffered from unrealistic expectations that trends of 2021 and 2022 would continue in 2023 which didn’t happen.

“ milestones got more detailed and focused and mindless hiring in hope of accessing more capital in 2023 suffered. businesses h to relook at ir burn rates and monitor ir cash runway closely and startups that did this managed to not just survive but also raise ditional capital for realigned growth goals.”

present year is interesting in proving some of business cases, he ded.