Amid headwinds, pockets of opportunities for funding innovative, disruptive startups remain: Experts
Early-stage funds will keep a watchful eye on key metrics like path-to-profitability, team and governance, cash flow cycles, and debtor days and guard against over-dependence of ventures on a single client when making investment decisions, experts said while speaking at an investor panel during TiECON Pune 2022 'Future Achievers Conclave'.
The challenging macro environment is set to throw up pockets of opportunities for startups and investors, and funds despite tightening their purse strings will be keen on bargain-hunting for innovative and disruptive technology ventures, according to industry experts.
Early-stage funds will keep a watchful eye on key metrics like path-to-profitability, team and governance, cash flow cycles, and debtor days and guard against over-dependence of ventures on a single client when making investment decisions, experts said while speaking at an investor panel during TiECON Pune 2022 'Future Achievers Conclave'.
"In these tough times, tech is a big enabler for improving profitability or enhancing the ability to drive revenues. We do see better adoption of tech by enterprises and expect some of our portfolio companies to do even better in these difficult times," Abhishek Prasad, Managing Partner of Cornerstone Ventures (CSVP Fund), said during the panel discussion.
Anil Gudibande, the co-founder of 1Crowd, said it is 'back to basics' for many funds, and that some of the better outcomes are expected from their deep tech investments.
1Crowd is an equity crowdfunding platform, focused on connecting investors with Indian startups and early-stage ventures, with an array of capital solutions and co-investment commitment.
For a startup, with a promising business idea, 1Crowd not only helps raise capital but also provides access to a pool of mentors and partners who can help nurture the business to its potential.
Nidhi Saraf, founder and CEO of Key Venture, while speaking at the event, noted that evaluation metrics and rigour have changed, and startups, which are merely replicating services or products, will find it difficult.
"Tough questions are being asked, and plain vanilla model or just replicating a service is no longer acceptable," Saraf said.
The irrational exuberance and quick term sheets that followed investment decisions will be replaced by greater rigour and scrutiny going forward, amid growing apprehension over 'funding winter' or downcast investor sentiments towards funding startups.
According to the panellists, technology that fuels non-discretionary consumer spending, disrupts markets, or yields cost savings and productivity for enterprises will be attractive.
The comments come at a time when investments and venture capital deal volumes in the startup space have started to taper as global investors turn wary of committing large cheques amid uncertain market conditions.
Click here to know Anil Singhvi's strategy for today
After a dream run and heady valuations in the past years, the wave of venture capital chasing the Indian startup ecosystem (the third largest startup ecosystem in the world) appears to be ebbing, mirroring slowdown headwinds in Western markets. Spooked by concerns over profitability, cash burn and corporate governance issues, global investors are raising their guard, while market corrections have taken the sheen off some newly-listed startups.
Creation of value needs to be a priority for entrepreneurs before they worry about valuations, Gudibande of 1Crowd said, observing that investing is a game of patience. Startups that chase disruptive models to address gaps in areas like financial inclusion, education, healthcare and infrastructure will be attractive, besides sophisticated technology for niche applications.
CSVP Fund expects the next few months to yield pockets of opportunities as valuations turn more realistic.
"Given our pre-series A, Series A stage funding, times will get exciting for us. Over the next 12 months, negotiations will be easier and valuations will get more realistic for us," said Prasad of CSVP Fund, a 50 million dollar fund that has been in operation for about three years with 15 portfolio companies.
It has invested in enterprises SAAS (Software as a Service) space.
Ganesh Natarajan, Conference Chair - TiECON believes that in a "time to get real", the path to scale profitable revenues and garner market and opportunity share, should be the key factor.
His advice to young entrepreneurs concerned about the market correction is: "Conserve capital and use the slow period to establish product-market connect".
Prominent angel investors, startup funds, entrepreneurs and industry thought-leaders converged at the 'Future Achievers Conclave', the two-day event that concluded on Saturday.
The conclave hosted multiple sessions and masterclasses, with extensive discussions around pathways to accelerated growth and value creation for entrepreneurs in 2023 and beyond, and debated innovative ways of partnering, fundraising and people hiring.
Click here to get more stock market updates I Zee Business Live
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
IRCTC Dividend 2024: Railway PSU announces 200% interim dividend - Check record date and other details
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
08:58 AM IST