Indian start-ups are bracing for lean times as the industry moves further into 2023. With investors now focussed on profitability while pinching their pennies, late-stage start-ups will experience more flat or down rounds in the days ahead, states a report by Bain & Company. The industry might also see an uptick in mergers and acquisitions (M&As) in some sectors, the report adds.
After a stellar year in 2021, venture capital deal value dropped last year—from $38.5 billion to $25.7 billion—amid a global slowdown. This year, too, with the challenging funding environment, investors are expected to re-evaluate their portfolios and save capital. This, according to the India Venture Capital Report 2023, may lead to consolidation, especially in the fintech and B2B e-commerce (house of brands) sectors. Public market exits (IPOs) of tech start-ups are also anticipated to remain muted throughout the year.
“Overall, there is a lot of dry powder left in the market, so capital is not a challenge; it is the allocation. Investors will back businesses that are positive at gross contribution level and start-ups will push for that,” says Abhishek Agarwal, Founder and Managing Partner at Rockstud Capital, an alternative asset management firm. Overall, it is going to be a “mixed year”. “I do expect some casualties, but businesses that are profitable or have inherent capabilities to be profitable will gain investor confidence,” he adds.
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