‘Funding winter a blessing for startups’

Bengaluru Indian entrepreneurs shouldn’t chase valuation, rather should build sustainable and profitable businesses in the long-run. These were the words of Vineet Rai, Founder of the Aavishkaar Group- the PE fund that invests in social impact-related ventures.

Addressing the gathering at the second India Startup Festival in Bengaluru on Thursday, Raialso has a word of caution for investors. He advised investors to provide active mentoring along with facilitation of their network than only investing capital in the startups.

He stressed that rural innovation can be scaled up easily in a country like India because of the sheer size of the economy.

“Indian economy has reached multi-trillion dollar mark on its own. While 65 per cent of our people live in rural India, around 20 million enterprises are non-farm based in rural India. That is more than all the enterprises in urban India. The opportunity is that the scale of trillion dollar is high, while the challenges like very fragmented market, small wallet size, and less technology intervention. That’s where the opportunity lies,” Rai said.

“Technology is a very critical aspect for rural innovation. Similarly, entrepreneurs should focus on governance. Governance is the protection for entrepreneurs. Good and sound governance protect you from the risks that you don’t know of. Building business is not only about making money, but it is also about building credibility. Focus on building sustainable and profitable ventures not necessarily chasing valuation. Honesty, transparency, and integrity are the only ways to buy credibility. Also, keep capital as an option. If you can remain bootstrapped, then remain so,” he added.

India Startup Festival, which kickstarted from today saw participation of more than 100 startups along with several key investors from both VC, PE firms along with HNIs (high net worth individuals).

The festival will conduct several seminars till August 12 in which around 20 startups will be selected for active mentoring with funding opportunities. Some other investors also opined that current funding winter is a boon in disguise for the Indian startup ecosystem.

“VC ecosystem has matured in India over the years. Current funding winter is blessing for companies to achieve sustainable growth,”Prasanth Prakash, Managing Partner of Accel said.

Giving an example of impact of the funding winter on startups, Prakash pointed out that many companies have reduced losses and have reported profits or are on their way to achieve the same.

While food delivery platform Zomato posted its maiden profit in 15 years in the first quarter earning of FY24, Paytm losses were down by 90 per cent during this period.

“Historically, consumer, fintech, & SaaS have been the fore-runners in the VC world. However, this is changing with emergence of new spaces like agritech, climate-tech, B2B ecosystem. Agriculture itself is a big enough opportunity with a market size of $500 billion,” Prakash added.

Similarly, Murali Vullaganti, Founder & CEO of PeopleShores-a US-based public benefit corporation- said, India requires impact investment that can bring in innovation in the agriculture sector.