Startup funding ecosystem in correction mode

New Delhi: Corrections are now happening in the start-up funding ecosystem, with a higher degree of accountability to show the route to profit, which is a good step for the industry, according to Marico Chairman and leading entrepreneur Harsh Mariwala.

With the funding environment tightened, now only the best proposal from start-ups can attract funds. Now, most of the funders are saying "I just do not want to look at growth, but I also want to see when you will start contributing to the bottom line, which is a good development," Mariwala told PTI.

"Just growing for the sake of growing without any visibility of profit is not a good business in my opinion. At some stage the business has to turn profitable," he added. In the current difficult situation, when the funding environment is tightened, now only the best proposal can attract funds, said Mariwla, adding earlier "too much of funding" was happening.

"In a way, things were too good for entrepreneurs, and many of the entrepreneurs could easily get funds and they started splurging and burning money. But now I think there is a higher degree of accountability to show the route to profitability," he added.

Mariwala further said the time frames compared to the earlier days have increased, which is fine because the scaling of the business is high and the growth rate is much higher.

"But you can't have indefinite periods of no profitability. There has to be some road map for achieving profitability and I think most of the funders are demanding that, which is a good thing compared to an earlier time when the demand on profit was much, much weaker and lesser," he added.

In the earlier environment, everybody was funding because there was a 'craze for funding', but that has got some degree of correction now in the recent past, he added. "Earlier it was too much of funding and maybe now (there is) a correction which is happening. I am sure if you have a good proposition, you will get funds. It is not that the funds completely dried up. But the funds are far more selective now," he added. When asked about the difficulties faced by the new-age entrepreneurs, Mariwala said unique businesses should definitely get funding.

"I would not say (funding has not) dried up, but it is getting tighter in terms of ability to get funds," said Mariwala adding "If you have a unique story, if you have a good story, people will be there to back you. But if you do not have, or have an average story and if you are a me-too player, then you will find it difficult to get funds."

While talking about Marico, he said it has made three acquisitions in D2C space and would help them to scale up. "The biggest benefit we can get them is in terms of physical distribution. Many times, for these smaller firms, it is too expensive for them to scale up through the physical route and also may be the funds also as there are impact because of the tightened funding Environment.