“Recession is the best time to start a company,” Baskar Subramanian, CEO and Co-founder of media-tech unicorn Amagi, repeats the often-stated assertion and substantiates with his own story. Subramanian, along with his long-term colleagues Srinivasan K A and Srividhya Srinivasan, founded Amagi Media Labs, a cloud-based broadcast network, in 2008, in the thick of global recession.
“In 2008, we truly felt we can disrupt the market. We were in the television business, doing geo-targeted advertising. In a normal scenario, when channels running full on inventory, they wouldn’t have listened to a start-up like us. In 2008, they were all trying to sell the inventory, that’s why the opportunity opened up. This helped us a lot in terms of fruition of our thesis. We could actually meet CEOs of all the TV channels in India which as a small company, we would’ve been able to do in a bubble environment,” he says.
Amagi has gone on to build a next-generation media technology company that provides cloud broadcast and targeted advertising solutions to broadcast TV and streaming TV platforms. It raised several rounds of investments and is now valued at $1.4 billion.
“During a recession, the competition for innovation is lesser. Most of the large companies are actually shutting down their innovation, that’s the first thing they will shut down because they want to focus on their core businesses,” Subramanian adds.
Varun Dua, who founded insurtech firm Acko, during the peak of 2016 start-up bloodshed, says entrepreneurs with deep understanding of their respective space and a long-term vision will find early backers.
“Our early investors appreciated the fact that we aren’t building something for 1-2 years. The outlook was that if everything goes to plan and if we execute well, this is a very large opportunity that can be materialized in half a decade or one. So, you are really not looking at that particular downturn. You understand it’s going to be a tough market for the next few quarters and it means is that you have to be a lot more frugal,” he says.
The company raised one of the largest seed rounds at the time -- $30 million -- as regulatory guidelines required to show at least $20 million to set up an insurance company. Achieving regulatory clearance was the first major milestone for the Acko. Dua said the management, in alignment with its investors and board, decided that the company will not spend more than 10 per cent of the capital raised till it gets regulatory clearance.
He says the lack of distraction is a critical attraction for early-stage start-ups. “With that decision, we de-risked everyone. We delayed hiring, we ran with a very small team. The biggest advantage of starting at a downturn is much lesser competition. But if you are trying to do a fad business, on themes that are suddenly playing out and attracting lots of capital, following global trends, they’re likely to dry out quickly. I think if people have their own purposeful journeys where they are really trying to solve an issue in a space that they deeply understand, there will be capital available even in downturn,” he adds.
Investors tend to agree with Subramanian and Dua.
“Even with the evolving macro factors and funding environment, it is probably the best time to build. Start-ups need to focus on the two most important things - building solid teams and having a grip on their unit economics. Experiments take time and finding PMF is an iterative process. It's much better to take an additional few months to perfect the value proposition and find the right customer rather than spend too much time trying to scale prematurely,” Maanav Sagar, co-manager at Bharat Founders Fund, says.
Shyam Menon, Partner and Co-founder of Bharat Innovations Fund, says start-ups ought to be careful with their spends as new rounds may take longer than usual as due diligence would take more time than before because funds may want to get more clarity on the product market fit, unit economics, costs associated with scaling before they commit.
Abhimanyu Bisht, CEO of Venture Catalysts anticipates start-up contribution to GDP to grow to 10 per cent over the next decade from current 3 per cent while Manu Rikhye, Partner, Merak Ventures, warned that the start-up ecosystem is expected to continue to be chaotic and noisy in 2023 and that it is crucial for all start-ups' to keep track of every penny spent on the company and compare it to the potential impact.
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