National Start-up Day: Founders see consolidation, organic growth, sustainable biz models picking up in 2023

A year ago, while interacting with startups at the ‘Startup India Innovation Week’ organized by the Department for Promotion of Industry and Internal Trade (DPIIT), Prime Minister Narendra Modi had declared January 16 as National Startup Day. India had just come out of the highs of 2021 — adding a record 44 unicorns and raising $62.7 billion in private equity and venture capital investments — and it seemed like startups could do no wrong. 

Then came the funding slowdown of 2022, triggered by global macroeconomic pressures. Despite that, India managed to add 22 unicorns in 2022, emerging as the world’s third-largest startup ecosystem, trailing only the US and China. The question on everyone’s mind right now is: How will 2023 turn out to be?

Business Today reached out to a bunch of founders for their views.

Saahil Goel, Co-founder & CEO, Shiprocket (which became a unicorn last year), said, “I believe the upcoming year is going to be the one where profitability and scalability will be a major focus for the investors. The expansive funding spree has seen its end, which means the ecosystem might even stare at the deepening of this funding winter in 2023.”

Goel’s advice to startups is to “revisit the basics” and “strengthen the foundations”. “A transparent and clear path towards profitability, along with sustainable business models will definitely work,” he said.

Most founders agree that reckless growth at all costs must end. In its place, startups need to focus on steady, organic growth.

Sampad Swain, CEO, Instamojo, said, “The overall downturn in access to capital has been looming large, and therefore, the need of the hour is to venture into sustained business models by lowering direct and indirect costs that can bring back focus on the total cost of ownership (TCO). While the expectation out of matured startups would be improvements in overall margin structures coupled with better cost optimization, early-stage startups need to move the needle in driving topline growth via organic means, rather than inorganic routes such as advertisements et al.”

Yes, startups are tough, and after the mass layoffs in 2022, many youngsters are opting out of them in favour of more secure jobs. But entrepreneurs believe startups are still critical for job creation. 

Anmol Singh Jaggi, CEO and Co-founder of electric cab-hailing service BluSmart, said: “The ecosystem has reached a stage where startups have become a serious contender for jobseekers and are also going to play a pivotal role in helping India achieve its goal of becoming a $5 trillion economy by 2025. In that light, it is important to think about startups as any other company and support the wealth creation opportunity [they create] for youth.”

Echoing Jaggi, Harsh Pokharna, CEO and Co-Founder of OkCredit, said, "By generating several new job opportunities and revolutionising many industries, the ecosystem has helped us penetrate pristine regions with innovative technology. The Startup20 initiative announced during the G20 Summit is a step in the right direction to facilitate the necessary collaboration."

"We also believe the year 2023 will witness many women-led companies," he added.

Many founders reckon that consolidation would be a theme this year. Given the paucity of free-flowing venture capital, many small- to mid-stage start-ups might find it harder to raise cash on their favourable terms, thus selling out to larger competitors, or even corporates.

Vidyarthi Baddireddy, CEO and Co-founder of PickMyWork, said, “​​The funding crunch will drive more M&A activity in 2023 as both founders and investors may rush to protect existing valuations. Or startups would have to restructure their costs to improve cash flow and prepare for down rounds in 2023 because of the funding winter.”

“We should also keep in mind that the investors are more inclined in putting money where the burn is low and the invested capital can be recovered in a designated period of time,” he added. 

While some concerns around fundraising remain, given the effects of the global slowdown are still trickling down in India, the overall mood is one of cautious optimism. “Indian start-ups have shown great tenacity, resilience, and flexibility in adopting technology. A progressive policy framework, provisions for 5G infrastructure and strengthening of digital payments will propel this growth,” a spokesperson from Dream11-parent Dream Sports (one of India’s profitable unicorns) stated. 

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