The startup ecosystem in India is in the thick of the funding winter, with prevailing conditions indicating no sunny days ahead.
The global economic slump, the ongoing Russia-Ukraine war, and the unsatisfactory performance of a few late-stage Indian startups which went the IPO route have dampened the investors’ spirit.
The funding in Indian startups dropped by a massive 80% (year-on-year) in the third quarter (July-September period) in 2022 , as per a report by market intelligence platform Tracxn. Indian startups raised $3 billion in the quarter that ended in September, down 57% from the previous quarter, it said.
At the recently-concluded Nasscom Product Conclave 2022, Rajan Anandan, managing director at Sequoia Capital, said that the exuberance of valuations, deal velocity, and the pace of transactions of 2021 will not come back for a long time.
How do startups cope with the somber outlook?
In an interaction with People Matters, Yamini Bhat, co-founder and CEO, Vymo, a sales engagement platform to improve sales productivity and engagement effectiveness for financial institutions, shares five suggestions that can keep you going this funding winter.
Recognised as a thought leader in driving sales transformation for enterprises, Bhat is one of the few women forerunners in the enterprise SaaS industry. Prior to this, she was an engagement manager with McKinsey and Company, wherein she spent over 5 years working across markets such as the US, South-East Asia, and India.
Scan your cost levers
Take a hard look at the cost levers. Find operational improvements that you can implement immediately and extend your runway. Examine overhead spending and spot the gaps; identify spends that can be put off for later. Do you need an extra floor of office space, considering most of your team is remote? Can you defer conducting an event for later?
Inactive software licenses that you continue to pay for; weed those out. Strategise to develop a low-cost/no-cost marketing strategy during these times and focus on pushing existing leads to conversion.
Invest capacity into scalability levers
Invest capabilities into activities that will help you scale without incremental operating costs. Consider reducing support costs, digitizing manual journeys, automating repetitive tasks and digitally enabling your workforce and customers. This will also empower your teams, freeing them up of repetitive tasks and allowing them to focus on core activities that can bring in revenues.
Automation also prepares startups to scale up rapidly once the market outlook improves.
Focus on retaining your employees and catalyse learning and development to ensure that your team is learning, growing, and in turn, contributing to customer delight. This approach builds a resilient culture within the organization, and you gain the trust and loyalty of customers.
While you cannot completely cap hiring, maintain caution while adding to your team and give out an offer letter only if growth depends on this hire.
Play to your strength
Underline your value proposition. Your product must feature as a 'must have' for customers and consider their near-term priorities. Try to park experiments and revisit them later. For example, see if you can get a foot in the door of large enterprises which will bring in revenues. While the initial challenges will seem insurmountable, if you have a compelling value proposition on the table, that can clinch it for you.
Also, sustain a keen focus on developing and fine-tuning your product based on user feedback to make it hard for a customer not to have.
Act when you see an opportunity
While you can take a conservative approach to experiments, look out for an opportunity that you have always wanted. If you have 18-24 months of runway sorted, take the plunge after calculated risks. Because once the cold weather lifts, it will propel your business further. And growth is what holds water - it gets valued over and over again and your customers will be back for more.
The venture debt market has opened up significantly in the last year, with several early-stage, high-growth start-ups looking to extend their runway until the next round. But in case they have some lung space, firms should go back to the fundamentals, become more resilient and sharpen their product that will fly past deep investor scrutiny of investors and customers alike.