WINTER CHILL

As funds dry up, startups are forced to balance growth with profitability

- NACHIKET KELKAR

NOT SO LONG AGO, the buzzword in the startup ecosystem was unicorn, a moniker for startups valued over $1 billion. Every startup dreamt of becoming one, and India has minted some 100 unicorns so far. In 2021 alone, 42 startups became unicorns.

In 2023, though a different species is garnering attention—the cockroach. No animal can match a cockroach’s ability to survive changing environments and move forward. And that is the need of the hour now in the startup world, which is stuck in a funding winter.

In 2020 and 2021, the world was awash with funds injected by central banks to tide over the Covid-19 pandemic. Money was not an issue and startups raised funds in multiple rounds. Last year, however, the weather turned bleaker as central banks tightened the liquidity screws and geopolitical tensions cast a shadow from Ukraine to Taiwan, and industries struggled with supply-side challenges. With a recession looming over major developed markets, and investors turning more cautious, startups are switching to the survival mode. They will have to struggle hard, but still keep moving forward, just like the cockroach.

Data by Tracxn, which provides market intelligence for startups and private companies, says that total funds raised by startups in India in 2022 plunged 39.2 percent year-on-year to $25.4 billion from $41.8 billion. There have been 1,939 funding rounds last year, compared with 2,903 rounds in 2021.