As funding dries up, startups are looking for profitability and sustainable growth, says Tracxn report

The market intelligence firm also highlighted the dropping number of new entrants in the unicorn club for 2022.

FPJ Web DeskUpdated: Thursday, December 15, 2022, 06:34 PM IST
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Unicorns such as Ola, Zomato, Paytm and Byju’s with their young founders, innovative teams and unconventional work cultures, introduced India to the startup success story. But even as Union Minister says that Indian startups are more likely to succeed than global peers, the reality is that 90 per cent of them are at risk of failing in the first five years. A decade after Indian startups came in the spotlight, Zomato and Paytm suffered IPO failures, and Byju’s has reported massive losses followed by layoffs.

Hit by investment drought

Fuding for startups has gone down by 35 per cent, and the number of major deals has halved for the sector, while IPOs are being pushed off citing low investor confidence in new age digital firms. Amidst these turbulent times, which have seen 18,000 employees losing their jobs, global market intelligence platform Tracxn has published a report to paint a comprehensive picture of India’s startup landscape. It adds that late stage funding for the emerging firms has also gone down by 45 per cent, with fintech and retail getting hit hard by the investment drought despite performing well.

Investors steer clear of risks

Although edtech firms weren’t able to sustain the growth they achieved during the pandemic, their funding suffered less than retail and fintech, with a 39 per cent dip. Apart from this, the number of new startips riding into the unicorn club also dropped to 22, which is less than half of the 46 entrants in 2021. The report says that as investors are becoming more cautious about risks, investments are drying up, prompting startups to take their finances seriously.

Big shift in approach

As investors are focusing on profitability more than the emphasis on growth at any cost, startups are also looking for sustainable models. This is a major attitude shift in an ecosystem, where only 18 to 20 out of more than 100 startups are profitable.

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