INSUBCONTINENT EXCLUSIVE:
Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are
beginning to struggle to raise new capital as prominent investors urge them to &prepare for the worst&, cut spending and warn that it could
be challenging to secure additional money for the next few months.
In an open letter to startup founders in India, ten global and local
private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current
changes to the macro environment could make it difficult for a startup to close their next fundraising deal.
The firms, which included
Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked
founders to be prepared to not see their startups& jump in the coming rounds and have a 12-18 month runway with what they
raise.
&Assumptions from bull market financings or even from a few weeks ago do not apply
Many investors will move away from thinking about ‘growth at all costs& to ‘reasonable growth with a path to profitability.& Adjust your
business plan and messaging accordingly,& they added.
Signs are beginning to emerge that investors are losing appetite to invest in the
current scenario.
Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across
104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch
In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.
New Delhi ordered a complete nation-wide
lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.
The lockdown, as you can
imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.
VCs warn coronavirus will impact fundraising
for the next 2 quarters
Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said he is prepared for a 90-day
slowdown in the business.
Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors
have called off the deal for now
He requested anonymity.
Food delivery firm Zomato, which raised $150 million in January, said it would secure an additional $450 million by
Two months later, that money is yet to arrive.
Many startups are already beginning to cut salaries of their employees and let go of some
people to survive an environment that aforementioned VC firms have described as &uncharted territory.&
Travel and hotel booking service
Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%
MakeMyTrip, the giant in this category, also cut salaries of its top management team.
Beauty products and cosmetics retailer Nykaa on
Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.
Investors cautioned startup
founders to not take a &wait and watch& approach and assume that there will be a delay in their &receivables,& customers would likely ask
for price cuts for services, and contracts would not close at the last minute.
&Through the lockdown most businesses could see revenues
going down to almost zero and even post that the recovery curve may be a ‘U& shaped one vs a ‘V& shaped one,& they said.
