2021 was a year for Indian start-ups. A massive $40bn was invested as funding and the trend continued in the first half of 2022, until…
The Funding Winter Began.
Funding winter is a period of market correction in capital inflow which lowers the probability of high valuations for startups in short to mid-term.
Simply put, it is the period where founders find it difficult to raise money.
The consequences of a funding winter are bad for startups focusing on expansion and not profitability. This is a massive setback for such startups who don't have a business model in place; blockage of funding then leads to mass terminations, cost-cutting, and possible shutdowns.
Something we are already witnessing.
Before diving into why we call the funding winter a blessing in disguise, let’s understand how we ended up here.
Massive Influx of Capital post-pandemic
In order to boost the economies post-COVID, central banks across the globe nurtured a lower interest rate scenario. This led to a massive influx of capital in the VC and PE industry, thereby leading to a funding boom and hyper valuations for startups.
Post-pandemic, the VC and PE industries saw a massive capital inflow as the central banks pushed lower interest rates to boost the economy. This led to a funding boom and hyper-valuations of startups in the Indian start-up ecosystem.
VCs showered their love on any startup showcasing signs of expansion but not necessarily proposing a pathway to profitability. And well, the VCs wanted to see the expansion happening quickly.
In order to meet their near impossible targets, start-ups burned cash and hired irresponsibly at inflated packages.
And here we are now.
VCs now are giving preference to sustainable business with a clear vision of making money. This means that start-ups are struggling to survive as the capital flow has diminished.
There are Consequences for Every Action
We all know the consequences being faced by start-ups in India:
- Founders trying to raise funds are seeing delays and renegotiations on the valuations
- Layoffs are happening everywhere, and the focus is on leaner teams
- Companies like Oyo and Byju’s have deferred their IPO plans
- Investors are now asking tough questions and looking more deeply into profitability than just scale.
A Blessing in Disguise?
However depressing this period might sound, funding winter is actually a blessing in disguise. Sometimes such scenarios knock on the door to provide a reality check.
Just like the human body counter adapts itself and optimises body operations in order to survive extreme conditions, startups need to adapt to this funding winter; they need to focus on unit economics and PMF and come out stronger.
Survival of the Fittest
The next 12-18 months are going to be tough. However, the ones who survive will go big. There is no problem with funds with the VCs; there's a lot of dry dust, and whoever gets the business basics right will have reached greater heights when the winter is over.
Strat-ups definitely need to extend their runways, which means cutting costs and generating revenue.
Discovering, hiring and training talent does come with a lot of expense.
You would end up spending about $200k a year on discovering, hiring and training an in-house marketing team, which would include:
- Marketing Head
- Performance Marketing experts x 2
- Content Specialist x 2
- Designer
- Marketing Ops Specialist
- SEO Specialists
At the same time, you also need an in-house effort.
GrowthSpree understands these gaps, which is why we come in as your extended in-house marketing teams, with a lot of prerequisite knowledge, thus, reducing the timeline for completing the learning curve. Importantly, we come in at 1/3rd the cost of an in-house team.
As extended teams, our focus is to help early-stage SaaS companies increase their MRR and ARR.
We understand the entire market sentiment and the competitors in play, comparing pricing and offerings.
Based on our qualitative research and your historical data, we build a plan to help build a validated GTM notion and then scale our efforts with data-backed experiments.
We also help set up the entire marketing and sales infrastructure and operations so that you have answers to all and any questions and don’t miss out on anything. Thus, you make informed and sustainable decisions.
I wish all the founders reading this all the best, it might be a tough phase, but I am sure you will figure out a way.
Or simply hire us to get ready for this winter :p
Affirm with us...
-Ishan Manchanda
Founder and CEO, GrowthSpree
