TLDR:
– Wipro Consumer Care’s managing partner, Sumit Keshan, emphasizes the importance of building a sustainable business.
– He highlights the need for startups to focus on profitability and cash flow rather than continuous fundraising efforts.
While winter has started approaching globally in the northern hemisphere, the funding chill in the venture capital world is being felt for over 1.5 years now. The boom of late 2020, 2021 and some part of 2022 is so strongly ingrained in the minds that it has been hard to accept the vicious drop in funding pattern. However, underlying this funding chill are compelling factors that validate the investment narrative. For instance, amounts committed by LPs (Limited Partners) towards India and SE Asia over the last 1-2 years are sizeable and large, and hence significant amount of dry powder is waiting to be deployed in the ecosystem.
Many startups are gunning for profitability, and few are profitable already, which is a departure from the earlier approach of growth-at-any-cost. The cardinal principle of running a venture on sustainable business practices is gaining traction, prompting a recalibration of the growth-profitability balancing act, which is a great positive. As more startups attain profitability and positive cash flows, the overt dependence on continued funding diminishes. Consequently, companies are redirecting focus towards building businesses rather than incessant fundraise efforts. PEs and VCs are adopting a more cautious stance towards cash guzzling and cash-burning businesses.
The battle for startups to raise their rounds of funding can be taxing. This involves not just time and effort but a certain concoction of emotion, uncertainty all woven together, leading to a feeling of excitement as well as stress. The battle is won once the process of fundraise gets completed. But, in some ways, the quest of winning the war has just started. Now is the time to look at your array of possible strategies, and the need to pick and decide the direction to turn to, the initiatives to be kindled, and press the pedal. Many companies who are at this stage are wanting to tread a more cautious path, having burnt in the past in many ways. If this is not your first round of raise, you are perhaps wiser on how and where to deploy, which areas to strengthen, and how to win the war with lower losses keeping the ship sailing comfortably in high and low seas, and for longer periods of time. There are the eight pillars of strength which need to be built if you have to sail high and long.
For startups and organisations that are low on capital, cash flow and cash conservation are crucial. Companies must seek out-of-the-box thinking to demonstrate growth and profitability during times of low capital. Investment committees play a crucial role in guiding the allocation of capital and validating the fundamentals of a business. The industry is shifting towards purpose-driven leadership, superior execution, and consumer-centricity, which will help enterprises find support and thrive in the dynamic landscape of funding and business stability.
