Today, it is not possible to predict the funding scenario of Indian Startups. 2016 has seen a low funding phase while 2014 and 2015 saw a boom in Indian Startup funding. Apart from the slowdown of funds inflow, we now hear more of startups shutting down and merging or conglomerating. This happened because the closure cycle of Investment has become long as it is focusing more on business economics rather than due diligence.
Changes in Funding Scenario in Indian Startups
- Focus Shifting to Business unit Economics:
Unit Economics is direct Revenue and Cost that you incur from your business model. The fundamentals in this case are
- Lifetime value (LTV):The amount of revenue a single unit generates during the entire duration of a customer's usage of the service.
- Cost per acquisition (CPA):How much it costs to acquire one unit.
Your business exists as long as your LTV is more than your CPA
- Cockroaches are getting some love:
Initially, investors used to fund companies valued at $1 billion or more but now that trend has changed. Investors are more inclines towards startups which are bootstrapped, have a strong business model and those who can self generate funds.
- Down-round funding:
A down round is funding round where investors reinvest in a company whose valuation has come down when compared to previous years. There is no harm in it has the startups are now being pushes to provide world class product or world class service.
- Conventional businesses are back in favour:
One more trend in the startups is the shift of senior and middle level employees to the conventional business. According to a recent ET report, a few of the top-level employees from unicorn startups have moved to conventional businesses
- More failure stories, and that is fine
There has been an increase in the number of startups that has been failed and shut down or curtailing their operations to make ends meet. But it's fine. There are stories all over the internet like Lesson from my failed startup , you learn from your mistakes and then make it big. Failing and accepting failures are very much a part of entrepreneurship, and this needs to be learnt and understood.
- Mergers or acquisitions in same or allied sector
Mergers of startups which are in the same sector have become quite frequent nowadays. It helps in making investment portfolio for investors more centralized. It not only decreases the market but also helps in efficient utilization of market from investor's point of view. It's a summarization of an article written by Alok Patnia. For the complete article you can visit, http://yourstory.com/2016/05/startup-funding-changes/