even as start-up resorting to dislike to keep To cut costs amidst the current volatile and uncertain market conditions, data accessed by news18.com shows that the financial position of the firms is under stress as the number of profitable firms has come down this year. The data shows that only 3.5 percent of start-ups that raised $100 million or more during January-June 2022 were profitable, compared to 29.2 percent in the year-ago period.
According to data from Venture Intelligence, there are 57 companies in total. India Funding raised $100 million or more during January-June 2022, compared to 48 such firms during the same period last year. Interestingly, it also showed that the total funding for Indian start-ups this year is the same as last year, showing a shrinking deal size.
Ajay Malik, managing director and head (investment banking advisory), RBSA, said, “Even though the number of companies raising $100 million and above in 2022 has increased, the total amount raised remains stable, indicating That the deal size has been reduced…thus represents less risk appetite among the investor fraternity.”
According to Venture Intelligence, only 3.5 percent of these start-ups (those who have raised $100 million or more) showed their EBITDA positive this year, while the percentage of such start-ups stood at 29.2 percent, thus indicating That there is significant financial stress on India. India’s start-up ecosystem this year. Ebitda means earnings before interest, tax, depreciation and amortization.
Since Ebitda records of all startups are not available on record, venture intelligence data includes only those companies whose data is accessible.
According to Venture Intelligence, 57 start-ups raised $100 million or more in 2022 as of June, 45 of these companies did not have EBITDA available and only two such firms showed their earnings positive.
It also said that 48 companies had withdrawn $100 million or more during January-June 2021. Of these, EBITDA of 18 companies was not available on record, while 14 were EBITDA positive for firms whose data was available.
RBSA’s Malik said valuations of start-ups are falling, funding is slowing and deal sizes are shrinking amid volatile market environment. These are adding to the financial woes of the start-ups.
According to an industry expert, venture capitalists and private equity funds are now looking at the current profitability of start-ups rather than the growth potential as was the practice earlier. “Therefore, profitability has become an important factor in raising funds going forward.”
Due to financial stress, start-ups in India are resorting to layoffs to reduce costs. Last week, edtech unicorn start-up Byju’s laid off more than 600 employees, including both permanent and contractual.
Prior to Byju’s, new generation enterprises including Vedantu, Unacademy and Cars24 also laid off more than 5,000 employees in India this year. Ola has laid off around 2,100 employees during January-March this year, followed by Unacademy (over 600), Cars24 (600) and Vedantu (400). In addition, e-commerce firm Meesho has laid off 150 employees, furniture rental start-up Furlenko 200, influential social commerce start-up Trail 300 employees and OKCredit 40.
Recently, Gaurav Munjal, Co-founder and CEO, Unacademy, in a letter to employees said, “We must learn to work under constraints and focus on profitability at all costs. (Funding) Winter has come… We must survive the winter.”
Major venture capital firm Sequoia Capital recently told the founders of its portfolio companies in its 51-page note that the era of being rewarded for hypergrowth at any cost is quickly coming to an end, with investors turning to those companies. that can demonstrate current profitability. “Capital is becoming more expensive while the macro is becoming less certain, giving investors priority and paying less for growth.”
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