InnoVen Capital, Asia’s leading venture debt firm, recently released the 9th edition of its India Startup Outlook Report. The report is based on insights gathered from over 100 start-up founders across stages and sectors such as FinTech, SaaS, D2C, Logistics, E-Commerce, Healthtech and Others.
Commenting on the report, Ashish Sharma, Managing Partner, InnoVen Capital India said, “2023 was yet another challenging year for the start-up eco-system, with a weak funding environment and a tough global macro. On the positive side, we are now seeing a higher appreciation for sustainable business models, more focus on unit economics/ profitability and realistic valuation expectations.
We are pleased to release the 9th annual Start up Outlook report, which is part of our continued effort to gauge the current sentiment, as seen through the eyes of entrepreneurs.”
Funding environment
68% of those who attempted to raise had a favorable fundraising experience in 2023, down from 71% in 2022. Founders are more optimistic about 2024, with 78% of founders expecting a favourable fundraising environment.
Balancing growth and profitability
For the second consecutive time in nine years (since the inception of the survey), founders have shown higher bias for profitability compared to growth. 62% of founders stated profitability as a bigger focus area, compared to 55% in 2022. 30% of founders claim to be already EBITDA profitable, up from 19% last year.
Exit expectations
Founders continue to look at domestic IPO as the most likely path of exit, with 64% founders choosing this mode of exit, up from 63% (2022) and 58% (2021). Preference for M&A continues a downward trajectory, falling to 22% from 28% (2022). Overseas IPOs are also not preferred anymore.
Business priorities and impact of AI
With the rapid development of AI capabilities, 23% believe that Artificial Intelligence will have significant impact on their business models over the next 2-3 years.
Hiring plans, talent, and gender diversity
61% of founders expect the pace of hiring to stay at the same levels or go down compared to last year.
Gender diversity in leadership roles continues to be a challenge. 75% of companies have less than 20% women in leadership roles, and 45% have less than 10% women in their leadership team.
Impact of funding slowdown
Most founders (82%) believe that focus on building sustainable business models has been a key impact of the funding slowdown, echoing the same sentiment as last year. The tightening funding environment has also led to a correction in valuations. Despite the sluggish funding environment, 85% of founders are optimistic about raising their next round at a higher valuation this year, compared to 75% last year. However, 20% of growth/late-stage founders expect a flat to a down round.
Over-hyped/ under-hyped sectors
Artificial Intelligence (AI) was seen as the most overhyped sector, while B2B and Manufacturing were chosen as the most underhyped sectors.
Favourite start-up and founder
Founders chose Zerodha as their most admired Indian start-up, for the fourth year in a row. Kamath brothers were chosen as the favorite founders.
About InnoVen Capital
InnoVen Capital is Asia’s leading debt firm with offices in India, China and Singapore It provides debt capital to high growth ventures Started in 2008 as the first dedicated venture debt provider in India, the platform offers multiple debt capital solutions. To date, InnoVen Capital India has completed over 400 transactions with more than 200 start-ups, including 35+ unicorns. Portfolio companies include Swiggy, boAt, OfBusiness, CureFit, Dailyhunt, Oyo, Licious, Byjus, Eruditus, Cure.fit, Infra.Market, XpressBees, Blinkit, Shiprocket, Elasticrun, Udaan, Zetwerk, Moglix, Firstcry, Mensa Brands, Blackbuck, Pharmeasy, Rebel Foods, BharatPe, Cars24, Spinny, Slice, Vedantu, Upstox, Ather, Porter, Chaayos and many more.
For more information, please visit www.innovencapital.com
