Despite Slowdown, Startup Founders Don’t Anticipate Revenue Downturn In FY23

Indian startup founders do not anticipate a revenue slowdown in the financial year 2022-23 (FY23), according to a survey conducted by Inc42. The response comes despite the global financial downturn being experienced by companies worldwide in the face of adverse macroeconomic headwinds.

When asked if they were anticipating a revenue slowdown in FY23, more than 78% of the 150+ startups participating in the survey responded negatively, with the minority anticipating a downturn in revenue as the end of the fiscal year approaches.

The lack of revenue slowdown expectations also explains Indian startups’ preference for ‘top-line revenue growth’ as a critical performance metric for FY24, with metrics such as operating profit, customer acquisition, market expansion and low cash burn further down the pecking order.

Surprisingly, the survey revealed that keeping the cash burn low was at the bottom of the priority list for Indian startup founders, at a time when Indian startups have come under fire for having high cash burn. For the 150+ startups that responded, only 3% responded with low cash burn as their top priority.

The trends also emerge as Indian startups face an unprecedented funding winter, as startup funding drops across the board. With late-stage startups impacted the worst, more than 50 Indian startups have already laid off more than 18,000 employees just to remain afloat, according to Inc42’s ‘Indian Startup Layoff Tracker’.

According to Inc42 data, Indian startups have raised $25.15 Bn in 2022, as of December 25, 2022. Compared with 2021, this is a decline of 39.96% year-on-year (YoY). While we predicted a correction of 24% last year, the added macroeconomic pressure due to the Russia-Ukraine war further exacerbated the issue.

That said, there are signs that the funding winter might just continue until the start of FY24, which makes three more months of startups looking for liquidity or extending their runways using other means.

The macroeconomic slowdown has also seen the purchasing power of companies and individuals around the world. For D2C startups, this might result in a revenue slowdown as individuals preserve purchasing power. With the newly-added threat of another wave of the COVID-19 pandemic looming large, individual spending might decline further.

With the increasingly difficult funding scenario as investors step up due diligence and stress on solid fundamentals and unit economics, coupled with the renewed threat of another wave of the pandemic, the next year might still prove tricky even if revenues don’t drop in FY23.