As the Indian startup ecosystem looks to overcome the funding and liquidity crunch in the market, Infosys cofounder and the architect of India’s Aadhaar ID Nandan Nilekani has said that even in the survival mode, startups need to focus on profitability and generating cash flow through the various avenues available.
In an interview with Economic Times, Nilekani has highlighted that the Indian startup ecosystem is dependent on fundraising, which is fine when there is liquidity in the market. But such companies come off as really fragile when there is a lack of funding. He added that the short term is going to be challenging and there is a strong need for resilience in business, which comes through building profitability.
“We need to bring back the notion that you have to be profitable, generate cash flow and fund your own destiny,” Nilekani said.
Stay Bootstrapped, Be Profitable
In September 2019, Infosys cofounder and Axilor Ventures’ Kris Gopalakrishnan had emphasised that startups need to first build a sustainable business, advising them to “stay bootstrapped, ensure zero debt and be profitable.” He had cautioned startups from taking too much risky money from external sources as it would end up hampering their independence after the crisis is overcome. Instead, he emphasised on startups should think about charting a path towards going public and maintaining profitability after achieving it.
“Entrepreneurs are not thinking about IPOs. They only want to be private. When they go for external funding, the funds come from overseas. So, most of the Indian start-ups today are owned by foreigners,” he added.
He had also asked Indian entrepreneurs to invest in Indian startups, focussing on the emerging opportunities in the next two to three decades in the ecosystem. He warned that almost 25% of Indian startups have less than six months of runway left and they would be in serious trouble if the disturbance caused by the Covid-19 pandemic continued.
Similarly, Ashish Tulsian, cofounder and CEO of POSist touched upon the need for creating healthy businesses. He had added that when the business is healthy and revenue are on high, startups launch initiatives which may not be valuable in times of crisis. They invest in the future and at times a little ahead. It’s not a bad strategy when things are going great but in times like these businesses might have to relook at these strategies.
Given the situation, Indian startups have to adapt and depend on other companies across sectors. It’s time for collaboration and partnerships, as seen in the case of essentials delivery. For instance, ecommerce companies and online grocery platforms facilitated home deliveries during the stringent lockdown by working with partners in transport and logistics sectors. While the travel and mobility sectors were hit, cabs and commercial taxis brought in some revenue working with logistics and delivery support.