Ahead of TiEcon Delhi-NCR 2023, Inc42 caught up with its co-chair and Tata 1 mg’s Prashant Tandon to discuss the current status of the Indian startup ecosystem, its biggest challenges and the future
Indian startups are experimenting with emerging technologies to create better solutions and there is a decent pool of angel investors and VCs backing them, said Tandon
Tandon called for progressive and supportive regulations, with a clearly articulated policy framework, to develop, test, scale and export these offerings from India
The dreary funding winter, which engulfed the Indian startup ecosystem last year, is showing no signs of relenting even as we move further into 2023. In contrast to a record-breaking 2021, which saw India producing 44 unicorns, only 21 startups were able to achieve the coveted billion-dollar valuation in 2022. The funding crunch has resulted in startups resorting to cost-cutting measures like layoffs, deal reversals, and shutting loss-making verticals. Amid this doom and gloom, one can be forgiven for thinking that the dream run for the Indian startup ecosystem might have come to an end.
However, the situation isn’t entirely bleak, as investor sentiment is still leaning in favour of new-age disruptive ventures. According to Inc42’s estimates, investors could be sitting on dry powder worth $16 Bn and they would look to invest these funds in the coming months.
But for now, investors are adopting a cautious approach. Startups must have a proven roadmap, a sustainable strategy, agility to adapt and the resilience to face any business climate in order to move to their next phase of growth.
As the third-largest startup ecosystem, India’s 80K+ startups are disrupting the markets across sectors, at home and abroad. During this transformative time, it is important for startups to understand market scenarios and recognise new opportunities. Homegrown startups must adopt new business strategies to skillfully navigate the bumpy (but rewarding) road ahead.
To help innovators in their pursuit, The Indus Entrepreneurs (TiE), a global organisation on a mission to foster entrepreneurship, is holding its flagship leadership conference on March 17-18 in Delhi NCR. With a focus on the theme ‘Navigating the New World’, the conference aims to bring startup founders, CXOs and investors together under a single roof to engage in thought-provoking discussions and networking opportunities.
Ahead of the conference, TiEcon Delhi-NCR 2023, Inc42 caught up with its co-chair Prashant Tandon, who is also the cofounder and CEO of online pharmacy startup Tata 1mg, to decode the present status of India’s startup ecosystem, its biggest challenges and what lies ahead.
Here are the edited excerpts:
Inc42: No new startup has entered the unicorn club since Tata 1 mg in September 2022. What factors have led to this slowdown in India’s unicorn streak?
Prashant Tandon: Valuations depend on a lot of factors. For instance, changes in macroeconomic conditions can have an impact on how much capital is raised by startups and at what valuation. But, I believe that there is no dearth of quality startups and many will continue to grow with better margins.
Once the market sentiment stabilises, things will improve. The startups which use this phase to set their models right will be well-positioned for IPOs (initial public offering) and financing rounds at attractive valuations. However, the key is to focus on the fundamentals and survive this so-called ‘funding winter’.
I think within the next five years, India will see hundreds of more valuable technology driven-companies. Entrepreneurs need to just focus on zoning out the noise around them and building great businesses.
Inc42: In 2023, the approach of the investors has moved away from growth-at-all-costs to sustainability. In light of this, how can startups create a path to profitability and scale?
Prashant Tandon: When the cost of capital is low, startups typically focus on expansion. When the cost of capital goes up, it is important that startups use the opportunity to make their business models sustainable and profitable.
Having gone through multiple such cycles over the past decade and more, I think it is pretty beneficial for startups and the ecosystem to have several iterations, instead of founders trying to throw money to solve key business problems.
Typically, a key shift is in the focus — a lot of tech and process debt is built up when the focus is on growth as the only important metric. Companies start moving resources from topline towards efficiency and automation. Also, most startups have a tendency to expand in multiple directions during the high-growth phase. However, they are forced to focus and pick the battles worth fighting during the time of capital constraint. This makes companies much better and sharper in their approach.
Inc42: India has become a hotbed for innovation, boasting startups across future-defining sectors like deeptech, spacetech, cleantech and more. How can the startup ecosystem strengthen its position in the global markets?
Prashant Tandon: A key positive change in the ecosystem is that now we have entrepreneurs taking on the next-generation challenges. They are experimenting with emerging technologies to create better solutions for what the world may look like in the future. In addition, we have a decent pool of angel investors and VCs to back technology innovation
This is a particularly interesting phase where India is not just playing catch up and bringing models from the west and localising their application or execution but also moving shoulder to shoulder with the world in creating fundamental technology solutions.
What is now needed is progressive, supportive and enabling regulations, with a clearly articulated policy framework, to develop, test, scale and export these offerings from India. A lot of groundwork needs to be done in this regard. The regulatory machinery needs to equip itself with the right skill set to play the role of the enabler.
Inc42: Speaking about the new markets, what is your advice for startups to scale up their reach in real India or ‘Bharat’ and tap new regional geographies?
Prashant Tandon: Given India’s strong business outlook, building for ‘Bharat’ is crucial to solving key challenges on the ground. I believe that there are significant opportunities in sectors such as agritech and healthtech.
A rising customer base of aspiring Indians will continue to surge consumption and we need to tailor new-age offerings in retail, especially through the D2C route, at par with the world.
Inc42: Tell us about the key themes and focus areas of TiEcon Delhi-NCR 2023.
Prashant Tandon: I see the excitement around four key themes, which we are also covering in TiEcon Delhi 2023.
The first one is ‘Make in India for the World’, where we will be discussing how innovation from India can solve cost pressures in global markets. With customers across the world looking for more cost efficiency and new resilient supply chains, India-based startups, especially in SaaS (software as a service) and product development sectors, stand to benefit.
We will also be exploring how disruptive technologies can be built for global application in sectors like spacetech, AI and cleantech, especially electric mobility. In addition, themes such as building products for ‘Bharat’ and aspirational India will take the centre stage at this year’s TiEcon.
Inc42: Which sectors within the startup ecosystem will be the most lucrative for funding in 2023 and why?
Prashant Tandon: In 2023, I expect funding to continue in early-stage ventures in the emerging technology areas. There is a lot of money in the venture ecosystem, and it will be deployed actively once the current portfolio is stable for most investors.
The 3-5 years horizon is extremely attractive and India offers rewarding growth opportunities. Stakeholders across the world are optimistic. So, I expect investment to continue actively and pick up pace as the startup ecosystem grows.
