How Can Early Stage Startups Achieve Sustainable Growth

SUMMARY

Indian startup founders have to reign in their unbridled optimism and growth-at-all-costs game plan due to the funding winter

Besides prudent funding, the new normal encompasses new and interesting equity structures, the emergence of a new class of investors and more

Apurva Chamaria of Google India explains how the tech giant’s initiatives are helping early stage startups reach their full potential

Nearly three years after the Covid-19 pandemic hit the world and sent the startup ecosystem on a roller-coaster ride, what is the actual state of Indian startups in 2022? The global health crisis is not over yet, and macro factors like geopolitical uncertainties, rampant inflation, a worldwide economic slowdown and risk-averse investors do not augur well for young enterprises at home and abroad.

In India, the funding winter has continued to wreak havoc throughout the year. In November 2022, startup funding nosedived 73% year on year and 15% month on month. The stark numbers clearly indicate that startup founders will have to reign in their unbridled optimism and growth-at-all-costs game plans as 2021’s FOMO-induced funding rush is beating a hasty retreat.

“What we saw in 2021 was an anomaly,” said Apurva Chamaria, head of startups, VC and private equity partnerships at Google India. “Traditionally, India saw a (yearly) capital inflow of $12-13 Bn into startups. But in 2021, it was about $42 Bn. This year (2022), it may close at about $25 Bn. The way I see it, $25-30 Bn is going to be the new normal for the next two years,” he added.

Besides prudent funding, the new normal encompasses new and interesting equity structures, funding stage focus, the emergence of a new class of investors and more, according to Chamaria.

Watch Vaibhav Vardhan, cofounder and CEO of Inc42, in conversation with Apurva Chamaria, head of startups, VC and private equity partnerships at Google India. The animated discussion focusses on the current state of early stage startups through Google’s lens, how Google enables startups with the help of its various tools and initiatives, and what the future holds for early stage startups

Indeed, with the country’s GDP per capita rising, many young Indians flush with money are constantly looking for better investment avenues than the stock market.

“A new class of investors is emerging. They are not typical HNIs (high net-worth individuals) but very regular youngsters in well-paying jobs who are now investing in startups. They want to learn from the founders, work with them and get exposed to how high-quality internet companies are getting formed,” the Google executive said.

But given the harsh funding winter, evolving markets and investor sentiment, how can startups, especially the early stage ones, navigate the challenges and achieve sustainable growth?

As one of the major startup ecosystem enablers, Google is keeping up its side of the deal and fostering innovation and entrepreneurship among early stage startups through its various offerings.

Apart from earning cloud credits, startups are encouraged to leverage initiatives like Google’s Startup School India, which offers a series of guided online training for companies from Tier 2 and 3 cities. Google’s GTM (go-to-market) team of experts also helps them build products/services using Google components like Workspace, Looker and its ilk.

Additionally, the tech giant mentors early stage startups through programmes like Google for Startups Accelerator. The topics covered include finding the right cofounder, defining founder responsibilities and how to handle founder disputes, among others.

“Both BabyChakra (later acquired by MyGlamm, a Good Glamm Group company) and ShareChat (became a unicorn) came out of Google for Startups Accelerator programme,” a proud Chamaria pointed out.

Although startup funding has taken a massive hit in recent months, Chamaria believes that its growth trajectory will depend on its domain, type of business and, most importantly, timing.

“So, the way to look at this is to be opportunistic. Always, always have a North Star. If you are getting a lot of capital at crazy valuations, go and grab the market share. Continuously try to become profitable and keep costs low. Also, don’t spend on things which are just vanity,” he elucidated.

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