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Start-ups are increasingly prioritising profitability over growth for the second consecutive year, with 62 per cent of founders emphasising profitability, up from 55 per cent in 2022, according to venture debt firm InnoVen Capital.
The 9th edition of the India Startup Outlook Report gathered insights from over 100 founders in various sectors, including FinTech, SaaS, D2C, logistics, e-commerce, and healthtech. Notably, 30 per cent of founders claim EBITDA profitability, a notable increase from 19 per cent the previous year.
Ashish Sharma, Managing Partner at InnoVen Capital India, notes the challenges faced in 2023 but highlights a positive shift towards sustainable business models, increased focus on unit economics and profitability, and realistic valuation expectations.
Also read: Seed funds are in season, despite funding winter
Funding experiences in 2023 showed a slight dip in favorability, with 68 per cent of fundraising attempts being successful, down from 71 per cent in 2022. Despite this, 78 per cent of founders anticipate a favourable fundraising environment in 2024.
Regarding exit strategies, domestic IPOs remain the preferred choice for 64 per cent of founders, while the preference for mergers and acquisitions (M&As) has decreased from 28 per cent in 2022 to 22 per cent. Overseas IPOs are no longer a popular option.
Artificial intelligence (AI) is anticipated to significantly impact business models for 23 per cent of founders over the next 2–3 years. However, 61 per cent expect hiring to remain stable or decrease, and gender diversity in leadership roles remains challenging, with 75 per cent having less than 20 per cent women in leadership positions and 45 per cent having less than 10 per cent women in their leadership teams.
Also read: TN recognised as ‘Best Performer’ in States’ Startup Ranking 2022
According to the report, 82 per cent of founders believe that slowdown in funding is pushing them towards sustainable business models. Valuation corrections have occurred, yet 85 per cent express optimism about raising their next round at a higher valuation this year.
In terms of sector perceptions, AI is considered the most overhyped, while B2B and manufacturing are seen as the most underhyped. Zerodha remains the most admired Indian start-up for the fourth consecutive year, with the Kamath brothers being the favourite founders.
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