Despite a correction in global financial markets and prevailing funding winter, India’s startup story is not yet over. Though some unicorns faced fund crunch this year as investors turned more watchful, the early-stage startups have the windfall gain.
In the third week of September, 24 Indian startups raised funding, with 23 of them receiving a total of about $220 million, according to the latest Entracker data. Of these 24 companies, 19 were early-stage startups which took away about one third of the capital (approx $70 million) raised in the week. The firms which got Series A funding includes Bhanzu (edtech, founded in 2020) and Deep Rooted (farm-to-consumer, founded in 2020) which raised $15 M and $12.5 M respectively.
Funded by venture capitalists, many Indian startups like Byju’s, Unacademy, Ola Cars, upGrad, Meesho, Swiggy have turned unicorns and decacorns over the years. They have been dominating the advertising landscape over the past few years by spending huge chunks of their revenue on big ticket sports properties. The IPL 2022, that was played April-May, turned out to be an extravaganza for startups with more than 60 of them coming on board as official on-ground partners, streaming partners and team sponsors. Byju’s is even sponsoring the FIFA World Cup.
However, due to funding winter, some of them are now recalibrating their advertising spend which is likely to impact India’s AdEx this year, industry experts suggest.
According to Shashi Sinha, CEO, IPG mediabrands, India, big ticket sports properties will be affected this year as unicorns have tightened their purse strings due to a range of reasons. “On the other hand, early-stage startups may not be able to spend as much as unicorns and decacorns do. They are likely to spend most of the raised funds on growth and expansion,” he opined.
Vanita Keswani, CEO, Madison Media Sigma, too feels there will be a significant decrease in ad spends especially in traditional mass media. “Their digital spend will increase. The high demand for impact shows of TV which was there earlier is also likely to dampen,” she mentioned.
Adds Lloyd Mathias, Angel Investor and Business Strategist, “The data dispels the fear that startup funding is slowing down drastically. However, the bulk of early stage startups are not mega spenders on advertising and most of them spend predominantly on digital. But mass media like television and national print are still dependent on growth stage companies and the traditional categories like ecommerce, edtech, fintech and consumer goods.”
After an uncertain festive period consecutively for two years, it's going to be an unrestrictive festive time for the early-age startups, says Samiksha Saxena, Director - Brand Planning, Mirum India. ”This will be an important period to implement all the learnings from the customer data collected through the year and use them to develop customized brand experience across all touchpoints. This period is the best time to broaden audience reach and strengthen the customer value proposition with the right tools. The role of digital will be significant in driving new customer acquisition and increasing overall sale conversions," she suggests.
"It will be exciting to see how marketers and advertisers leverage the new consumer trends for showcasing creative bravery as well as planning their media funnel. Right use of innovation and technology will be the driving measures to anticipate business growth. Use of rich media platforms, voice and amplifying storytelling via the power of creators; in line with the newer consumer habits will be some of the driving factors for brand preferences and capturing more mindshare,” she shared.
The startup scene
Abhimanyu Bisht, CEO, Venture Catalysts, termed the current funding scene as “more realistic”, compared to FY 22, when according to Bisht, “even idea stage companies with just a team and no product raised capital at bloated valuations which made it tougher for them to raise their next rounds at higher valuations.”
“Investors are rather looking to find opportunities in earlier stages where valuations are much more realistic with higher potential for growth in their investment. Realizing this true value creation, larger funds have started investing much smaller cheques than usual to get in early in companies where they see value being created in the next 5-7 years in the form of the new age of unicorns,” Bisht noted.
Calling this an exciting time for the growth of the Indian startup ecosystem, Nandini Mansinghka, CEO & Co-Founder of Mumbai Angels, explained, “Seed and Series A investments recorded an increase of 88% and 22%, respectively, in the first quarter of 2022 compared to the same period in 2021. The early-stage investments in the second quarter of 2022 also doubled compared to the same period last year. This indicates a larger scope for wealth creation and socio-economic transformations.”