Investors Tell Indian Startups To 'Prepare For the Worst' as Covid-19 Uncertainty Continues

Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to "prepare for the worst" and cut spending. From a report: In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal. The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners -- some of the prominent names in India to back early-stage startups -- asked founders to be prepared to not see their startups' jump in the coming rounds and have a 12-18 month runway with what they raise.

"Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about 'growth at all costs' to 'reasonable growth with a path to profitability.' Adjust your business plan and messaging accordingly," they added. Signs are beginning to emerge that investors are losing appetite to invest in the current scenario. Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch.

Better late than never?

[Nidi62]

Many investors will move away from thinking about 'growth at all costs' to 'reasonable growth with a path to profitability.'

Isn't that what they should have been doing all along?

Re:

[whodat54321]

More prudent investors have been doing that for a long time. The problems of the push for fast profits in India is that there is not much that can be squeezed out of an already low wage factory country, so all the low-hanging fruit is already stripped out. This is the 'bottoming out' of the race to the bottom, and now greed is tempered by the fact that money isn't all that easy if you cannot outsource things to a cheaper place. Welcome back to fundamentals, India!

Re:

[hey!]

Few investors are going to vest *exclusively* in high risk ventures, so really what they're talking about is moving money out of the "growth" oriented part of their portfolio towards the part that generates safe short term income.

Both kinds of investment *can* be socially useful.

but...

[RotateLeftByte]

Where can they outsource/offshore to (in order to cut their costs)?
Bangladesh? Myanmar? Nowhere?

anti-humanity

[AndyKron]

Who the hell would want to have a startup in that country? I would say anybody doing that is anti-humanity, pro me me me.

Robocall Scammers

[Retired ICS]

The robocall scammers are all dying of COVID-19 so there is something good coming out of this after all.