‘Funding winter’ helped start-ups cut cash burn and mature: Deloitte, others

Funding winter has helped startups manage businesses better & wisen up, with capital flows expected to return in CY24.

The Funding Winter, meaning the long stretch of low capital infows into start-ups through 2022-23, have helped them manage their businesses better without burning excessive cash, and wisen up as managers, industry observers said.

However, they claimed that India is viewed as one of the places where funds deployment is considered safe, and so, they expect capital flows to return in the first and second quarter of CY24.

Peeyush Vaish, Partner & Telecom Sector Lead at Deloitte India told The Hindu that the start-up sector let the cash burn happen as long as the valuations spiked.

“In that era probably that was the right thing to just burn cash and survive on funding. Some start-ups actually boomed then. But today, they have certainly passed that era as they have matured, learnt how to run with less cash and achieve better profitability,” Mr. Vaish said.

Today, startups were showing maturity with high CAGR, better profitability, lesser losses, lesser cash burn and focus on hyper niches instead of going all over and looking at everything at the same time,” Mr. Vaish added.

Milan Sharma, Founder and MD, 35North Ventures, a VC Firm in Mumbai opined that the funding winter was a mid-course correction for businesses with spiked valuations and low profitability. “Yet, those who were quick to pivot and focus on low cash burn models have managed to stay immune,” he added.

According to Rajeev Ranka, Partner at Incubate Fund Asia, recent market shifts led investors to prioritise startups with robust economics, a well-defined problem-solution fit, and resilient business models.