Joy of meeting in person, but some caution as unicorn founders get together after two years amid funding winter

"So good to finally see you in person," was the most used line by thousands of founders and investors at the TiEcon India Unicorn Summit 2022, as people were meeting physically for the first time in over two years, thanks to the Covid-19 situation normalising in most parts of the country.

“I am so glad events have started happening physically again. I am happy that I finally got a chance to meet my investors in person,” a founder of a startup was seen talking to one of his colleagues.

“And of course, how I have missed these grand lunches and dinners!” he exclaimed.

The founder’s sentiment was shared with thousands of founders, investors, bankers, and advisors among others, who attended the India Unicorn Summit 2022 arranged by TiE Mumbai at the exuberant Jio World Convention Centre in Mumbai last week.

People were sharing business cards, networking, talking about their businesses, and direct and indirect rivals, and were also discussing the Indian economy and the country’s startup ecosystem at large. Many sounded sanguine about the opportunities that India as a country, and its startup ecosystem offers to the country’s 64,000 startups and 102 unicorns. But one could sense a hint of caution as most were seen chanting the good old phrase: ‘cautious optimism,’ as a funding winter is looming over India’s startup ecosystem.

To be sure, this was a change in stance for most who were seen exuding optimism over the last two years, when billions of dollars were flowing into India’s startups, at multi-billion dollar valuations.

“This is just a phase and it shall pass. The only problem with this year’s downward trend is that the base is exponentially high. But that doesn’t change the fundamentals of India and these startups will be offered opportunities worth billions, so I am cautiously optimistic,” an investment banker, who has advised many startups on fundraises over the last two years, told Moneycontrol.

Founders, meanwhile, were talking about ‘value creation,’ ‘building a resilient business with the right culture,’ and generating cash rather than talking about multi-bagger valuations, which was essentially the theme for the last two years, with investors pouring billions into India’s startup ecosystem.

“To build a business of scale and value, the first thing you have to do is stop chasing valuation and start chasing value creation,” said Anupam Mittal, founder, and chief executive of one of India’s oldest consumer internet companies, Shaadi.com.

Also Read: Customer funding is best form of funding: Anupam Mittal of Shark Tank fame

“When I talk to all the IT services stalwarts, the lesson that I learned is that you guys didn’t even know what the word valuation meant. You just saw a problem and went after it. Even when I look from an investment lens, for example, I think, having a passion for a certain problem and having a long-term commitment towards solving it is where value creation happens in my view, so most overnight success stories that we hear about are actually 20 years in the making,” Mittal added.

Corroborating Mittal’s comments, Ashish Mohapatra, co-founder, and chief executive of SoftBank-backed small-medium enterprises loan marketplace unicorn OfBusiness said that a company should look to create value first as valuation is an eventual outcome that chases the value created by the company. Mohapatra also talked about incorporating the ‘right’ culture at companies, which helps in building long-term sustainable businesses.

“Another learning is that the partners that you get during a recessionary time, whether they are your investors or even your own employees or your colleagues, are the ones who are going to stay with you for a really long time.”

“So for us, it's the combination of three things one, culture - just thinking profit first, stakes and quality. The second is to have an execution mindset. And the third is resource allocation, you have to start putting money and your best people in the right places.”

Rizwan Koita, founder and chief executive of healthtech unicorn Citius Tech echoed Mohapatra’s comments and said that expanding a business over a long term is about building the right culture and following the right processes, and all other things can take backstage.

“I would encourage everyone in the room to create something that is long-term, to make sure that there are no cracks in the foundation. If the foundation itself is not built to scale, then at some point one of the pillars is going to crack and which one will that be is often very hard to predict, especially when you have a structure with a lot of pillars,” said Koita.

“If you're building something for the long-term, then you must lay a concrete foundation and you must follow all your processes, which are required for it, and if all of that takes an extra two days it's going to be worth it. Because anything which you have done at the foundation level, you will have to pay or not. In the long run,” Koita added.

Amitava Saha, co-founder, and chief executive of logistics unicorn Xpressbees, meanwhile, said that the culture should be such that it helps companies in saving costs and lets them focus on profitability.

Also Read: Startups should prioritise profitability amid funding winter: Unicorn founders

“Building a culture of being careful with spending is something that is going to pay into dividends over a period of years,” said Amitava Saha, founder, and CEO of logistics unicorn Xpressbees.

“First we have to be conscious about spends, then we'll say we're conscious about gross margins and third, obviously we have to be very conscious about profitability. We want all investors to be extremely clear about what they're getting into when they come in hence, whatever happens is through the process of communication. So we make sure that we actually put the risks involved in front and center it,” Saha added.

Moreover, founders also said that profitable unicorns, which burn less cash, get a lot more opportunities to expand their businesses as they do not have to worry about raising funds since they have cash on their hands.

“We were not raising money for cash. Now is a great time for us, considering there is a lot of opportunity in the market and we have money in the bank. We are looking at investments and acquisitions going forward,” said Bhaskar Subramanian, co-founder, and chief executive of local ads targeting software-as-a-service unicorn Amagi Media Labs.