At a time when start-up funding rounds are not going through as founders and investors are in a logjam on valuations, Anand Daniel, a partner at venture capital firm Accel, is of the view that start-up founders should rather think about survival if push comes to shove.
“Flat or down rounds don’t matter. Survival and being alive is the most important thing. If you are not there on the other side, then what is the point of holding on to a lot of stock,” he told Moneycontrol.
“If they have capital for the next two, three years, and build a profitable company, then they don't have to go out and raise a downround. On the other hand, if they didn't raise enough capital last year and they have to raise money today, all these valuations don't matter,” he added.
Daniel is considered to be one of the star investors of Accel’s India arm. He has led early stage investments in unicorns like Swiggy, Vedantu and Spinny, and made growth stage investments last year in the likes of Emeritus and MyGlamm.
The VC firm, along with management consulting company Bain, has come out with a report which says that funding for online marketplaces, including those in e-commerce, fintech, edtech, and food delivery, fell 68 percent to $4.5 billion in the first 10 months of this year.
With mature e-commerce platforms like Swiggy, Zomato and Flipkart yet to break even, the report highlighted that B2B marketplaces like Infra.Market, Zetwerk and OfBusiness were among the fastest to attain profitability.
“B2C marketplaces end up spending more on customer acquisition costs like discounts and marketing. These spends tend to be lower for B2B – and so they reach profitability faster,” said Daniel.
“In most boardrooms, the focus has turned on to unit economics — are you making money on a per order basis? And then, what will it take to scale up to a level where you can cover your fixed costs? Those discussions are being held on a regular basis,” he added.
The VC investor highlighted the fact that even the public markets were rewarding growth last year with valuations in terms of revenue multiples, but that has now changed with tech stocks on the Nasdaq going through a meltdown.
“The eventual aim is to build a long lasting company. If you want to list in the public markets, you will have to work that back and apply it to every stage of evolution of the company… Irrespective of whether it is a Series B or Series C round, valuations are what the market is willing to pay at that point in time,” he said.
In March, Accel raised a $650 million fund, its seventh focusing on India after a record-breaking year for startup funding, at a time when murmurs of a funding slowdown had already begun.
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