Access to capital will be a constraint for startups in 2024 and no one should bet on funding numbers going up this year, said Vineeta Singh Co-founder and CEO of SUGAR Cosmetics.
While there is a conversation about the election changing the scenario a bit, Singh said that she wouldn't bet on that. "In 2024, we can only hope for recovery. There was a sharp decline in startup funding from $25 billion in 2022 and $38 billion in 2021 to $11 billion in 2023. I don't expect funding to grow significantly. The conversations with international funds that invest in India, I don't see a shift in the way they are thinking," she said.
Singh who continued her stint as a judge in Shark Tank India said that the third season of the show is like an oasis in the desert against the funding background. "The amount of capital in India has been low but Shark Tank India has continued to be one place where entrepreneurs have a much better shot at raising capital."
Capital constraint
She added that while funding will be a challenge this year, the growth in terms of revenue and scale continues. "The GDP (gross domestic product) growth of India is on track. Revenue growth of startups will be as good as 2021 but access to capital will be a constraint," Singh told Moneycontrol.
On the sets of Shark Tank India season 3 some of the prominent themes were, focused on profitability and attention to corporate governance.
"There was a lot more focus on profitability, cash flow. We have spoken a lot more about this in season 3. A lot of companies we saw in season 3 had good fiscal discipline and corporate governance. This was the theme for season 3 and it will be for the startup ecosystem in India this year. Innovation and technology is another theme because of the new ideas we have seen," Singh said.
Her message to founders is to enter the startup space if they are in it for the long run.
Also read: Indian startup funding landscape: An analysis of 2023 and outlook for 2024
"I have seen many founders operating on a negative run rate for months which is dangerous because to bank on a knight in shining armor to come and save the company from bankruptcy, is not realistic. It is important to have a 12-month plus run rate so that the fiscal discipline is maintained. Managing cash flow tightly is important."
She added that after the big funding gold rush, many people became founders just for the sake of it because there was access to capital. "Businesses in India take time to become profitable. So, don't build (a business) for the sake of it and do it only if you are there for it for the next two decades. Be in it for the long run."
Shark Tank India drives innovation
Singh said that the show is driving diversity and innovation from smaller towns in India's startup ecosystem.
"The diversity continues because if you see the venture capital ecosystem it is led by male founders but if you look at Shark Tank India and my portfolio, more than 50 percent of the capital I have invested in is in companies that have backed women founders. Also, my investments outside of metros like tier II, III cities, it is more than 50 percent. The show has managed to get to the smallest of all towns with a lot of people aspiring to be on the show."
She said that in season 3 she saw green shoots in the health-tech space.
"We have huge investment and startup opportunities in 2024 in India in the health-tech space where things are shifting from cure to prevention. I am seeing green shoots on the show where we saw a lot of healthcare devices made in India for the world. We also saw a lot of healthy food and general health-enabling tech and I think for 2024 that's going to be a massive opportunity."
The other big thing that continued is a digital-first brand, Singh added. "There was not so much deal traction like in 2021 and 2022 but it (digital-first brands) is one of those categories where we did not see a slump in funding. On the show, we saw a lot of digital-first brands. One company has created a transportation app for rural India, another company is like a consolidation of all the food products created by rural women under one brand name. This is going to be a growth area for the next 10-20 years," the SUGAR Cosmetics CEO said.
Also read: VC funding in Indian startups sinks to a 6-year low in November
She added that online spending and online SaaS (Software as a service) revenue have grown significantly in the last 10 years and they are primarily driven by startups. "The contribution to Indian GDP is going to be high by startups. Also, it is estimated that in the next 5-7 years at least 5 percent of the new employment is going to be generated by startups because we will have 70-80 million young Indians who will need jobs in the next 5-10 years and startups will play a key role in that employment generation."
On her business, Singh said that she will plan for an initial public offering (IPO) in the next 2-3 years. "In December 2023, we turned profitable and now we are looking to build on that."
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
