Startups have been dealing with a funding winter for a while now, and it’s becoming increasingly important for them to prioritise core capabilities and profitability over growth.

In conversation with unicorn startups of India is a very special show that brings together CEOs and founders of a handful of India’s top unicorns, and in this episode, these leaders will explain their decision-making process and how they identify and prioritise business objectives.

Hosted by Paromita Chatterjee, the panellists for this episode include Vinayak Shrivastava, CEO and co-founder at VideoVerse, Abhishek Sharma, the co-founder and COO at GOQii Inc, Aditya Agarwal, head of Global Digital Segment, Citibank, India, Arindam Paul, founding member and Chief Business Officer Atomberg Technologies, and last but not the least Priya Singh, co-founder and director at Chalo Mobility.

The full episode is available here. What follows are the highlights from this episode. Do watch the full show online for deeper insight into the minds of the people behind India’s top startups.

Let me start off with you, Aditya. Where would you say we are currently when it comes to funding?

Aditya: An easy and liberal flow of capital over the last few years helped startups scale up very quickly and diversify, but sometime early last year we’ve seen that capital flow slow down. There are numerous reasons for that, but the good news is that liquidity with investors continues to stay strong. Deployment has probably slowed down a bit, but we’ve seen an acceleration in the journey towards profitability.

You're saying that the focus is really on profitability. Priya, how would you react to some of these statements, especially for someone with your background?

Priya: The good thing was that we exited and made money and kept investing in the same company out of sheer passion. The market sees your track record and starts to believe in you. It just becomes easier to convince people to invest in you.

Atomberg Technologies. That’s a very interesting and high-tech name. You had some marquee investors when you started eight years ago, and today you’re talking about fresh rounds of funding. What’s the story that moved them?

Arindam: We were never a tech brand and were always benchmarked with consumer brands so the focus has always been on gross margins from day one. Investors saw that we’d reached a certain scale, and in a capital efficient way at that, and were interested.

Abhishek Sharma, co-founder of GOQii. You're wearing one of your devices as I can see, but QOGii is much more than a device, isn’t it? What was the key demand from your investors?

Abhishek: It’s been an interesting journey. We have always been a service company, but people only see the physical part, which is the device. What we did was build a service layer on top of wearables. Our core is still health-tech, but we’ve added more layers to make our services more holistic. Investors looked at profitability and sustainability.

Aditya, they are all talking about profitability, and a focus on ROI. It's a demand from investors, but also seems to be coming from companies themselves. What's the big picture here?

Aditya: Like any other market or industry, when a lot of money starts chasing growth, you obviously see valuations getting stretched. The way I think I would look at it is whether there is real value being created. You need to understand each company, to see if there’s a plan in place, if that plan is being followed, etc.

What does diversifying mean to you in today's market?

Priya: If you are diversifying in your core, I personally believe it's okay. But if you are diversifying in other areas, I don't think that we should be doing it.

It's category-specific, right? Vinayak, you are in a consumer durable market. Would you approach this a little differently because you are using technology as a platform?

Vinayak: Yeah, absolutely. The core of the business has to be rock solid. It has to be generating money before you try. We have expanded, but only after our co-business became stable. Access to capital does not mean that you can solve problems by just diversifying.

A lot of early unicorns were focused on whether to diversify their offerings or whether to explore new geographies. Is that still an approach that works in today's market?

Aditya: It should not be a function of capital that is available to you, it should be a function of the product market fit. A SaaS company can expand sooner since the model is easy to replicate, but a local business like Chalo is very localised and will have to start from scratch in a new market.

Vinayak: You don't need money to expand, it's just that in the last few years, there was such easy access to capital. Everyone thought that you could raise money, and raising money meant raising valuations. No one focused on really building a business.

Abhishek: During the golden era or bubble era, the focus was to raise funding, not to create business. People just wanted to game the valuation.

The phase of chasing that target of becoming a unicorn is perhaps dimming a little bit, right?

Priya: When you become unicorn and your share falls. The entire world is watching.

What's the debt side of the market looking like? Are you seeing a shift from equity towards debt?

Aditya: It’s not really a shift from equity to debt, but we are looking at debt becoming complimentary to the equity because the risk capital has to come in from equity, given the nature of the business. But as companies are moving faster towards profitability, and we have quite a few companies which are already profitable, they have an option of debt capital solutions especially on the short term to start with. And then there are a lot of Investors who are also looking at deploying debt capital from a long-term perspective.

That is something which is coming in handy. We are helping a lot of clients with debt capital solutions, especially on the working capital side.

That equity window is getting a little narrower. Abhishek, you were saying that you are disagreeing with that? You're saying that if you have a good enough story, if you have good enough financial metrics, equity investors are still willing to follow you there?

Abhishek: It's about realization. Numbers don't lie. As long as your numbers are honest, the investors are there.

Vinayak: It's become more expensive now. Earlier, you could raise a lot of money and dilute much lesser equity. It's just that the market has changed. The cost of equity is expensive now.

Arindam: I think what has changed is diligence has started becoming stronger in the funding bubble. A lot of investments happened without proper diligence. The second thing is that valuations have gone more realistic, and I don't think it's bad at all for founders also, because the moment you are overvalued, you are factoring in a lot of future growth which you are not sure about.

Does this mean that risk taking has come down a little bit?

Abhishek: The whole startup ecosystem is a risk.

Yes, and you were called Indian cowboys three years ago, what about now?

Abhishek: That’s how you mature, otherwise how do you build business or the new economy, or even for the country? It’s not the wild west anymore. You need to grow, you need to keep on evolving. It's the evolution which is more important.

Priya: I’ve seen four funding winters. This funding winter is not a problem. The problem was when our entire business, public transport, shut down during Covid. Then I knew that I must revise and pivot and change the way I was thinking. We went and transformed to digital immediately.

That was going to be my next question. I mean, the pandemic was a time when everybody was focusing on digital. Now that we are returning to business, how did it impact you, for instance?

Abhishek:  The pandemic from a business perspective was good for us because people got more aware about their health. We saw the need, decided to address it sustainably, and that’s why we’re doing well post-pandemic.

Vinayak: The pandemic was great for us as well. Sporting shut down, but digital consumption changed. Everyone wanted to go digital and they wanted a solution.

Priya: It was difficult for us initially, but when things came back, everyone was ready to go digital and we could implement a solution immediately. It was wonderful for us in the end.

Arindam: For us it worked both ways. The first wave shut down manufacturing, but then e-commerce went up significantly and now there’s a permanent ship. Digitally influenced sale also went up.

Everybody had some losses, but mostly wins. And now we are talking about a global recession. What does it mean for the startup ecosystem?

Aditya: We’re not decoupled from the world, but we’re in a sweet spot from a large economy perspective. In a relative term, India is well positioned. And anyway, startups have always been thriving on private capital. Not much has changed and that trend is likely to continue. We see so many VCs having India focused funds, which they have raised in the last year or so. All that liquidity is waiting to get deployed.

What’s the plan ahead?

Priya: Our model is well integrated and sound, and we’re seeing a good response from everyone. We’re optimistic about the future.

Arindam: We are optimistic because the India consumption story has just begun.

Vinayak: The idea is to continuously keep focusing on the core part of the business. We’ll keep growing that, and go a little bit deeper into the sports segment.

Abhishek: We are expanding internationally but the model and the strategy is very simple. We stick to our core of the tech and the service and deliverable, but then we form a JV with a local partner for market access.

Aditya, the final word to you. Mumbai seems to have a different breed of startup entrepreneurs, there’s a different focus here, right?

Aditya: I think people are thinking the right direction. I see is a lot of focus coming back on customer centricity and constant innovation, which is key to the whole startup ecosystem. As my fellow panellists said here, we have to solve the problem and be focused on it.

We as a bank would generally sound a little more simplified and standardized, but I think there's a lot of innovation happening in the whole FinTech and banking space as well.

That seems to be the underlying theme: a lot of innovation. I think we are still seeing that the risk-taking appetite has not gone away, but the focus is really on the core aspect of the business. And we've seen that all these startups have a very bright future ahead.

Thank you so much for joining us. “Powered by Citi” 

Moneycontrol journalists were not involved in the creation of the article.