Startups’ funding winter to end by middle of 2024?

- Fund managers are in a wait and watch mode now

- A big correction has already happened in startup ecosystem

- PE, VCf unding fell 60.5% to $6.64 bn in Jan-March

- Many fund houses sitting on enough liquidity for deployment

Bengaluru: Funding winter is likely to draw to a close in the first half of next year in the startup ecosystem as fund managers believe that economic indicators are expected to improve from next year onwards.

Industry insiders also opined that with cost optimisation moves and focus on profitability, the new age companies will be ready with sustainable business models for better growth prospects.

“Though it is difficult to predict when the funding winter will end. But our hope is that it may take another three to four quarters. So, somewhere around 2024, we should see inflows coming back,” Partner at private equity fund, Siana Capital Management, Dinesh Goel told Bizz Buzz.

Currently, startups across the world have seen fund inflows drying up in the last two quarters. According to a joint study published by Bain and Indian Venture and Alternate Capital Association (IVCA), funding for Indian startups dropped to $25.7 billion in 2022 as compared to $38.5 billion in 2021 as global economic slowdown loomed.

Private equity (PE) and venture capital (VC) funding fell 60.5 per cent to $6.64 billion in January-March period of from $16.8 billion a year earlier.

Such drastic fall in funding has taken a big toll on startup ecosystem with many companies laying off staffers in India and abroad. More than 21,000 employees have been laid off by about 70 startups, including from unicorns like Byju’s, Ola, MPL, Innovaccer, Unacademy, Vedantu, Cars24, Oyo, Meesho, Udaan and many more.

“If you look at the scenario, this is a global phenomenon. But we expect things to start improving from next year onwards,” Ankur Shrivastava, Founder & Managing Partner of Momentum Capital told Bizz Buzz.

Sources in the know said that all the excesses of past years are getting amended during this funding winter. Sharp cut in employee count, focus on profitability and more reliance on internal accruals are some of the measures taken up by the startups to achieve sustainable growth in coming years.

Startups operating in the technology space remain optimistic about the growth recovery from the second half of 2023 onwards.

“It is almost normalising. If you see the technology stocks in the US market are recovering, and macroeconomic indicators are improving. So, our hope is from Q3 onwards, things should go back to normal. This is because a big correction has already happened (in the startup ecosystem),” said Mainak Sarkar, Co-founder & CEO of Bengaluru-headquartered tech startup, Explorex.

Though it’s difficult to predict when the funding winter will end. But our hope is that it may take another three to four quarters. So, somewhere around 2024, we should see inflows coming back, Dinesh Goel, Partner at Siana Capital Management, tells Bizz Buzz