By ROBIN GHOSH
( FORMER CHIEF ECONOMIST, BENGAL CHAMBER OF COMMERCE AND INDUSTRY)
KOLKATA, 7 MARCH 2023:
Lately funding for startups has slowed down.
In the first half of this calendar year Indian startups raised $ 18 billion. Though this amount is higher than the corresponding year – but if you calculate on a quarter to quarter basis – there is a clear slowdown.$ 6.9 billion against $11.9 billion . It is down by 60 percent.
The reasons for this decline are many: Russia-Â Ukraine war, high interest rate and fear of recession.
Given this psycho- economic mindscape, startups need to explore alternative avenues for fundraising.
What are the alternatives? A quick survey indicates:
1 .There are multiple investment channels like revenue based financing, equity crowdfunding, lease financing, corporate debt, fixed income and other equity linked funding instruments.
2. Alternative investment platforms enable companies with recurring revenues to raise non – dilutive growth capital.
3. Revenue based financing in exchange for a percentage of their future revenues.
4. Investment platforms that offer equity and debt based securities pool cash from multiple investors and securitize it on the basis of receivables.
5. To mitigate and minimize risks, alternative investment platforms closely work with anchor investors.
The playbook is clear. Anchor investors/ venture capitalists continue to play a pivotal role for startups. And here listen to Mr. Narayana Murthy, INFOSYS founder:
” I would hold the venture capitalist who propounded the theory that what is important is only the topline and not the bottom line. I think that is completely wrong. In someway, in many cases this is also a Ponzi scheme”
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