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Thursday, December 7, 2023

How Funding Winter Can Make Start-ups More Sustainable

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Today is a world of entrepreneurs. One which holds such risk-takers in high regard. While the recognition and financial success they receive are lauded, the low times are equally disheartening and certainly make one question their choice.

The present state of funding winter which has clouded the country and the world is one such time. Raising funds is now difficult as compared to the sunny side the founders saw a while back. However, such times mould strong characters. In fact, experts and renowned founders feel that those who are able to raise funds in such time can be a sure-shot bet.

During a panel discussion on “Raising funds when investors are more cautious’, at the Entrepreneur 2023 Summit in New Delhi, the panelists discussed their experience of raising capital in the proverbial winter and what has changed. The panel comprised of Akshay Chaturvedi, Founder and CEO LeverageEdu, Shivam Shahi, Co-founder & COO, Blue Tokai Coffee, Akshay Singhal, Founder & CEO, Log9, and Rohit Ramana, Co-founder, Chief Financial and People Officer, Mintoak.

“In 2021, money was free to some extent. We ended up raising money at 17x, but that was short lived as it took us four months more next time to get to that same valuation and raise the funding. It’s good that you raise at the right multiple, at sustainable revenue numbers and sustainable business model.” Akshay Chaturvedi, Founder and CEO LeverageEdu said,

However, he feels that negotiations are much tighter now than before. “It makes you much more secure if you have raised money in this market as you know it’s not rushed. Everybody has taken their time to take a look at every single number,” says Chaturvedi.

Concurs Akshay Singhal, Founder & CEO, Log9, said, “In our deeptech fundraising has never been quicker or faster as a lot of tech due diligence happens. A lot of third parties have to get involved and have to take a bet. But what has changed from last year to now is the multiple. Somebody who was willing to bet on 20 or 25X multiple of revenue is no more the case now. Except that nothing has changed. We were able to raise funds last year and this year as well. But you don’t get the same kind of valuation numbers. There are more eyeballs looking as compared to the hype cycle. When the hype subsides, businesses which are more sustainable, they get more precedence.”

Shivam Shahi, Co-founder & COO, Blue Tokai Coffee recalls that the company raised the funds from people who initially rejected it at the first go. “After a few months, we fit into their calculation. It’s more about aspirational correction. Money is there. It’s better money which we are getting right now as it comes with a lot of questions and adds sustainability to the business which was not the case in the last two-three years.”

Rohit Ramana, Co-founder, Chief Financial and People Officer, Mintoak, shares another interesting aspect that he sees now. ” The beauty of raising funds now is that you are sure that you are not selling your stock at a valuation which is not sustainable and therefore from thereon you are not going to decide on how you are going to deliver on those numbers and expectations. Ultimately if your shareholders are coming in and making enough returns, that sets you well for future rounds.”

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