Skip to main content

Investors tell Indian startups to ‘prepare for the worst’ as Covid-19 uncertainty continues

Just three months after capping what was the best year for Indian startups, having raised a record $14.5 billion in 2019, they are beginning to struggle to raise new capital as prominent investors urge them to “prepare for the worst”, cut spending and warn that it could be challenging to secure additional money for the next few months.

In an open letter to startup founders in India, ten global and local private equity and venture capitalist firms including Accel, Lightspeed, Sequoia Capital, and Matrix Partners cautioned that the current changes to the macro environment could make it difficult for a startup to close their next fundraising deal.

The firms, which included Kalaari Capital, SAIF Partners, and Nexus Venture Partners — some of the prominent names in India to back early-stage startups — asked founders to be prepared to not see their startups’ jump in the coming rounds and have a 12-18 month runway with what they raise.

“Assumptions from bull market financings or even from a few weeks ago do not apply. Many investors will move away from thinking about ‘growth at all costs’ to ‘reasonable growth with a path to profitability.’ Adjust your business plan and messaging accordingly,” they added.

Signs are beginning to emerge that investors are losing appetite to invest in the current scenario.

Indian startups participated in 79 deals to raise $496 million in March, down from $2.86 billion that they raised across 104 deals in February and $1.24 billion they raised from 93 deals in January this year, research firm Tracxn told TechCrunch. In March last year, Indian startups had raised $2.1 billion across 153 deals, the firm said.

New Delhi ordered a complete nation-wide lockdown for its 1.3 billion people for three weeks earlier this month in a bid to curtail the spread of COVID-19.

The lockdown, as you can imagine, has severely disrupted businesses of many startups, several founders told TechCrunch.

Vivekananda Hallekere, co-founder and chief executive of mobility firm Bounce, said he is prepared for a 90-day slowdown in the business.

Founder of a Bangalore-based startup, which was in advanced stages to raise more than $100 million, said investors have called off the deal for now. He requested anonymity.

Deepinder Goyal, co-founder and chief executive of food delivery firm Zomato, said in January the startup would close a round of up to $600 million by the end of the month. Two months later, Zomato has only raised $150 million.

Many startups are already beginning to cut salaries of their employees and let go of some people to survive an environment that aforementioned VC firms have described as “uncharted territory.”

Travel and hotel booking service Ixigo said it had cut the pay of its top management team by 60% and rest of the employees by up to 30%. MakeMyTrip, the giant in this category, also cut salaries of its top management team.

Beauty products and cosmetics retailer Nykaa on Tuesday suspended operations and informed its partners that it would not be able to pay their dues on time.

Investors cautioned startup founders to not take a “wait and watch” approach and assume that there will be a delay in their “receivables,” customers would likely ask for price cuts for services, and contracts would not close at the last minute.

“Through the lockdown most businesses could see revenues going down to almost zero and even post that the recovery curve may be a ‘U’ shaped one vs a ‘V’ shaped one,” they said.



from TechCrunch https://ift.tt/39C5xEK
via Technology

Comments

Popular posts from this blog

Instagram accidentally reinstated Pornhub’s banned account

After years of on-and-off temporary suspensions, Instagram permanently banned Pornhub’s account in September. Then, for a short period of time this weekend, the account was reinstated. By Tuesday, it was permanently banned again. “This was done in error,” an Instagram spokesperson told TechCrunch. “As we’ve said previously, we permanently disabled this Instagram account for repeatedly violating our policies.” Instagram’s content guidelines prohibit  nudity and sexual solicitation . A Pornhub spokesperson told TechCrunch, though, that they believe the adult streaming platform’s account did not violate any guidelines. Instagram has not commented on the exact reasoning for the ban, or which policies the account violated. It’s worrying from a moderation perspective if a permanently banned Instagram account can accidentally get switched back on. Pornhub told TechCrunch that its account even received a notice from Instagram, stating that its ban had been a mistake (that message itse...

If only your bike had a trunk. Oh wait, now it does.

Just to let you know, if you buy something featured here, Mashable might earn an affiliate commission. Biking is one of the best ways to get around, especially if you live in a city. It's quick, it's eco-friendly, and you get a bit of exercise.  If you already commute on two wheels or are thinking of starting, there's a storage device you kinda need. SEE ALSO: This bamboo keyboard combo adds a touch of tranquility to your workspace The Buca Boot is a pretty magical two-in-one hybrid: It’s a super secure storage box for your bike that works like the trunk of a car. You can lock your helmet or whatever else in it and leave it safely behind. It’s also a basket—open it up, and you can carry a bouquet of flowers and a baguette like the picturesque cyclist of your dreams.    Read more... More about Storage , Car , Bicycle , Trunk , and Cyclist from Mashable http://ift.tt/2eHNwLB via IFTTT

California Gov. Newsom vetoes bill SB 1047 that aims to prevent AI disasters

California Gov. Gavin Newsom has vetoed bill SB 1047, which aims to prevent bad actors from using AI to cause "critical harm" to humans. The California state assembly passed the legislation by a margin of 41-9 on August 28, but several organizations including the Chamber of Commerce had urged Newsom to veto the bill . In his veto message on Sept. 29, Newsom said the bill is "well-intentioned" but "does not take into account whether an Al system is deployed in high-risk environments, involves critical decision-making or the use of sensitive data. Instead, the bill applies stringent standards to even the most basic functions - so long as a large system deploys it."  SB 1047 would have made the developers of AI models liable for adopting safety protocols that would stop catastrophic uses of their technology. That includes preventive measures such as testing and outside risk assessment, as well as an "emergency stop" that would completely shut down...