InnoVen Capital, Asia’s venture debt firm, recently released the seventh edition of its India Startup Outlook Report 2022. The report is based on insights gathered from 100 startup founders across stages and sectors such as fintech, SaaS, D2C, logistics, education, B2B, and others.
Commenting on the report, Ashish Sharma, Managing Partner, InnoVen Capital India said, “2021 will be remembered as the year when the Indian venture eco-system hit an inflexion point. A record U$ 38 billion of capital was invested into startups. Forty-four new unicorns were born, including 15 from our portfolio. Perhaps the most promising aspect was the IPO story, with Zomato and Nykaa leading the way. We are pleased to release our seventh annual Start-up Outlook report, which will provide some useful insights to all stakeholders that have a keen interest in the venture eco-system. This report is part of our continued effort to gauge the current sentiment, as seen through the eyes of entrepreneurs. We hope that the report will provide some useful insights to all stakeholders in the eco-system.”
Funding environment:
In 2021, 84 per cent of founders had a positive fundraising experience (92 per cent of all founders that attempted to raise capital) in the year. The favorable fundraising experience was significantly higher than 2020 when only 54 per cent of founders had a favorable experience. An overwhelming, 75 per cent of founders believe that the fundraising environment will improve further in 2022.
Balancing growth and profitability:
While both growth and profitability are important, 83 per cent of founders had a higher bias for growth over profitability as a focus area. 20 per cent of startups surveyed claim to be EBITDA profitable, while 51 per cent aim to turn EBITDA profitable in the next two years.
Exit expectations:
Encouraged by successful IPOs in India, notably Zomato and Nykaa, 71 per cent of founders believe that IPO is the likely mode of exit for their investors. This is a significant increase over 2020 (47 per cent). The majority of founders (58 per cent) chose IPO listing in India as the most preferred exit option compared to 30 per cent in 2020.
Hiring plans, talent and gender diversity:
Forty-eight per cent of founders expect a higher pace of hiring in 2022. FinTech, D2C, agritech and healthtech founders were the most bullish on hiring. The survey also highlighted that talent management and hiring good talent is the top challenge as well as the top priority for founders. Improving gender diversity continues to be a challenge. Only 30 per cent of startups surveyed had more than 20 per cent of women in leadership roles, which is a slight reduction from 33 per cent the year before.
Covid impact on work culture
Covid led to a significant change in the workplace, with blurring boundaries between home and work. Fifty-four per cent of startups are operating in either work-from-home (WFH) or hybrid models, which is expected to continue in 2022. There was no consensus on whether Covid has been a positive influence on the culture or not. Half the founders see a positive impact on productivity and innovation, while the other half believe that WFH has led to a lack of teamwork/collaboration and a challenging work-life balance.
Over-hyped/ under-hyped sectors
Quick Commerce (Grocery delivery) was highlighted by the founders surveyed as the most overhyped sector, while healthtech was chosen as the most under-hyped sector.
Favourite start-up and founder
Founders chose Zerodha as their most favorite Indian startup, the second year in a row. Deepinder Goyal was chosen as the favorite founder.