Government Initiatives have Significantly Impacted the Startup Ecosystem: Bhawna Bhatnagar of WeFounder Circle

In the ever-evolving landscape of the Indian startup ecosystem, adaptability and resilience have become more crucial than ever. In an insightful conversation with Amit Singh, Bhawna Bhatnagar, Co-Founder of WeFounder Circle, delves into the challenges and opportunities that startups are facing during the funding winter. With a keen eye on market dynamics and a wealth of experience, Bhawna shares her perspectives on the strategies startups are employing to navigate this period of uncertainty. From innovative marketing tactics to the impact of regulatory changes, she offers valuable insights for both aspiring entrepreneurs and established startups aiming to thrive in the evolving market

Amit Singh: What are the most common challenges faced by startups during the funding winter, and how are they adapting to overcome them?

Bhawna Bhatnagar: In this challenging market for startups seeking substantial rounds of funding, we’ve observed a significant drop. Industry data reveals a 77% decline in funding for Indian startups during the first seven months of 2023 compared to the previous year. Amidst this, startups confront several common challenges, including:

• Lengthened funding cycles: Closing rounds, which once took three months, now extend to six months or more. This particularly affects Series A and above rounds.
• Heightened investor caution regarding valuations: The optimism and outlook of two years ago have taken a backseat. Investors now scrutinize business foundations, unit economics, and the route to profitability more     closely.
• Limited funding leading to strategic shifts: Startups are compelled to pivot their strategy, prioritizing quicker revenue generation over riskier ventures.

To combat these hurdles, startups are recalibrating their approach. They are tightening expenditures, curbing marketing and hiring costs, and diligently tracking milestone achievements.

Amit: How have regulatory changes and government initiatives influenced the funding landscape for tech startups in India?

Bhawna: Government initiatives have significantly impacted the startup ecosystem. The Startup India program, a key policy drive, provides funding, tax incentives, IP rights support, and international event access. The GIFT City fund facilitates acquisition financing, paving the way for strategic M&A deals. Additionally, investor-friendly measures, like zero GST for GIFT IFSC-registered firms and provisions for transacting in USD, facilitate cross-border transactions.

Further, the government’s increased FDI limit in sectors like defense and insurance has opened doors for more capital and innovation. Substantial support comes via grants and fund-of-funds, exemplified by:

• DIPP providing Rs 600 crore (+Rs 25 crore Interest) to SIDBI, which further committed Rs 623 crore to 17 VCs.
• A proposed Rs 10,000 crore Fund of Funds by Mar 2025, averaging Rs 1,100 crore per year.
• Initiatives like Credit Guarantee Scheme, Atal Innovation Mission, and Pradhan Mantri Mudra Yojana are fostering the local startup ecosystem.

Amit: Can you identify specific industries or sectors where startups have witnessed substantial growth despite the funding winter?

Bhawna: Despite the market challenges, certain sectors have garnered more funding volume. Notable sectors include fintech, securing $2.1 billion in funding, followed by e-commerce ($1.1 billion) and enterprise tech SaaS ($683.9 million). Cleantech also performed well, with $271.3 million raised across 32 deals. Moreover, the resurgence of interest in Artificial Intelligence, particularly Generative AI, has boosted investments. Agritech has seen significant investments recently.

Amit: How are tech startups adapting their pitch and business models to align with the preferences of cautious investors?

Bhawna: Tech startups are recalibrating their approach to attract cautious investors. They are:

• Prioritizing clear paths to profitability from the outset, showcasing customer acquisition metrics, revenue growth, and key performance indicators.
• Focusing on practical business models, outlining revenue generation, pricing strategies, and potential upselling/cross-selling avenues.
• Addressing risks upfront and outlining mitigation strategies.
• Emphasizing long-term vision and strong IP to create a distinctive market position and reassure investors.

Amit: What are some unconventional marketing and branding strategies that startups are using to stand out in a crowded market?

Bhawna: Amidst budget-conscious marketing strategies, startups are increasingly embracing:

• Hyperlocal marketing, concentrating efforts on specific geographic regions or communities.
• Founders becoming influencers, building personal brands to steer brand narratives and reach target customers.
• Content-centric thought leadership personas, cultivating communities and engagement indirectly.
• Hosting events and workshops to enhance brand awareness and customer interaction.
• Unique experiences through gamification, collaboration, and experiential marketing to foster early community building.

Amit: In light of recent challenges, what are the key areas where startups need to focus their efforts to stay competitive and relevant in the evolving market?

Bhawna: Startups must concentrate on:

• Building a business with a clear vision, path to profitability, and scalability.
• Adopting a tech-first approach from inception; paying attention to customer needs and adapting based on market trends.
• Adopting resource-efficient and lean working models to achieve initial MVP and early traction.
• Utilizing the support of incubators and accelerators for early-stage startups.

Amit: With international investors eyeing the Indian market, what measures can startups take to attract foreign investments and expand their global reach?

Bhawna: Startups seeking overseas investment and global expansion should:

• Develop a unique core offering targeting a specific market segment.
• Showcase a strong month-on-month revenue trajectory combined with robust technological differentiators.
• Identify products/services adaptable across geographies at a favorable price point. There are several US, UK, EU, and Dubai-based investors looking for such solutions that either don’t exist or are very expensive in their geographies.
• Seek strategic angel investors with cross-border networks.
• Explore third-party and government cross-border facilitation programs.

Amit: What advice would you give to aspiring entrepreneurs looking to venture into the Indian startup space amid the changing dynamics of the post-funding surge era?

Bhawna: For aspiring founders entering the dynamic post-funding surge era:

• Identify genuine problems and devise lean, scalable solutions that can turn profitable soon.
• Collaborate with mentors, advisors, and a dedicated founding team who invest in you and encourage financial discipline.
• Embrace financial discipline and an ability to adapt swiftly.
• While raising funds, maintain a two-year runway and keep your burn as low as possible.
• Balance the fine line between building and conserving resources for a successful journey.