Indian startup stories are creating a sensation. They inspire many into entrepreneurship. 14 Indian companies turned into unicorns – companies valued at more than one billion dollars – between January and June 1, 2022. The government is trying to create a new startup culture. Government agencies are instructed to reach out to entrepreneurs whose startup initiatives may not be viable due to insufficient support or resources. The Department of Science and Technology will undertake consultancy work to promote Phase-2 startups and 3 cities in areas such as e-commerce, fintech, edtech and biotech. 50% of the country’s startups come out of tier-2, 3 cities where opportunities and resources are relatively less. Level! References abound in Startup Glamour. Shark Tank’s equity-meets-live-action theatrics add to the launch mania. Maybe a few aspiring entrepreneurs are motivated to chase the billion-dollar valuation of a Facebook movie. Social network
But there is a note of caution, even if entrepreneurs are striving to become the next unicorn, their focus should be on sales and they should be striving to make their businesses successful rather than trying for reviews based on reviews. Businesses need to generate more revenue than relying solely on investment to sustain their businesses. Historically, successful companies produce products [internally] – Until startups are up to date. But not all products are born in the beginning. In the real world, most entrepreneurs and founders are generally business owners first, and entrepreneurs second. They started their company not because of who they could contact and how much they could raise, but because they invested their own time and money in creating something that would generate income by selling things to customers. In particular, there is a misconception that the fundraising cycle at the start of a company is a cost-effective way to fuel growth. It’s certainly faster and cheaper than forming a team and building a product and selling to an established market. But fundraising isn’t free. You need to spend money to collect money. And best of all, startups that have the best chance of making money don’t necessarily need it. For the money to be sustainable or successful.
If one has an idea and has access to talent/infrastructure, one should not focus on seeking investment. Instead, put that energy into the sales floor. Go out and present the new product to existing and potential customers or early adopters or anyone who actually needs the product you’re building. Maybe those customers will support the idea in reality. Maybe someone could sell a few MVPs and get an immediate income on the books. It also helps to get a better understanding of how the new product can be invested and qualified to build a new company. The more entrepreneurs think about a business like a business and treat it like a baby unicorn, the more likely their business will succeed. It doesn’t matter if that business is started in an existing organization, a dorm room, or a popular incubator. What matters is how many customers want your product and how much they will pay for it.
Apart from being focused on sales, entrepreneurs need to analyze the latest trends to be realistic as reviews are now driven by sustainability instead of being bullish based on reviews. By 2021, US VC-backed companies will have raised $329.9 billion. In addition, early-stage VC activity exceeded $80 billion for the first time, and annual exit values exceeded $774 billion. This massive influx of cash has pushed startup prices higher in 2021. However, with the end of the Covid-19 pandemic seemingly on the horizon, entrepreneurs and investors alike are wondering what the future holds. Can these sky-high prices last? Is this investment frenzy sustainable or should we risk it? The purpose of the US federal government is to control the money supply and regulate inflation and unemployment. It doesn’t support venture capital directly, but changes by the Federal Reserve have a ripple effect. The U.S. Federal Reserve has provided approximately $5.8 trillion in financial support to the U.S. economy. The government injected cash into the economy. So, many funds and other bondholders received huge sums of money that they would have invested elsewhere. Most of the money went into the stock market, some into real estate, but a significant portion of this windfall was received by VCs and thus led to higher valuations.
The Fed has begun to shrink its balance sheet, which has raised some concerns. Current investment levels are unsustainable as the money supply is not increasing, so there will be a slowdown in VC deals. However, the total amount of money already committed is still high. The future will reflect the growth of valuations in the past. In later stage startups, valuation fluctuates in sync with stock market changes. Good startups continue to be in high demand and enjoy high valuations, while less successful ones have difficulty raising the next investment, which can lead to flat or down rounds. The Good startups are marketable and sustainable. A few reviews may be lost, but now the money is allocated which means no unexpected crashes to worry about.
Markets are interconnected these days. There will be a similar trend in India as in America. A combination of macroeconomic factors, falling technology valuations, China’s technology crackdown, Russia-Ukraine war, supply chain issues, etc. have reduced capital flows globally, bringing rationality to valuations. Now, the focus has shifted to business fundamentals, with metrics like unit economics and profitability back in vogue. It does not mean that these did not exist in the past, but in terms of capital latitude, these were pushed into the background. So as an entrepreneur, you should be running the business and not just becoming a unicorn based on the ridiculous valuations that the market promises, it should be the goal.
End of the article
