Yes, there’s a funding winter. Yes, the number (and size) of deals are down. Yes, it’s a funding bear market. However, is it all gloom and doom for the Indian cub?
We think not!
An abundance of capital aside, a bullish funding market may in fact not be the best time to launch a startup. There’s stiff competition for talent; added hiring, attrition and compensation challenges; elevated overheads like rent; and much more.
A bear market could mean fewer me-too ideas
While a bullish funding market might more easily enable prospective entrepreneurs to secure funding for their ambitious visions, it often also helps many other me-too entrepreneurs secure funding for similar or idea-adjacent startups.
Competition is good, but an excess means that startups in crowded categories are often compelled to exhaust valuable amounts of capital competing against each other, and not focusing on sustainable growth and profitability. This results in drastic corrections, pivots, and scale-backs that we’re all too familiar with.
Some of the biggest startups were formed in tough markets
While it’s true that a great company can be founded in any market, some of the biggest startups such as Apple, Facebook, Uber, and WhatsApp, to name just a few, were all formed during challenging economic conditions.
Bear VC markets help founders focus on what’s important
Sustainable companies and great products take time. While it may be true that fewer startups secure funding in a bear market, it is also evident that those startups that do raise funds can give their undivided attention to building a solid product, a sustainable company, and a better market position. Also, unlike in bull markets, startup CXOs don’t have to worry as much about factors like team attrition that swell in a bullish market.
Bear VC markets usually mean better returns for investors
In a slower market, startups can leverage the less frenzied pace to build companies that can play the long game. VCs can also invest more time in nurturing their startups to their fullest potential. In a bear market, they can be more focused and directed, and less triggered by the acquisition race.
Startups are especially important to governments in a slow economy
Governments recognise that technological innovations often come from startups, and see value in prioritising entrepreneurship. This, in turn, catalyses job creation, reverses the brain drain, expands the tax base, and creates a more robust startup ecosystem, which in turn attracts and inspires the next wave of founders.
Download YourStory’s H1 2023 Funding Report
Looking for more insights and trends into the startup ecosystem? Download a free copy of YourStory’s H1 Funding Report today. The report covers 25 insights that defined H1 2023 and delves into the trends that are defining the year.
