Corrections are now happening in the startup funding ecosystem, with a higher degree of accountability to show the route to profit, which is a “good step” for the industry, according to Marico Chairman and leading entrepreneur Harsh Mariwala.
Now, most of the funders are saying “I just do not want to look at growth, but I also want to see when will you start contributing to the bottom line, which is a good development,” Mariwala told the Press Trust of India (PTI).
“Just growing for the sake of growing without any visibility of profit is not a good business in my opinion. At some stage the business has to turn profitable,” he added.
In the current situation, when the funding environment is tightened, now only the best proposal can attract funds, said Mariwala.
“In a way, things were too good for entrepreneurs, and many of the entrepreneurs could easily get funds and they started splurging and burning money. But now I think there is a higher degree of accountability to show the route to profitability,” he added.
Mariwala further said the time frames compared to the earlier days have increased, which is fine because the scaling of the business is high and the growth rate is much higher.
“But you can not have indefinite periods of no profitability. There has to be some road map for achieving profitability and I think most of the funders are demanding that, which is a good thing compared to an earlier time when the demand on profit was much, much weaker and lesser,” he added.
In the earlier environment, everybody was funding because there was a “craze for funding”, but that has got some degree of correction now in the recent past, he added.
“Earlier it was too much of funding and maybe now (there is) a correction which is happening. I am sure if you have a good proposition, you will get funds. It is not that the founds completely dried up. But the funds are far more selective now,” he added.
When asked about the difficulties faced by the new-age entrepreneurs, Mariwala said unique businesses should definitely get funding.
“I would not say (funding has not) dried up, but it is getting tighter in terms of ability to get funds,” said Mariwala adding “If you have a unique story, if you have a good story, people will be there to back you. But if you do not have, or have an average story and if you are a me-too player, then you will find it difficult to get funds.”
While talking about Marico, he said it has made three acquisitions in the D2C (direct-to-consumer) space and would help them to scale up.
“The biggest benefit we can get them is in terms of physical distribution. Many times, for these smaller firms, it is too expensive for them to scale up through the physical route and also may be the funds also as there is impact because of the tightened funding Environment. So there are opportunities for FMCG firms to acquire and grow,” he added.
When asked about his message to the corporate world, Mariwala said it’s a highly competitive environment and to succeed in this, it is important to create a business model with a stronger right to win.
“That right to win will come only out of some unique proposition. It could be pioneering, it could be innovative, it could be some technology, it could be some service orientation. But you can not succeed in today’s business environment with a me too business where others are already there and you are one of the additional ones,” he said adding “so the need to differentiate is very very high.”
Marico Innovation Foundation (MIF), founded by Mariwala, as a not-for-profit arm of the FMCG company Marico, has announced the 9th Edition of its flagship awards platform Innovation for India Awards 2023.
MIF, which aims to nurture and propel innovations has invited applications for two broad categories – India-based for-profit organisations including startups and corporate innovators and India-based not-for-profit individuals or organisations including government entities, philanthropic bodies, charitable trusts, multilateral agencies, community foundations, NGOs, and CSR / corporate funds.
The awards ceremony is scheduled to be held in February 2023 in Mumbai.
