: View from Hyderabad: Startups that show resilience will survive #IndiaNEWS #Business Hyderabad: Different players in the startup ecosystem see the current challenging situation as a passing phase

View from Hyderabad: Startups that show resilience will survive #IndiaNEWS #Business
Hyderabad: Different players in the startup ecosystem see the current challenging situation as a passing phase and believe that there is lot of correction happening, which would result in the best companies staying afloat.
Sanjay Enisetty, founder of early-stage venture fund firm 50K Ventures, calls it interesting time for startups.
Its interesting time, not a bad time for startups. Its the time that only good companies will remain. Founders which have tenacity and resilience stay back in business and others who are not prepared and just wanted to ride the wave will definitely collapse, Enisetty told IANS.
He believes it is just a passing phase and not Doomsday, and a lot of correction will happen, in which good companies will remain. He sees this as a process of settling down wherein only the cream of the startups will remain and investors will wait and watch.
Its just a temporary phase for 2-3 quarters. In a way its good because lot of dust will settle and only good companies will remain.
Enisetty says lot of companies have to do correction in cost-cutting and resource downsizing. I dont see series B and C happening. Lot of funds are kept on hold.
He pointed out that last year, many companies attained status of unicorns. Almost every month, 1-2 companies became unicorns and the number reached 100. On the other hand, there was an IPO fever, and every company wanted to go for IPO. When the downfall started, reality dawned on everyone, Enisetty said.
Unicorn status was created so that they can fast-track to IPO rounds. Its not that easy without having fundamentals rights. As many reports show out of 100 unicorns, only 17 are profitable. Other unicorns are highly negative in terms of revenue. Fundamentally for any business, financial discipline is a must. Overall, it was completely not seen in these companies, he said.
He noted that almost every week, one or the other company are laying off staff. VCs called portfolio meetings and clearly told them to cut down on costs, not to do any aggressive marketing plans and thats why 7-8 companies have laid off around 5,000 people in coming days we will so more such thing happening.
According to him, the situation is impacting companies in mid-stage, early growth stage and growth stage.
Enisetty also believes valuation correction is going to happen. People will focus on profitability, break-even and then scaling. Majority of models have to sustain, become profitable and then think of scale.
He pointed out that edtech industry was worst hit for two reasons. All edtech companies raised and made money and attracted lot of users during last two years of Covid time. The scenario was different.

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