Reviving Startup Funding: Unleashing innovative strategies to overcome financial constraints
2 min read 16 Jul 2023, 12:01 PM ISTIndian startups experienced a 36% decline in funding in the first half of 2023 compared to the same period last year. To overcome funding challenges, experts suggest implementing a lean business model, exploring alternative financing options, and focusing on positive cash flows.
PremiumIndian startups witnessed a significant fall in business funding in the first half of 2023 (January to June) by raising only $3.8 billion during the six-month period, a massive decline of 36% as compared to the fundraising in H1 of 2022. Last year, Indian startups raised $5.9 billion in the first half.
However, Ankita Poddar, Manager of Valuations and Advisory at Aranca said that startups have various alternative financing options at their disposal which range from traditional methods like bridge or mezzanine financing to modern approaches such as crowdfunding and peer-to-peer lending.
She stated that companies can also explore options like factoring or purchase order/supply chain financing to process customer orders and generate immediate cash inflow to support expansion efforts.
“Implementing a lean business model, negotiating with vendors for better terms, and opting for leasing instead of purchasing can significantly reduce operational overhead and free up resources that can be directed towards fueling growth," Poddar added while saying that considering the combination of these strategies can help startups to navigate the fundraising challenges.
Vittal Ramakrishna, CEO and Founder of POD World suggested adopting a lean model that minimizes spending, optimizes resources, and maximizes a startup's runway can help companies to sustain themselves until market conditions stabilize in the funding ecosystem.
According to the POD World's founder, companies should look for funding-raising platforms like angel investors, and take advantage of government schemes under the Startup India Initiative.
“Forming partnerships with other companies or investors can be helpful. Exploring different ways to get money, like crowdfunding or grants, can also be a good idea. And last, using resources wisely and finding ways to save money can free up funds for innovation," Ankur Srivastava, Entrepreneur, Angel Investor, and Founder of Qi Tech and Qi Media told Livemint.
Kanav Kalia, CMO of Oxane Partners stated that the Indian startup ecosystem has slowed down since the funding winter hit in 2022, hence, the funding woes continue to worsen which led to various challenges with investors.
“Some bootstrapped companies are focused on achieving the founder-product-market fit, and continue to grow steadily. This approach allows them to make strategic adjustments to their business models and offerings to better serve their target market and drive profitability. Some of these also follow a customer-centric approach," he said.
Karan Mittal, Partner at EV2 Ventures recommended one of the key strategies to overcome funding constraints is to build a business model that emphasizes positive cash flows which begins by focusing on positive unit economics and creating real value for customers, rather than pursuing only valuation.
“Over and above this, Technology can also play a crucial role in navigating funding constraints, by embracing digital solutions, automation, and data analytics while allowing companies to adapt to market changes more efficiently and make informed decisions."
