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50% of Founders Struggled in Raising Capital From Investors in 2022: Report

Despite the downturn in growth-stage financing, the report notes a sharp rise in angel investments and continued confidence in accelerating business growth in 2023

50% of Founders Struggled in Raising Capital From Investors in 2022: Report
Eklavya Gupta Co- founder and CO-CEO at Recur Club

Outlook Start-Up Desk

POSTED ON February 23, 2023 11:38 AM

Raising capital from investors in 2022 was a significant challenge for Indian start-ups, with 57 per cent of founders struggling with limited access to suitable investors, and 51 per cent encountering delays and a lack of urgency among investors, according to the Startup Pulse 2023 report. Equity funding has become more challenging, leading to an increased focus on alternative financing, sustainable growth, and improving efficiencies. Only 17 per cent of founders were able to raise additional capital in 2022.

In response to these challenges, Indian stRaising capital from investors in 2022 was a significant challenge for Indian start-ups, with 57 per cent of founders struggling with limited access to suitable investors, and 51 per cent encountering delays and a lack of urgency among investors, according to the Startup Pulse 2023 report. Equity funding has become more challenging, leading to an increased focus on alternative financing, sustainable growth, and improving efficiencies. Only 17 per cent of founders were able to raise additional capital in 2022.art-ups adapted by concentrating on slower but more effective expansion to maintain improved unit economics. Over 60 per cent of founders turned to increase overall efficiencies, while 37 per cent cut their CAC and G&A costs. Median ARR per employee increased, while median growth decreased from 103 per cent to 48 per cent. Despite the downturn in growth stage financing, the year witnessed a sharp rise in angel investments, particularly in the retail sector, with a stronger emphasis on value-based investments than rapid growth.

India is still one of the biggest global economies with the quickest growth rate on a large scale, and the Indian government has consistently made sustained efforts to support the start-up ecosystem. The country has a rich and vibrant start-up ecosystem, with 58,000 tech start-ups, out of which 108 are unicorn businesses and a total investment of $136 billion backed by almost 9,600 investors. Despite the global slowdown, 81% of founders are confident that they can accelerate their business growth in 2023, with SaaS, co-working and tech services firms being the most optimistic.

Startup Pulse 2023 suggests that founders will continue to focus on alternative financing, sustainable growth and improving efficiencies in 2023, with an increased emphasis on diversification. The report also notes that as the founders’ emphasis moves to enhance margins and cash flows, there is a need for investors to consider more flexible financing options that prioritise sustainability over rapid growth.

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