The ‘funding winter’ seems to haunt the start-up founders in 2023. The Startup Outlook report by the venture capital (VC) firm InnoVen Capital revealed that nearly 58 per cent of the founders think that bagging investment will be difficult in 2023. 

The start-up founders went through upheavals last year. According to a PwC report, venture capital investments witnessed a 42 per cent year-on-year decline to $4 billion in November 2022. Late-stage funding also dropped BY 52 per cent to $6.5 million in 2022 from $12.5 million in 2021. Overall funding dropped by 33 per cent to $24 billion last year, compared to $37 billion in 2021. 

The report by InnoVen Capital also pointed out that nearly 58 per cent of founders managed to raise funds last year, compared to 92 per cent in 2021. 

Amid the funding winter, nearly 18,000 employees lost their jobs in 2022. Edtech alone was accountable for 44 per cent of the total job losses. The InnoVen report highlighted that hiring will also be slowing down in 2023. Only 38 per cent of the founders are expecting to hire people at a fast pace. 

Talking about the report, Ashutosh Sharma, the managing partner (MP) at InnoVen Capital, said, "2022 was a challenging year for the startup ecosystem with an end to cheap money, rising interest rates and a challenging geopolitical environment. The positive aspect of the slowdown has been an increased appreciation for building sustainable business models.”

According to the report, the funding winter has led the founders to prioritise profitability over growth. Nearly 55 per cent of the founders are eying to be profitable rather than achieving growth. 

"While both growth and profitability are important, for the first time in seven years, founders had a higher bias for profitability over growth. Around 55 per cent of founders stated profitability as a bigger focus area, compared to only 17 per cent in 2021," the report stated.