Scaling Efficiently while Staying Lean Investors share what founders should do in the' funding winters'
By Deepa Vaidya
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Here's what investors have to say on going back to being a lean start-up and scaling from there.
Says Ashish Fafadia, Partner, Blume Ventures, "Make sure that if at all the next round is going to be raised, it is going to come on the public markets, for a growth company. Second, you are going to build it from that lens where you will, in a visualisation of a PAT for yourself if you are at the growth stage, because listed markets may be okay for you to come and not have a PAT. Personally, I would definitely tell my founders that try and focus on business that are PAT positive. And in that vein, the last punchline on the growth side is, that it's okay to be a listed company at INR 10,000 crore of enterprise value or even a little lower. You can be a public company and grow after that also. On the early stage side, the idea is to focus on fundamental problems and build it easily and long term in mind and make money of your customer rather than investors."
Adds Ankur Mittal, Co-founder, Inflection Point Ventures, "Principally we have always evaluated businesses with positive unit economics, even at growth stage. We actually started advising our startups way back in October '21, that those in a position to raise capital get enough of it to get through '23 and some parts of '24. The focus still continues to be on growth at the stage at which we are, but far more responsible growth. But now the advice is, find a way to continuously grow, there is no point in just surviving over the next 12 months."
On how to raise capital efficiently and build new categories, says Abhishek Agarwal, Managing Partner, Rockstud Capital, "Largely, things are established in a way, where there is not enough margin for you to become a category creator, or unlike when a buzzword comes up again or it changes to something different. One is to really see what change is coming into the ecosystem. If you can see the value, or the player who is coming with something unique, that is where you actually go and back those kinds of founders."
On how do they see the capital construction itself becoming a very important element of thinking about business building from a capital efficiency point of view, says Mittal, "Besides the new solutions coming for using credit cards to solve for working capital requirements, we have asked our founders to sacrifice a little bit of growth if required and to work with clients where the working capital cycle is shorter, or to go to a model where you get the capital better."
On speed vs scale, says Agarwal, "I don't think that founders are really looking immediately at growth. While it is good to scale overnight, it's not good in the long run and that is what everybody should be mindful about. Even in their projections, the founder should be looking at it realistically, because once you commit yourself, then people are going to chase you. Don't commit, unnecessarily because it looks good to you."
