Have you been reading about Startup funds drying?

If you ask a Rapid-fire question Which is the jumping creature? to the HR person of a tech company, the undoubted answer will be Engineers! (Frogs come next). When I interact with founders and promoters, I hear from them that no engineer works for more than 15-18 months in a company. As they jump from company to company, their package doubles! A 4-year experience engineer with relevant tech expertise, demands anywhere between Rs.15 to Rs.20 Lakhs. Out of 10 people who take the Offer Letters, one will reluctantly join the company. Is it realistic and sustainable compensation? Can’t say; price discovery happens in the market.

Now, what has happened? Are they not going to get similar packages? They may, but the high probability is ‘may not”

Why? What has changed now?

Global inflation, leading to a possible recession is pulling the easy money out of circulation. What will you do at home in hard times? Will you spend recklessly? Buy unnecessary stuff? Will you start negotiating? Will you start cutting costs? If the answer is YES, that’s what the startups including tech companies and others will resort to.

None of the fund houses will believe an idea, put money and bet on it in the lax way they were doing so far. They will start questioning the feasibility/viability of the product, project, or business model. A real winner will continue to get funded and he will succeed. For others, looks like lottery season is over, no more jackpots!

Is it my imagination or a serious issue?

I have read, almost all the material made available, in the public domain about issues in startup funding in the past 20 days. Roughly, after around 150 pages of reading, I couldn’t find even a single encouraging statement from any corner. All of them were talking of layoffs, cost-cutting, job loss, corporate governance, tight accounting, etc. Some of them were saying IPL sponsorships will also be in trouble! EdTech, the most hyped idea is roasted now. They say, the kids are back to school with the bag on the back, offline mode and they are listing the shortcomings of watching digital devices; sudden enlightenment!

Who is spared for now? Door Delivery companies are not the immediate target. They are, probably, getting into the pan; frying will commence soon.

Will the sunshine again for startups? Oh, yes. Maybe after a couple of months or years, but certainly the sunny days will revert. When it is back, it will come in a new avatar to fund new themes like Agtech, Eggtech, or Pigtech instead of Edtech!

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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Yuri
Yuri
3 months ago

The comment is absolutely relevant to nowadays situation.

Hari Sai
Hari Sai
3 months ago

Awesome analysis and good insights sir.

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