India’s start-up ecosystem could attract only $15 billion in the financial year 2023 after a strong funding winter brought investments down by 70% compared with the $50 billion it received in the previous year, according to a report released by Redseer Consulting on Tuesday.
Increasing cost of capital and interest rates, recession in developed markets, a decline in the value of tech stocks, and the slowdown in consumer Internet growth have all been challenges for sustained funding, said Mohit Rana, Partner at Redseer.
Redseer analysis of 100 unicorns projected substantial improvement in their profitability four years down the line. The number of profitable unicorns is projected to grow from approximately 30 unicorns in FY22 to 55 in FY27. Some 50% of these unicorns are expected to become profitable by FY27, while some 20% will likely struggle due to regulatory challenges, plummeting demand, and unclear business models, as per the study.
According to Mr. Rana, who conducted the study, profitable unicorns in the country could generate five times the profit in FY27 over what they did in FY22. The top four sectors expected to drive the highest pool of profit will be FinTech and financial services, B2B, SaaS, and e-commerce.
There could be a decline in losses made by companies, however, these unicorns would continue to see funding challenges and drop in valuation.
“While tech has an outsized impact on the economy, there is also a tendency for overvaluation in the start-up world,’‘ observed Mr. Rana.
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