Listed Stocks,Startups • Jan. 4, 2023
Start-ups to look forward to in 2023
As we enter 2023, there’s a lot of discussion about the Funding winter that start-ups faced globally in the year 2022, owing to various macro-economics issues like Ukraine-Russia conflict which led to a major hike in inflation, the re-emergence of covid and many other factors. This had made experts wonder if 2023 would provide start-ups with new opportunities to help revive the entrepreneurial spirit among the masses.
At the global start-up scale, India is all set to weather this winter comparatively more easily than most of its global competitors namely US and China as most top tier funds have accumulated a record amount of funds, an indicator that we might witness intense investment cycles in times to come. As of 7th September 2022, India has emerged as the third largest ecosystem globally with over 80,000 Start-ups to invest in India and over 100 unicorns comprising a cumulative net value of over US$ 340Bn among them, becoming the only 3rd country after US & China to achieve the milestone of 100 unicorns. Recent news indicates that over 22,000 Latest Start-ups have been registered this year. One of the major contributors to building this start-up ecosystem in India has been the major improvement in India's Ease of Doing Business rankings by 23 spots over the last couple of years and India entering the Top 50 ranking in Global Innovation Index which signifies significant improvement in enabling the most innovative environment.
However the promising start-up ecosystem is facing multiple challenges owing to macroeconomic conditions.
Macro Environment & Indian Start-up situation:
As RBI keeps increasing interest rates to tame inflation, these hikes would lower the valuation for start-ups even if they might not have been exposed to any debt and are financing their requirements using their own equity.
The arrival of 2023 is expected to see start-ups continue on their ambitious drive to raise funds in order to expand their businesses. Although the depreciating value of the rupee is expected to impact them in this process. Depreciating the value of rupees will affect their funding plans, specially for those start-ups that have already raised debts in dollars. Debts will also become expensive. Rupee depreciation is also expected to shoot up the operational costs of start-ups that might have a negative impact on their net margins.
All this calls for a change in the Investment scenario of Indian start-ups. The system's efforts to reverse rupee depreciation is expected to push Venture Capitalists to prioritize profitability over growth. This would also have an impact on start-ups looking to raise Seed Funding.
Top 3 Listed Best Indian Start-ups to invest in 2023:
Cred: Based in Bangalore & Founded in 2018, Cred is a platform where you can pay credit card bills and get rewarded for it. The platform has created a new model where users get ‘Cred coins’ when they pay their bills through Cred app. These coins can be later redeemed for buying any product, entering a contest or joining any workshop.
Vernacular.ai: Founded in 2016, this start-up is an AI-SaaS business aiming to become the leading voice automation and AI based platform globally. The company provides Speech recognition and Voice assistants as a service to the banking, food & beverage and hospitality industry. The company raised 5.1 Mn$ in 2020.
PharmEasy: Based in Mumbai & Founded in 2015, PharmEasy is an online pharmacy and medical store, specializing in OTC products, diagnostic tests and medical equipment. During the Covid 19 pandemic, the company became successful by catering to online orders of medicines, by providing healthcare products at the doorsteps of their customers. PharmEasy became the first health-tech. start-up to raise a massive 350 Mn$ and be granted a Unicorn status in the healthcare segment. PharmEasy acquired a 100% stake in Medlife while the latter got over 19% share in PharmEasy.
Top 3 Unlisted Best Indian Start-ups to invest in 2023:
Oyo: Oravel Stays and Private Limited (Oyo) owns and operates an online hotel booking platform Oyorooms.com. It offers its services under the brand ‘Oyo Rooms’ with facilities such as air-conditioned rooms, breakfast, Wifi, washroom, and television. It allows users to book a room at an affordable price through its mobile application.
Urban Tots: Deepak Houseware & Toys (DH&T), commonly known as Urban Tots is primarily involved in the business of manufacturing & selling plastic toys, electronic toys and roll plays. The company’s products are available at retail outlets like Hamleys, FirstCry, DMart, Reliance Retail etc. as well on famous e-commerce websites like Amazon and Flipkart.
TATA Technologies: TATA Technologies limited operates as an engineering and product development digital services company serving automotive, industrial machinery, aerospace and industrial verticals in Asia Pacific and Europe. TATA technologies provides aerospace PLM, automotive PLM, construction and heavy machinery, PLM software sales, enterprise solution group, training and support.
Platforms for Start-ups: Many companies are coming up with their own Start-up Investing Platforms to enable Investors to invest in start-ups. These platforms have the potential to become a bridge between Accredited Investors consisting of Angel Investors and Venture Capitalists and start-up founders looking to raise funds for expansion of their businesses. While there are many platforms like Groww, Upstox which are focusing on the Listed Market to help trade shares of listed companies, there are a few companies that are willing to replicate the same in the Unlisted market as well. Planify is one such company that aims to bridge the gap between accredited investors and start-ups. It specializes in helping unlisted start-ups find the right sources to raise funds. Planify aims to become India’s largest Private Equity Marketplace.
There are other sources for founders to raise funds and these include Finding Investors Online on sites like Velocity . Other sources of fundraising include Crowdfunding websites as the name suggests focus on requesting the crowd to fund specific projects or businesses or social ventures. Under this, small amounts of funds are raised from a large set of investors by launching fundraising campaigns with aggressive advertisement to help market the project. These campaigns run for a specific duration and are gaining a great amount of traction these days.
As India continues to take big leaps across industries in enabling start-ups to introduce sustainable and environment friendly products to help solve modern day industrial issues, it is expected to open new avenues for investors and contribute to employment generation as well as growth in the Indian economy.