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Why Startups continue to raise money in a challenging market environment?

Startups and venture capital backed companies raised more than Rs 1 Lakh crore during calendar year 2019, 26% more than the over Rs 81,000 crore raised by equity capital markets. In times when we see a liquidity crunch face several companies in the Indian market, and see several well-known brands face bankruptcy, many people wonder why entrepreneurial investors continue to be bullish on technology startups. As an investor myself I see several reasons for the same:

  1. The growing digital economy: As a country, India faces several challenges such as, the lack of infrastructure, poverty, lack of access to water and good healthcare facilities. However, in the last few years one thing we have seen happen is the access to technology for all. With the introduction of Jio many people have had access to data at affordable prices where today we have one of the cheapest telecom rates in the world. This creates an opportunity to access a large population like never before.
  2. The need for technology and innovation to solve on ground problems in the country: With the present situation of healthcare and education in the country, if we want to meet the government goals on providing affordable access to all, we need technology to connect people. Startups can play a big role in this. For example, we will not be able to educate enough doctors to meet the doctor-patient ratio we desire, but if we use smart technologies to connect patients to primary care specialists and diagnostic equipment, we can help solve a large part of our primary care problem in the nation. Many startup funding programs in India and early stage investors invest in such companies.
  3. Determining in which industries would the next decade of growth be: Today industries are globally going through a change, as we see a change in consumption patterns as well as increased technological connectivity. As an entrepreneurial investor one does not just look at the industries of today but focuses on understanding the industries of tomorrow, where the growth of the next decade would come from.

So while the equity markets are an important component to economic growth, in today’s India the value to be created by the private markets is not to be ignored, where the startups of today could be the listed entities of tomorrow and where the next set of Billionaires of India would come from.

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