With the funding environment now turning challenging, Indian start-ups will have to concentrate on delivering best services for sustained growth. Discuss (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· The perceptible slowdown in private equity and venture capital investments into Indian companies since the beginning of this calendar year should serve as a reality check for entrepreneurs who seem to have taken foreign capital for granted.
· The long-term shifts in adoption of digital products in the country during the pandemic had led to a burst of innovation and heightened fund-raising activity.
· Unnecessary diversifications into multiple micro-markets in order to show business growth, lack of product innovation resulting in me-too product offerings and padding numbers to show higher customer acquisition numbers are other common issues with the start-ups soliciting funding.
· Further, episodes such as the recent one of alleged fraud in a high profile payments start-up raises questions regarding governance risk in some of these companies.
· Stock market regulator, SEBI, needs to ensure that investor trust in these start-ups is not lost since stock markets are an important channel for providing funding to these companies.
· The regulator should push through with its proposal to make start-ups disclose the basis of valuations used in pre-IPO funding rounds and during the IPO.
· In the absence of profitability track-record, it becomes very difficult for investors to value these companies. Regulators should also ensure that these companies comply with the governance requirements so that investor interests are protected.
