While there’s money for startups, it is very selective: Lightspeed's Kumar

Edtech unicorn upGrad recently raised $210 million from a clutch of new and existing investors. The firm is among a handful of startups, which are managing to attract risk capital in a tepid funding environment. The funding winter is ‘officially’ here and investors are weighing all the business metrics before writing cheques for startups.

“While there’s money, the money is very selective. That’s essentially what we are seeing in the market. From series B, C onwards, conversations (between investors and founders) are starting to get more and more difficult where there has to be very clear, clean PMF product to market fit), where you need to be able to show unit economics working,” says Harsha Kumar, partner at Lightspeed.

Also, the launch of new startups has somewhat been impacted adversely as not many people are keen on making entrepreneurial bets in a subdued macro scenario, restricting market supply. “I think that risk appetite even from a founder’s perspective was a lot higher in the last two years because there was liquidity across stages. At this point, it feels safer for a lot of people to stick to your jobs rather than stepping out and doing something. So, it is an environment of cautiousness all around both on the supply side, demand side and across stages,” says Kumar.

No matter how tough the market is, opportunities can always be found. Several successful ventures have often been borne out of a crisis. The SaaS and fintech spaces, for instance, have enough room to grow. SaaS is exciting in any market as every downturn impresses upon companies the need to be more efficient, thereby creating opportunities for SaaS players to build new solutions for clients, says Kumar.

“From a consumer standpoint, the reality is that wherever there’s a pain point, that market is still open. So, fintech can always get better. In India, in wealth-tech for example, there’s enough solutions if you want to be on the risk side of investments...but if you want to do more capital preservation, then there’s actually not enough products out there. Several small businesses from a lending standpoint are still viable but are probably finding cost of capital to be higher. So, a lot of new interesting lending models can emerge. Fintech still has a lot of opportunity in any market,” says Kumar.