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The big layoffs from companies like Meta, Byjus, Unacadmey and many others have shown that economic slowdown or funding winter is a real thing. It also tells many things about the startup culture in India and the race for higher valuations. Amid all this Prateek Toshniwal, Angel Investor and Chartered accountant shared his opinion on various aspects
What motivated you to pursue a career as a venture capitalist?
I always wanted to become a chartered accountant and after my CA I joined KPMG. I worked in the international taxation domain. I did a lot of structuring for big Multi National Companies and startups as well. I did a lot of work on the research side and valuation assignment from 2016 to 2018. I thought to explore the area of startups due to my research and it was new. I started investing in 2018 and invested in 32 companies individually.
What are the common mistakes by startup owners?
It is about learning rather than mistakes. The only mistake that startup owners make is either they go after a product which is too new and gives a high valuation or they build a product which is not in demand. I always say that to build your business your valuation will come over and find a product that solves the challenges of the masses.
What are the types of startups that you find lucrative or interesting?
I have different answers as my opinions have changed. Earlier I was interested in ed-tech, fin-tech, and health tech but now I am interested in clean energy, agriculture, web 3.0 and gaming
How do you see the funding winter?
The first quarter of this year was still good but after that business slowed down and startups could not cope with the businesses that they expected to do in the next quarter. The main reason for this is the global corrections that are happening and it is not only for India but for any other country. However, India is doing very well in comparison. It is expected to remain for six to eight more months after that we will see more unicorns
What impact will the recession have globally and in India?
The impact has already been there for 8 months and might be there for another few months. The impacts will include valuation corrections which means doing the right valuation and some companies might shut down due to overvaluation in which employees will lose their jobs. If every industry their decision cautiously we might see improvement in employment post-recession. I don’t expect any long recession in any Asian country. India will survive and also has not much depreciated. If the world depreciated 40 per cent India just depreciated 10 per cent. However, there might be some effects which may stay a little longer than expected.
What could be the reasons that are not getting affected?
India has become an entrepreneurial country. Due to growth and the China effect, India is becoming a manufacturing hub. Almost all the MNCs want to come to India as they see India as a growth factor and have a lot of growth potential for example If other countries give 10-12 per cent, India might give 6-8 per cent.
What do you think is the best sector to invest in for any VC at these times?
I think VC will invest in future sectors like clean energy or carbon neutral, blockchain, electric vehicle, and web 3.0. However, it used to be ed-tech, and fintech but not anymore. The defence sector has huge opportunities, a recent defence expo in Ahmedabad witnessed almost $15 million of investment.
What do you think might be the reason for the layoffs?
It was always about the funding that they could not secure. It is also about the expansion that was not needed and the demand that was present earlier but could not happen not now here. It is not just about the funding that has stopped but also about the business that has been hampered.
Do you agree with the term called startup bubble?
I disagree with the startup bubble term. I hardly see any company which could be called a bubble. However, there might be some sector-specific companies. India has created startups like Nykaa, Byjus, OYO, Zomato, BharatPe, and Paytm and none of them is a bubble as they are running businesses and growing. Recession not only hampers the economy but also businesses.
How do you see the initiative of going completely cashless?
Cashless is a global trend and any Indian going abroad cashless is also a trend. As India is a growing nation and tends to be a developed nation, I see going cashless as a great shift. Now you have all the financial services in one app and It also reduces the chances of leakages that are any sort of financial crime. However, It is impractical to go completely cashless with a population of 1.3 billion people.
How do you see the investment of VCs getting affected across the globe?
As a Venture Capitalist, I would want to invest in the countries like India, Africa and UAE and would avoid places like USA and London as they are more affected by Global events. Africa could become present India in the next 10 to 15 years. However, I would still stick to India but for global investment, Gulf Cooperation Council and Africa belt are preferable.
What is your advice to startup owners?
My advice for startup owners would be that they should optimise their expenses and should simply go for their business without expanding much. They should also drop their dream of valuation for a couple of months and should run for business overvaluation.
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