According to Blume Ventures' Karthik Reddy, Venture capital in India is expected to invest USD 10 billion in 2024. If we compare with a muted $7.5 billion invested so far in 2023, it is witnessing quite steady growth.
"If you strip out the crazy numbers of 2021 and 2022, the numbers are not way off, compared to 2019 and 2020. Essentially, what created the spike has gone away. But the consistency in terms of growth has been there. It has been flat, but 2023 was meant to be that kind of year," said Reddy, Co-founder at Blume Ventures and Chairperson of the Indian Venture and Alternate Capital Association.
"For 2024, we're more optimistic; it's the case of the proverbial wheat separating from the chaff," Reddy told a media house at the sidelines of the conclave. All the problem cases are getting surfaced; they're getting addressed. Some might die, some might go bankrupt, and some might have downturns, but they'll fix themselves. So what didn't get cleaned in 2023 will get cleaned in 2024. When this happens in venture capital, it clears the air, and people know what exactly they're buying at what price," he further said.
“It's never been seen in venture capital for 15 years; other than Flipkart's downround in 2016 and Ola's back then, there's been very few that have taken massive downrounds; that's only happened in the last two years. So we haven't finished that cycle, and when that happens is when capital comes confidently, and that will begin to happen during the second half of 2024," he said.
So a big question is why a startup business requires a Venture Capital firm or an individual Venture Capitalist? The simple answer would be to take one’s business growth trajectory forward. Furthermore, to note, there is a general belief that VCs are only for investment. However, that is not true in any sense. Having VCs on your side can not only help you with funds but also can hand hold your business through turbulent times.
Now let’s looking into why startups need VCs on their side:
Seed Funding and Early-Stage Support
During the infancy period of any given startup, VCs can play the most quintessential role in providing the much needed funding and early-stage support.. This initial injection of capital is crucial for startups as it boosts the development of their products or services, enables market research, and validates their business models. And in a cut-throat market like India, without this financial backing by VCs, many startups cannot find the way to get off the ground.
Expertise and Mentorship
VCs also go above and beyond from just providing capital to offer invaluable expertise and mentorship to entrepreneurs. As VCs bring unparalleled experience in the world of business, their expertise in the startup ecosystem can help businesses with strategic guidance on product development, marketing strategies, hiring practices, among other important parameters. Furthermore, this mentorship can be instrumental in helping startups navigate challenges and make informed decisions as they navigate the today’s complex world of business.
Scale-Up Capital
Scalability in operations is another crucial aspect for any startup to progress beyond the initial stages. For this, businesses often require additional capital injections. Even here, VCs play a vital role in providing this scale-up capital to enable startups to expand their teams, ramp up production, enter new markets, and also invest in research and development. Hence, this infusion of capital at critical growth stages can accelerate the pace of expansion for startups.
“There's nothing wrong with raising venture capital. Many lean startups are ambitious and are able to deploy large amounts of capital. What differentiates them is their disciplined approach to determining when to spend money: after the fundamental elements of the business model have been empirically validated.” - Eric Ries, American Entrepreneur and Blogger
