The venture market last month has been characterised by prophecies of gloom and doom over the last month, with multiple VCs putting out tweets, videos, letters on how the landscape has changed, to the extent that this was put out last week:
There has also been some, well, cutting advice to the VCs.
We decided we won’t tweet about it, but definitely touch upon the perspectives on the evolving landscape, its impact, and the way ahead in our newsletter.
Among the many views shared, there was a tweet thread that made a detailed comparison of this downturn with the last two, and what implications it might have on startups:
The bottomline of the analysis is that while correction from the current crash might take long like the 2000-2003 crash, the underlying companies today (with the exception of maybe a few sectors) are fundamentally more sound compared to majority of the companies in the 2000-2003 era. This downturn, with respect to underlying fundamentals of the companies, is more in line with 2008-09, when capital became more expensive and made companies more disciplined, focused, and frugal.
Here’s what Bill Gurney from Benchmark has to say:
Bill Gurney talks about a permanent reset in PE ratios in public markets, flowing down to private markets. While calling revenue multiples as a benchmark as dangerous, he suggests focusing on the quality of revenue based on distinguishing traits such as: sustainable competitive advantage, network effects, customer lock-ins, positive unit economics, gross margin levels, and quality of revenue (concentrated vs. spread over large customer base; partner dependencies as well as organic demand vs. costs of customer acquisition).
We are seeing signs of the slowdown trickling down to the seed-stage in India; deal volumes are down, hopefully, valuation resets also will happen.
However, there is a (lot of) silver lining amid the doom and gloom. According to Gartner, spending on Cloud and SaaS is expected to grow at 20% globally over the next two years, with SaaS expected to be in the $200B range. There is significant growth projected in the “Infra”, “cloud management & security” as well as “desktop as a service” segments.
This shift to cloud is a big opportunity, as we see it. As seed investors, we are doubling down on investing in startups who are building for enterprise-value, who can build frugally with a low cash burn for a prolonged period .
The latest on the Indian B2B landscape
Chiratae-Zinnov, in its most recent SaaS report, said that India was well on her way to becoming the second largest SaaS nation globally, surpassing China, by 2026, with Indian SaaS revenue projected to exceed $100B.
Further, categories like cyber security, cloud-native, vertical solutions, hyper intelligent automation solutions, and Web3 would be the key themes to watch out for in 2022.
Noteworthy Indian B2B action in May:
Warehouse automation company Greyorange raised a growth capital round to scale up its customer base and operations in the US. For a robotics company from India to scale and raise capital is an encouraging sign!
B2B marketplaces saw some action, with Fashinga (B2B marketplace for fashion) raising a large round.
The Indian ecosystem hit the 100-unicorn mark, causing a flurry of analysis on their composition, business models, etc. What was some solace is that the B2B businesses in the unicorn mix had a much higher proportion of profitable companies. Read more here.
Arali perspectives:
We recently wrote about our focus of building a concentrated portfolio, and the reasons driving our conviction. Read about it here.
From Arali’s portfolio:
Deeptech healthcare startup Oivi presented at the DTech-Con Startup Pavilion on May 7-8, 2022.
Both our robotics companies, CynLr (Gokul N A) and Unbox Robotics (Shahid M.) discussed robotics & deeptech along with Arali's Arun Raghavan on May 19 at TiE Chennai 'A to Z of Deeptech' at IIT Madras Research Park (IITMRP).
Pathfndr saw some great engagement & conversions at the #SAATE travel expo from 18-20th May.
CogniSaaS participated at SaaS Insider's India 2022 conference, India’s largest B2B SaaS conference in Bangalore on May 26-27.
WIZ was part of the Air Cargo India exhibition & conference in Mumbai from May 31-Jun 2, 2022.