MUMBAI: Call it the impact of the funding winter nudging investors to take a stricter look at companies' financials before writing cheques to them, startups are striving to achieve profitability.
Meesho, MobiKwik, Oyo are among startups which managed to report profitable quarters in FY24. Meesho, for instance, turned profitable since July 2023 and claims to have sustained it thus far. "Over the past two years, our focus on profitable growth through cost optimisation initiatives, combined with operating leverage, has significantly enhanced our profitability," the company said in a recent blog post.
More startups are expected to turn profitable in the coming months, said investors and analysts. After a record funding of $42 billion that startups attracted in 2021, investments into startups declined to a seven-year low of $8.2 billion in 2023. Late-stage or bigger startups bore the brunt of this decline, with funding having dropped to $4.2 billion during the year from over $15 billion in 2022, estimates shared by market research firm Tracxn showed.
"Profitability or the path to profitability is absolutely critical for any startup which is not profitable today or for any new startup that comes up... And companies which have turned profitable need to ensure that they maintain profitability. Only profitable companies will be able to attract investments. Due diligence by investors into startups will be deep - there will be questions on gross margins, unit economics, cash flows and companies will have to be prepared for that," said Padmaja Ruparel, president at Indian Angel Network (IAN).
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