It will take another 12-18 months before the market recovers from the ongoing funding winter, according to Madhu Shalini Iyer, Partner at Silicon Valley-based venture capital firm Rocketship.vc
“Down rounds will also start to happen in such a funding environment. I don’t think down rounds are a terrible thing, founders should do whatever they have to do to make sure the business is doing well. Also, we should keep in mind that some of the last year’s funding round valuations were atrocious and those revenue multiple do not make sense,” Iyer told businessline.
She added that early-stage start-ups need to keep pushing for growth instead of hunkering down in this environment. If these companies hunker down and simply try to survive this time, they run the risk of becoming irrelevant by the time markets recover.
“All partners at Rocketship are founders and operators. We have run companies during such slowdowns and so our advice is different from many other VCs. What we are telling our companies is that be smart, and learn how to navigate this environment but navigate in a way that you are thriving at the end of it. Because if you come out of the slowdown, surviving or limping, you will not be relevant anymore,” said Iyer.
Facing risks
Except late-stage companies (Series D and above), Iyer believes that start-ups cannot afford to hunker down, not invest in growth or not take calculated big bets.
“There is going to be the competition that will arise at the end who will be able to build the same product much faster and outdo the survival mode companies. They might survive the slowdown but then they have to shut down a few years later because there would be no growth and no customers willing to use their product. They will not be relevant anymore,” she added.
Rocketship.vc announced the $125 million first close of its third fund earlier this year. Of which, Iyer said almost 90 per cent amount is yet to be deployed.
The firm is actively looking at deeptech, fintech, and B2B companies, among others. The average ticket size of their investments ranges between $3-7 million. Some of its portfolio companies include NoBroker, Khatabook, Apna, Teachmint, Jar and Animall.
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Published on November 29, 2022
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