At a time when the start-up ecosystem is battling a funding winter, advertising spends have dried up, and profitability has taken centre stage, Rajan Anandan, MD, Sequoia Capital, India and SEA, believes that in the next 12-18 months many growth-stage start-ups will turn profitable. He added that today there is more “uninvested venture capital dollars” raised only for India than ever before.

At a session of the ongoing Goafest 2023, Anandan said, “In India, fund-raising for Series B and beyond (more than Rs 100 crore) has slowed down. But there is a very healthy number of companies starting up and raising a seed round or fund-raise of less than Rs 100 crore.”

“Over the next 12-18 months, late-stage companies will either become profitable or go out of business.... because if you are not a profitable company, you can’t go public in India. We believe that most late-stage companies in India will get profitable. We are seeing examples of improvement in profitability at a rapid pace. There are, of course, muted levels of ad spends currently. But the advertising community should expect that, by 2026, they will see a set of clients that are in very strong foundational position,” Anandan added.

On the current investor sentiment he said, “Today there is more dry powder, which is uninvested venture capital dollars that have been raised only for India, that there has ever been (before). We are seeing more and more founders starting from zero and rapidly scaling up.” He added that this is supported by the development of India’s digital highways — comprising transaction ecosystems, e-commerce platforms, and payments and logistics platforms — over the last decade.

Anandan pointed out that over 40 per cent of the new start-ups in 2022 are software companies from India, which are building for the world, and added that this trend will only accelerate.

He pointed to the rapid growth in digital advertising. Even e-commerce advertising has been growing manifold. “In the next 7-8 years, e-commerce advertising is expected to touch the Rs 70,000-crore mark. So its important for the advertising community to see how they can be relevant to the advertising needs of start-ups and small businesses,” Anandan added.