Economics
In News: With funding starting to dry up, the startup ecosystem in India is bracing itself for a “long and bitter winter”.
- Potential mass lay-offs in the next 12-18 months, particularly in sectors such as ed-tech and gaming that got a significant push during the pandemic
- Industry estimates peg the cumulative job losses in startups at over 10,000 so far this year
- A slew of factors have led start ups here, including the Russia-Ukraine conflict, supply chain disruptions, consequent inflationary pressures, and rising cost of capital, amongst others.
- Central Banks around the globe are raising interest rates curbing excessive liquidity in the economy, which is squeezing out funds for the start-ups.
Challenges in fund-raising
- The global slowdown and tightening monetary conditions will likely add to investors’ uncertainty and situation may not improve till the US economy revives.
- However, India-focused start-ups may have a better value and revival will be higher in the days to come as India is expected to bounce back shortly.
- All these challenges may succumb to a sharp correction in valuations, forced mergers and acquisitions, and a decrease in venture capitalist funding.
- However, this may also help stronger companies and genuine start-ups with a better product to emerge from the crisis.
Source: The Hindu
