Start Up

  • IASbaba
  • July 12, 2022
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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

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