India’s startup growth story lacks fundamentals - Part 1

Why read this story?

Editor's note: When Indian startups raised a record amount of funds in 2019, followed by the minting of a dozen unicorns in 2020, many counted dollars raised as a marker for the tech upstarts to take over the market. The COVID-19 pandemic followed soon after, which served as a validation of eye-watering valuations for many consumer internet companies. Nothing could go wrong. But, it did. The US Federal Reserve has raised interest rates seven times since 2022 and continues to be hawkish to control inflation. That put a hold on much of the money supply allocated to emerging markets like India. As the investment environment became constrained, investors started dusting business evaluation and diligence questions that have been kept in storage for the last 10 years.  Under usual circumstances, a constrained funding environment should not be a dealbreaker for small and large companies involved in the Indian internet economy. However, they should demonstrate mastery of two out of three business fundamentals:  Growth—an increase in consumers and revenueA path to profitability—reduced customer acquisition and operating costsSignificant barriers to entry (a.k.a. a moat) We …