The painful development of India’s startups

“How longvcvc is your runway before takeoff?” That is how venture capitalists (s) begin meetings in India these days, says Ananth Narayanan, founder of Mensa, one of the country’s newest unicorns (companies worth in excess of $1bn). Until recently the main question that mattered for India’s startup scene was valuation. But the mood has changed. Plunging share prices at companies that have gone public have made firms much warier about investing. Prizing unrealistic valuations has given way to worrying about how quickly startups might begin to make money. So far Mensa, which buys stakes in digital brands, is one of a handful of such firms that makes a profit.That leaves plenty that do not. Since the beginning of 2021, the number of unicorns created in India has risen from 40 to 108. Only America and China have produced more. In 2021 promising startups had no trouble finding investors eager to fund fast-growing firms with big ideas. That year investment in startups tripled to $35bn. The momentum continued in 2022, with $3.7bn invested in March alone. Such was the clamour that startups had their pick of “founder friendly” investors who were not too bothered about supervision, the drudgery of background checks and other intrusive oversight.