According to a survey of startup founders undertaken by this publication, the tightening of global liquidity has concentrated the emphasis of Indian startups on profitable expansion. The ecosystem will benefit from the sector’s exit from the recent funding glut as investors, both private and public, reassess fancy valuations during a mad dash for growth. Effects on failing enterprises and recruiting should increase new-age entrepreneurs’ competitiveness and, eventually, reward winning concepts and strategies. Private equity and venture capital firms with an emphasis on India are reportedly holding a record 40% of unallocated cash—about the same amount that companies lost between 2021 and 2022. Two-thirds of startup entrepreneurs who were surveyed foresee layoffs and four out of five expect significant business restructuring in 2023.

The lack of funding is anticipated to last through 2023, with the majority of experts anticipating big down rounds and a rebound in the capitalization of the IT industry in 2024. Startups are anticipated to use this break to concentrate on their income streams by squeezing costs and stepping up marketing efforts. Unless, of course, there is a product-market fit that might profit from increased market share increases during a crisis, conserving capital is the wise move. Startups stand to gain from focusing on micro issues like unit economics when macro variables become adversarial. Company governance and corporate strategy both have room for improvement.

Startups with established growth plans might also leverage the decline in private financing to get ready for listing. Some businesses may decide it makes sense to avoid leaving money on the table when the open market appetite returns. Yet again, the focus is on profitable growth following the rash of high-profile IPOs in 2021 that were ultimately punished by investors. Startups will be able to handle the next phase of tech funding, which may have corrected from last year’s peak, if they can find a method to demonstrate returns with smaller capital.