The US recession has had significant impacts on Indian startups. This blog explores the effects of such a downturn and provides survival tips for Indian startups during a recession.

1. April 24, 2023 Valuation
How a US Recession Could
Impact India’s Startup Ecosystem
If you watch the news regularly, chances are the news of the US recession has
captured your attention. Well, this is not the first time we are seeing an
economic downturn hitting the startup world.
Just like every sector, the startup is affected by the global economic downturn.
But what exactly does the US inflation, pandemic, and European war impact
on the Indian startup ecosystem?
To cut a long story short, it has a good impact on early-stage startups, while for
IPO investors, it might not be good news.
Here in this blog, we will learn about the recession, what impact exactly the
US recession will have on Indian startups, with some recession survival tips
for Indian startups.
What Is A Recession?
A recession is a long downturn in economic activity that happens when goods
and services value falls for two or more successive quarters. This business
cycle contraction reflects the fallen value of goods, lowered income levels,
industrial production, and stock prices.
What Is A Recession In Startups?
No business is immune to the effects of the US recession. Tech startups have
laid off large numbers of employees, and with funding drying up the situation
is envisioned to get worse.
This economic downturn has become worse due to geopolitical concerns, for
example, Russia-Ukraine War. Hence, many businesses suffer from
High Inflation
High-Interest Rates
High Price Of Oil & Gas
High Layoffs
All these make it harder for early-stage startups to access capital. As banks
and investors become more selective in their new investments.
Hence, startups can expect lower valuations, lower financing round sizes, and
fewer deals.
US Recession Impact On
Indian Startups
There’s no crystal ball to exactly predict the impacts of the recession on Indian
startups; however, below are some of the common ways in which a recession
can impact startups.

2. Impact of Recession on Startups
Low Consumer Demand & Spending
Consumers tend to tighten their budgets and cut down spending during a
recession which can significantly impact startups dependent on consumer
spending.
To maintain customer demand and spending, startups will need to adjust their
product or service pricing and offer discounts or promotions.
Less Funding Opportunities
The second issue that startups can face is less availability of funding during a
period of recession. Traditional funding sources, like banks and lending
institutions, become less interested in extending credit to startups as investors
and venture capitalists become more mindful of investing.
Hence to keep their startup running, they will need to look for alternative
funding sources that include crowdfunding, angel investors, and government
funding.
Higher Competition & Consolidation
Many startups might struggle to survive during a recession leading to
increased competition for consumers and market share.
To add more, big businesses may take advantage of the economic downturn
to acquire smaller startups which ultimately leads to increased industry
consolidation.
Survival Strategies
Recession can bring a lot of difficulties, but with proper survival strategies,
startups can improve their chances of surviving the recession and thriving in
their business.
How US Recession Is Impacting
On Early Stage Indian Startups?
Now talking about the current recession i.e. US Recession, below is what we
found startups are experiencing in India.
Longer Investment Rounds
Pre-seed and seed velocity has been noticed to slow down a little, but the later
stage has been delayed considerably. The investment rounds are now taking
about 3-6 months longer to close the deal.
Lower Valuations
Startup valuations are coming down where early-stage startup deals are
pricing 15-20% lower and later-stage startup deals are pricing 30+% lower.
Lesser Deals
The competition for best startup deals is expected to remain strong in the
current year, 2023. However, all the firms today believe that 2023 is the best
pace of investing.
How Indian Startups Are Being
Impacted By Funding Slowdown?
India has turned out as the third-largest startup ecosystem in the world with
Indian startups experiencing impressive growth of almost 15 times between
the years 2015-2022. This growth has been due to a sudden surge in investors
and incubators.

3. However, the funding winter and global investments have been found to be a
slowdown in the recession period, which ultimately is affecting the growth of
Indian startups. From small to big, many startups are struggling to meet their
end goals, with cost-cutting measures such as layoffs and others.
To survive in this challenging recession, startups are needed to focus on their
unit economics, simplify operations, and plan mindfully for business scalability.
Startup founders who are flexible and well-prepared to deal with the
upcoming expansion changes and challenges are more likely to attract
investors during the recession.
By and large, startups that prioritize innovation and are prepared to disrupt
the norm are more likely to thrive even during tough times like recession.
Why Recession Is
Good For Early Startups?
There’s no doubt that recessions are challenging, but they can also be good for
startups. How?
It might be hard to believe, but a recession can be the perfect time for your
startup to position itself for long-term success.
Early-stage Indian startups may face limited funding options and smaller
rounds but businesses always have pain points that other companies can help
solve. That’s why many investors are still willing to take risks if they believe in
the idea or product.
On top of that, a bad economy can help remove companies that provide poor
or unnecessary services. So if your startup has a good idea and a solid
foundation, you better don’t quit. For later-stage or well-funded startups, it
could even be a good chance to acquire competitors struggling to survive.
How Indian Startups
Can Survive Recession?
Make sure you have adequate funds to survive any unforeseen situations.
Optimize startup costs without compromising on the quality of the product
or service to improve financial health in the long run.
Stay agile to adapt to the dynamic market conditions
Take good care of employees by maintaining a positive work culture, and
providing employee benefits to help retain talent while keeping them
motivated.
Finishing it up
Financial uncertainties are common in business. And it might bring a lot of
challenges to running the business smoothly. Talking about the US recession,
it has made a significant impact on Indian startups, both in a good and bad
way.
No business can ever know for certain if there will be any recession in the
coming years. Hence, what’s left is to be cautious about how you can survive
the recession in India.
Business Valuation Services In India
India is home to a thriving startup ecosystem. Startups need accurate startup
valuation services to get the best funding for their ideas.
My Valuation is helping startups with the best startup and business
valuation services in Bangalore and providing them with the right insights
and guidance needed to establish their value.
Require an accurate startup valuation for your seed funding?
Contact us today.
How a US Recession Could Impact India's Startup Ecosystem
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How Indian Startups Are Being Impacted By Funding Slowdown
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4. How Indian Startups Can Survive Recession
How US Recession Is Impacting On Early Stage Indian Startups
US Recession Impact On Indian Startups
Why Recession Is Good For Early Startups
Impact of Recession on Startups
What Is A Recession In Startups
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