100X.VC, India’s first venture fund to invest in early-stage startups using iSAFE Notes, is providing deep insights into the early-stage startup landscape of the country with the 3rd Edition of ‘India Sentiment Outlook Survey.’ The survey was conducted among 475 founders from different sectors and 75 investors participating in early-stage ventures.
Ninad Karpe – Partner – 100X.VC said, “The Indian startup ecosystem had 44 unicorns in the past year and we’ve already witnessed 17 unicorns emerge in 2022. Given the economic conditions, the survey result indicates a mixed reaction from founders and investors around the current market landscape. However, we are optimistic that there is still room for early-stage funding with credible and large investment deal flow.”
Detailed findings of the survey are as follows:
Founder’s survey findings –
1. Expecting growth: 76% of founders are bullish on business growth in the near term. Only 24% of them are bearish on their expectation for business growth. This indicates an increase in investor trust in Indian startups, which are emerging as a high-return asset class. The factors leading to the growth include a conducive market environment, quality of businesses, and an increase in angel investment activity.
2. Outlook on fundraising possibilities: 49% of founders believe fundraising has improved significantly in the post-pandemic scenario. About 23% feel it will be extremely difficult, and 28% expect no change. The Companies Bill will provide additional support to entrepreneurs and clarity on corporate structures and governance.
3. Plans on raising funds: More than half of the surveyed founders (52%) plan to raise funds in the next three months, 26% to raise funds in the period of 3-6 months, 15% in 6-12 months, and 7% in more than 12 months. Founders now prefer first working with Angel Investors, VCs, and Angel Networks.
4. Funding amount: 53% of founders plan to raise up to USD 300K, 16% are targeting USD 300k-500k, and 13% of founders to raise USD 500k to 1 million. Around 5% of founders plan on raising more than USD 5 million.
5. Key sources of funds: The top 3 sources of funding are direct investments from Angel Investors, Angel Networks, and Venture Capital Funds. 26% of founders also feel that family, friends, and corporate venture capital are key funding sources. A very small number of founders go to banks or family offices for funding.
6. Awareness of iSAFE notes: About 59% of the surveyed founders are aware of iSAFE notes. iSAFE is a simple document similar to a convertible note that secures investors the right to some future equity. About 52% of founders find iSAFE a founder-friendly investment instrument for seed stage funding.
7. First cheque: 46% of founders believe Rs 1.25 crore cheque from 100X.VC will last 12 months, around 12% believe it will last beyond 18 months, and the remaining founders think it will sustain for 12-18 months. Founders also want investors that can make value additions as well. They also expect business introductions, mentoring, and fundraising.
8. Focus on Metaverse: 55% of the founders believe Metaverse and Web3 are good opportunities for Indian startups, and 17% feel that these are not big trends with Indian startups. With these technologies, a digital economy is under construction and will be disconnected from the physical economy in the next decade.
Investor’s survey findings –
1. Investors’ plans: The majority of the investors, which is 52%, plan on investing in less than five companies in the next 12 months, 37% want to invest in 5-15 companies, and 11% say they will invest in more than 15 companies in the next 12 months.
2. Unicorns in India by 2025: Roughly 45% of the investors expect 100-200 more unicorns in the country by 2025. 32% expect less than 100 unicorns, and 23% expect more than 200 unicorns. It is an indication of enormous confidence in the growth trajectory outlook from the investors.
3. Source of startup deals: 48% of investors believe more start-up deals will come from angel investors at the seed stage. 14% believe more startup deals will come from accelerators. A small fraction of 9% of investors feel more deals coming from incubators, and 7% believe they come from investment bankers.
4. Perspective on iSAFE notes: A good percentage of 75% of investors believe iSAFE is simple to execute with no legal cost. 25% opine iSAFE is simple to execute with a legal cost, and 4% view iSAFE as complex to execute with no legal cost.
5. Priority sectors: 23% of investors are closely monitoring SaaS-based startups, 22% are looking at FinTech startups, 21% at deep-tech startups, 18% at B2B startups, and 18% at clean-tech startups. Other sectors like Agritech, Web3, and EdTech are on a low priority.
6. Leading deals and factors influencing investments: 51% of investors are leading deals. While making the investment decision, 18% of investors prioritize Founders’ Right to Win, 14% of the investors prefer market size, and 12% look at the business model.