A large number of top executives have moved from unicorns to Series A and B firms or even down the chain in recent months – a move that reflects fund flows in the startup space.
Nearly 77% of active funding so far in 2023 have been below $30 million deal size – that are primarily pre-Series A, Series A and B companies, data put together for ET by executive search firm Longhouse Consulting showed. As many as 239 companies funded so far this calendar raised less than $5 million.
“A large number of deals are happening at the Series A, B or very early stage. A lot of executives are looking to move from unicorns to these places where there is a significant interest in funding,” said Anshuman Das, CEO of Longhouse Consulting.
Top executives who have quit unicorns or soonicorns in recent times include Dale Vaz, former chief technology officer of Swiggy who is now founder and CEO of Aaritya Tech; Arun Dhwaj, former VP engineering at Wakefit, now cofounder and CEO of SmartBitPixel Tech; Shruti Sivakumar, former VP design at Meesho, now cofounder and chief design officer of Wint Wealth; and, Victor Das, former director growth at Unacademy, now cofounder of Wisemonk.
ETtechPrateek Agarwal, former GM monetisation at Meesho and Shikhar Saxena, former group product manager at Meesho, are also building something of their own, according to Longhouse Consulting data.
Discover the stories of your interest
Experts attribute this trend to a combination of factors including an overhang of uncertainty due to inadequate funding, a series of mass layoffs, and many firms’ plan to get listed on stock markets.Also read | Over 17,000 Indian startup employees laid off in the first half of 2023 as funding winter refuses to thaw
“Due to the funding winter, several of the unicorns have focused on the core, while giving away multiple areas of focus,” said Amit Nawka, partner, deals and startups, at PwC. “As a result, people who are doing the things that are no longer in focus may also be among the cohort that is wanting to build something of their own or join an early stage venture as a cofounder and at a significant stake,” he said.
Also, valuations of several unicorns are being slashed.
It is 10 months since an Indian startup entered the unicorn club, data from Longhouse showed. The latest was Molbio Diagnostics in September.
India’s three largest startup investors – Sequoia Capital India, Tiger Global Management, and SoftBank – have reduced their deals by 80% this year, highlighting the horror of the funding winter.
They were involved in just 12 deals in the first half of 2023 compared to 60 a year earlier.
“At this moment, with the funding slow down and as organisations prioritise sustainability and focus on cash burn management, individuals are facing significant uncertainty and job instability,” said Ankur Pahwa, managing partner of venture capital fund PeerCapital.
Additionally, corporate governance concerns and substantial layoffs have dimmed the sector’s allure, prompting numerous top executives to consider exploring establishing their own ventures, he added.
There is a reluctance on the part of some executives, who may have already vested their stock ownership benefits, to be a part of a listed entity in the case of companies going for IPOs, experts said.
“Several senior executives who have spent considerable amounts of time building something innovative at some of the large IPO-bound startups may not want to be part of a public company,” said Pranav Pai, founding partner at 3one4 Capital, an early-stage venture capital firm. “They would have also vested their ESOPs. They may want to shift to smaller startups or build another of their own, thus leading to an exodus of top executives,” he added.
There is also fear that public listing will lead to lack of clarity on role calibration and opportunity for high quality innovation, triggering top-level exits from unicorns.