The panel of leaders from the new economy sectors was debating the balance between growth and profitability as business prudence takes centre stage at technology companies and startups.
The panelists included Oyo Rooms founder and chief executive officer Ritesh Agarwal; Byju’s cofounder Divya Gokulnath; Meesho cofounder and chief executive officer Vidit Aatrey; Ashutosh Sharma, India head, Prosus Ventures; Rajesh Magow, cofounder and group chief executive officer, MakeMyTrip; and Lingraju Sawkar, president Kyndryl.
“I feel that the tech ecosystem in India is now getting closer to maturity, and the question arising is should I think about growth or profitability?” said Aatrey of ecommerce unicorn Meesho. “I don’t think it’s a trade-off in my head anymore, and even within our team the understanding took some time to come. But now it’s very clear that both of them have to be in the same direction. So internally, we don’t take siloed goals of either growth or profitability anymore.”
After a record year of fundraising in 2021, Indian startups and tech companies saw a 75% drop in investments raised from private equity and venture capital firms in 2022 as a result of monetary policy tightening across the world, leading to investors sending a message to portfolio companies to stop chasing “growth at all costs.”
Magow of online travel portal MakeMyTrip said that the ecosystem should not make the mistake of having a forced agenda on either growth or profitability.
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“Neither growth should be pushed down the throat, nor profitability. It is a function of the lifecycle of the company because profitability naturally comes with scale and you have to get to that scale,” he said. “Bad practices that creep in just because there is capital available in abundance are the ones that should be the focus area in my view and not necessarily just forcing one agenda or the other.”
On whether the discipline adopted by startups in the backdrop of a funding winter will be sustained, Sharma of Prosus Ventures said that the ecosystem should remember what it went through this time.
“We have a very short-term memory–so that’s a big problem,” he said. “And I think we all should remember what we went through at this time. There will be a lot of capital available and it’s unfair to not use that capital. And so you should use it, but always remember at the back of your mind as to what you’re going through right now and always keep that in your calculations as you move forward.”
Looking ahead
As the startup and tech ecosystem emerges from the challenging environment, panelists pointed to practices that could separate the wheat from the chaff.
“I fundamentally believe that along with revenue and growth, cost competencies, especially in businesses in India, will give a very critical competitive advantage in the long term,” said Oyo’s Agarwal. “We are not interested in doing new businesses (or going into) new geographies but are looking to commit to a core business. We want to continue bringing the best services to our customers and maybe premiumise more.”
The panelists also talked about the impact of the pandemic on internet businesses and the learnings as the world emerged from Covid-19.
“In the pandemic, we understood that the best way of learning is neither completely online, nor completely offline,” said Gokulnath of Byju’s. “But just like everything in this world, it’s hybrid. The way we work, the way we travel, the way we live, the way we learn, the way we teach–everything has changed forever. So we adapted to this new normal and now we have multiple formats.”
Going ahead, even as tech companies face headwinds, macroeconomic indicators point to potentially strong spends on technology.
“I think from a domestic perspective, very clearly, all indicators are very strong. We heard the Prime Minister talk yesterday about India’s ‘techade’ and everything else around it. Given the tailwinds, I think India’s tech spend for enterprises is going to be pretty strong by leveraging two or three key elements,” said Sawkar of IT services company Kyndryl.
“One is, of course, the drive to get to the $5 trillion economy in a few years. The second, what we call the demographic dividend, and the third thing is that the India Stack of technology has delivered big dividends across the board.”