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New Delhi: This is one of the main questions that most people are asking as geopolitical tensions between Iran, the US and Israel persist in casting uncertainties to world markets.
Such conditions normally instigate fear to investors. There is volatility in the markets, fluctuation in the oil prices and reduction in risk appetite. Under these circumstances, financing of startups- which is already a high-risk asset group- tends to decelerate. But the present situation narrates a little bit different story and particularly in India.
Funding Hasn’t Stopped
Although the world is tense, startup funding in India is not on a standstill yet. In the recent weeks, a few Indian startups have been able to raise large sums of money.
KreditBee, a Fintech platform, was reportedly able to raise around $280 million which indicates that people still trust digital lending. The Bellatrix Aerospace, a space technology start-up, collected nearly $20 million, which indicates that investors are becoming more interested in the Indian space market as a top-tier industry. In the meantime, Astranova Mobility and Nekkar Power both raised ₹60 and ₹75 crore respectively in the electric vehicle (EV) and clean energy sectors, respectively.
These deals show one thing: in spite of the uncertainty, investors are continuing to fund businesses that they have confidence in.
Long-Term Thinking by Investors
But what is sustaining funding ecosystem?
The solution is in the decision-making process of investors. They do not base on existing headlines or temporary disturbances. They are rather oriented on the long-term growth potential.
Geopolitical tensions might have a short-term effect on markets, but not alter the general trajectory of industries such as fintech, clean energy, or electric mobility. Investors are betting on the future of the world in the next 5 to 10 years- not merely a response to the current situation.
Sectors Attracting Capital
Even in a wary climate, some of these industries still receive investments as they have good prospects ahead:
- Fintech: As more people are becoming more digital and the underbanked are numerous, financial technology is a booming market.
- Electric Vehicles (EV): The trend towards EVs is gaining momentum due to the increasing fuel prices and government subsidies.
- Space Technology: New commercial opportunities in space are being created by the hands of the private players, attracting investor interest all over the world.
- Clean Energy: With increased concerns on climate, there is an increased momentum towards investments in renewable and sustainable energy solutions.
One similarity among these sectors is that they are all in tandem with the long term global trends. Grounded in Reality Check, Startups. With that said, the environment of funding is not as simple as it used to be.
Numerous startups are yet to secure capital. Investors have taken on a more critical approach where they are only interested in profitability, good business models, and definite revenue routes. The times of aggressive valuations and easy money have died down. Also, a number of companies have postponed their IPOs because of unstable market conditions, which is an additional sign of a more cautious attitude. In short, while funding hasn’t stopped, it has become more disciplined.
The Bigger Lesson
This period provides a valuable lesson on the way that markets work during a period of crisis. There are usually intervals of indecisiveness between good and bad businesses. Whereas there are players who are struggling, some have a chance to develop and be invested in.
Active investors during such periods are the ones who are not concerned about the risks at the moment but rather about creating value in the long run.
Conclusion
So, does war or geopolitical tension stop startup funding? Not entirely. It can slow down and increase the bar to startups but does not stop the system. Capital flows on- particularly to those sectors and companies which are resilient and promising. Finally, despite the uncertainty in the world, nothing has changed in terms of business: good ideas, good implementation, and future vision will still be attractive to invest in.
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