THIRUVANANTHAPURAM: Amid fears of yet another global recession, startups in Kerala focusing on products are likely to be hit badly. The sector has already been affected by the decline in venture capital (VC) funding, which had acted as a catalyst for the growth of such startups. Unlike service-based startups, product startups are highly dependent on funding from angel investors.
Global high net-worth individuals (HNIs) have already started holding investments in the product startup sector. The Kerala Startup Mission may introduce a stimulus package for such startups in the future to ensure a robust ecosystem in the state. However, IT experts say that the recession will not have a bad impact on the IT sector in the state.
Data from quarter to quarter shows that funding for startups in India is slowing down. The financing amount decreased from the record-breaking USD 17.1 billion in quarter three to USD 14.5 billion in quarter four in 2021, and subsequently to USD 11.8 billion in quarter one in 2022, both quarterly lows.
Kerala Startup Mission CEO Anoop P Ambika told TNIE that the mission is planning to build a network of 100 HNIs from the state to provide funding for startups that have solid products.
“My reading is that startups expecting a big valuation game to woo investors may face a downturn in the next two to three years. But startups that have a solid product will survive for sure. At present, there is a lot of capital available in the market. Besides, the funding scenario has shown an improvement this year from the second quarter,” Anoop said.
In addition, the Startup Mission will continue to provide grants and funding to startups, he added. According to John M Thomas, CEO, Kerala IT Parks, the recession will not hit the whole IT sector but will affect the funding for product startups.
“Investors holding back money may affect the growth of startups, especially product startups, relying on VC and angel funding. But the startups with strong financial backing can survive for long. At the same time, the recession will have little impact on the whole IT sector, and investment in the IT space remains robust,” John said.
Meanwhile, software-as-a-service (SaaS) startups, which are coming off a successful run fuelled by the pandemic, are set to experience yet another surge in growth as a result of the impending global recession. According to industry experts, the economic uncertainty in North America and Europe may lead to an increase in demand for these firms’ products as large corporations fire thousands of employees worldwide.
Plans afoot to build a vibrant IT ecosystem in state: IT Parks CEO
Kochi: In addition to developing infrastructure facilities, the state government is coming up with various plans to boost the IT sector in Kerala. Plans are afoot to create, attract and retain talents to build a vibrant ecosystem, said John M Thomas, CEO of IT Parks. He said, state’s IT sector is not much affected by recession. “IT industry has rarely been affected by a demand constraint. The problem here is that there is a lack of talents to meet the huge demand,” he said. After identifying the problem, the government has come up with steps to create skills locally, he said. “We are now focusing on talent creation,” he said. “It is also crucial to retain the talents, both created locally and attracted from outside. This can be done by improving lifestyle amenities, which is an area gover-nment is working towards,” he said.