National Start-up Day: Why incubator T-Hub believes 2023 will be a ‘promising year with few hiccups'

The Government of Telangana-backed T-Hub, which incubates and scales start-ups, is looking at 2023 with cautious optimism. After a year of correction and “reassessment” for startups, T-hub reckons this will be a “promising year with few hiccups”.

Speaking to Business Today on the occasion of National Startup Day, T-Hub CEO Srinivas Rao Mahankali (MSR) said, “2023 is expected to be an exciting year for the startup ecosystem with fewer layoffs, an increase in demand for gigs, the adoption of measured fundraising, and investors warming up to emerging regions. This will be the year when tenacious, innovative and problem-solving entrepreneurs have a chance to stand out from the crowd.”

By all measures, 2022 was a tough year, with venture funding into Indian start-ups decreasing 38 percent and investment deals reducing by 32 per cent. But this “environment encourages companies to create clearer and more sustainable growth paths, because the judgments of investors favour stable profits at all costs, rather than expansion”, MSR explained.

What should start-ups do to navigate the caution of VCs?

MSR said, “​​Start-ups must build better unit economics, rather than expensive acquisition-led growth channels, as geopolitical issues, global supply chain crisis, and other macro issues are expected to dominate. Start-ups should understand that capital is not readily available. This also leads to consolidation opportunities for well-funded startups that are close to profitability.”

T-Hub, which has impacted more than 2,000 start-ups through its various programmes and initiatives, and has notched up 600 global and national corporate partners, further believes that fintech, healthtech, traveltech, EVs, retail, spacetech, and femtech will be the top-performing sectors in 2023. Meanwhile, areas like semiconductors, manufacturing, SaaS, foodtech, and edtech “are likely to see a slowdown”.

But good companies will continue to draw investor interest. “It is clear that there is a lot of dry powder in the market, and solid companies will be well-received, but the bar for investment is higher,” MSR said, adding, “There are few emerging sectors where investors are willing to take a leap of faith for profitability.”

Additionally, India’s position in the global economy will also continue to favour investments into the country. “The country's economy is doing better than other major economies, consumption figures and loan figures point in the right direction, and policies seem to indicate that the ecosystem is benefiting,” MSR explained.

T-Hub is also expecting the Union Budget 2022-23 to further accelerate the growth of start-ups. Tax incentives for investments, lower TDS, change in the taxation of ESOPs and a single window for clearances are some of the measures it hopes would be announced in the upcoming Budget.

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