In the first two months of the current fiscal year, the third-largest economy in Asia only created one unicorn. In the months of April and May 2021, 10 companies in the nation joined the exclusive group of businesses valued at $1 billion or more.
This follows two years of fundraising and valuations that have skyrocketed. The worldwide supply chain disruptions brought on by lockdowns, the Russia-Ukraine conflict, the collapse of global tech stocks, the rise in inflation, and the subsequent increase in interest rates are just a few of the many causes contributing to the liquidity crisis.
During a bull market, VCs often considered more significant factors like growth potential, turnover, market share, and so on. Profitability and sustainability strategies are now under the spotlight. They are currently determining if the firm will require further investment while it is still in the cash burn phase and may eventually reach profitability. If not, the fundraising effort would be stopped.
The crucial thing to realise is that, in the long term, if you continue to ignore the profit component in the valuation and expansion process, the likelihood is great that you will wind up at a dead end with another pitch waiting for the investors to have another round.
For businesses with excellent and realistic business models and a sustainable strategy, there is no funding winter. Even now, deals are still being concluded in a variety of industries. The proper businesses grow and mature as a result of having to endure numerous seasons repeatedly to maintain their value.