The startup world is undergoing a major shift and gone are the days when “growth at all costs” was the ultimate goal. Startups are now being forced to focus on something far more than sustainability and it is profitability with increased regulatory scrutiny and evolving rules.
The change in India is particularly evident in sectors like fintech, edtech and health tech. The compliance requirements have become stricter in such segments. LexStart Partners founder Anisha Patnaik said that unclear regulations can make fundraising a big challenge for the startups as basically investors look for clarity.
Regulations bring added costs for startups as complying with laws is not cheap and it also impacts financial projections. Investors are now more cautious and often releases funds in stages to ensure that the startups stick to the rules.
However, everything is not bad in the new approach as the primary focus is to look building sustainable as well as profitable businesses instead of just reckless expansion. Patnaik believes that the next big wave will come from startups driving innovation in green technologies and embracing environmental, social as well as governance (ESG) practices. Investors are now looking for businesses that care more than just profits. The businesses should be ethical and simultaneously aslso responsible.
The demographics of startup founders are also changing. The startups are no longer just for young and fresh-out-of-college entrepreneurs. More experienced professionals in their 30s and 40s are simultaneously stepping into the game.
Another game-changer for startups is the rise of legal tech. Startups can now handle basic legal needs at lower costs with advanced tools powered by artificial intelligence. Legal services thereafter become more efficient and accessible.
The recent removal of the angel tax has given startups a boost. It is encouraging more investments from angel investors by reducing compliance headaches.
The lesson here is that the startups must adapt to survive. The focus on sustainability and profitability is not just a regulatory requirement, but it is the smarter way forward. Building businesses that innovate responsibly, care about the planet and stick to the rules is not just good ethics, but also it is good business.
