When it comes to fundraising, these are difficult times for companies. There is not enough money available right now. Nitin Kamat, the creator of the brokerage company Zerodha, holds this opinion. In a series of tweets, he predicted that the number of founders and business leaders resigning, particularly late-stage startups, will rise, making it challenging for companies to endure this challenging funding environment.
Why could such a thing happen?
The 43-year-old Kamat is listed as having a net worth of $2.7 billion on the most recent Forbes rich list, which is equal to Rs 22,116 crore in Indian rupees. According to Kamath, the mismatch between values and business fundamentals and liquidation preferences are the key causes of the capital shortage.
Kamath thinks that trade-off investors are also subject to liquidation preferences. In the tweet, he said that new investors would be given the greatest precedence.
A lesson for investors
According to Kamat, it’s probable that the current environment of limited funding will teach investors that businesses in India should be structured differently since preference concerns in mergers and acquisitions (M&A) and initial public offerings (IPOs) are difficult to resolve.
It’s not always a good idea to raise money at a high valuation.
It’s not always a smart idea to raise a lot of money at a high valuation, according to Kamath. For investors, it might be preferable to mark up the investment and boost the performance of their fund.
The founders and teams, however, might not be pleased because their stock would continue to depreciate with every new round as a result of the preferred problem.
Be proud of this
Investments resemble loans, in Kamat’s opinion, when it becomes difficult to secure new funding during periods of stagnant growth or when businesses are valued highly. With little to no outside funding from venture capitalists, Nitin Kamath is proud of having taken Zerodha from its infancy to its pinnacle.
Zerodha is entirely bootstrapped and is the startup that has caused the most commotion in the Indian broking industry.
Bootstrapping, or beginning a business with solely personal savings, may involve borrowing or investing money from family or friends.