The start-up ecosystem has seen a lot of growth in the past decade. In India, start-ups have been sprouting in every nook and corner, and globally, there has been an influx of start-ups across various industries. However, in recent times, start-ups have been facing a severe funding crunch. As a result, many start-ups have had to let go of their employees, downsize their operations, or even shut down completely. In such a scenario, start-up founders need to work towards market share ownership and the path to profitability hand in hand.

So, why has this situation arrived, and why have start-ups been unable to plan their fund-raising activities properly? According to a PwC India report, start-up funding in India hit a two year low at $2.7 billion in the 3rd quarter of 2022. Seed stage rounds also experienced a contraction and saw a 38% drop as compared to the previous year.

One of the main reasons is the need for start-ups to manage their cash burn. In the initial stages, start-ups focus on acquiring customers and gaining market share, often at the cost of profitability. It is because start-ups operate in a highly competitive and dynamic market and need to expand their customer base quickly to establish their foothold. As a result, they often tend to focus on growth at the expense of profitability. It has led to an unsustainable situation, where start-ups have been burning through their cash reserves and without a clear path to profitability.

In the current situation, where venture capitalists (VCs) and private equity (PE) players are no longer interested in only ‘cash-burn’ start-ups, founders need to navigate the path to profitability and market share ownership in a balanced way. Like mature businesses, start-ups need to build visibility of sustainable business models with free cash flows, per unit and overall profitability, and return on equity capital. This would enable them to attract more investors interested in investing in businesses with a clear path to profitability.

Burning cash to get a larger pie of the market share is a one-way street. Sooner or later, capital will become scarce or dry. Also, using this methodology to raise capital with higher valuations continuously is not a ‘win-win’ approach. Start-up founders must evaluate their business models with a clear 3-5 year short-term and 7-10 year long-term view for a self-sustainable model. They need to focus on building a business model that can generate sustainable revenue while controlling their costs. This requires a deep understanding of the market, the competition, and the customer’s needs.

Start-up founders must focus on acquiring customers in a cost-effective manner by leveraging technology and digital marketing tools. They need to build a sustainable customer acquisition strategy to drive growth without burning their cash reserves. It could involve creating a solid online presence, leveraging social media and content marketing, and using data analytics to optimize their marketing campaigns. Additionally, they must focus on retaining their existing customers by providing them with high-quality products and services and building a strong brand.

Start-ups must also focus on building a solid team to execute their business plan effectively. This requires hiring the right talent, building a healthy culture, and providing employees with the right incentives. In addition, they need to ensure that their team is aligned with their business objectives and has the right skill set to execute their plans effectively.

In conclusion, start-up founders need to work towards market share ownership and the path to profitability hand in hand. They need to focus on building a sustainable business model that can generate revenue and profit while controlling their costs. This requires a deep understanding of the market, the competition, and the customer’s needs. They need to build a strong online presence, leverage digital marketing tools, and build a strong team to execute their business plan effectively.

By doing so, they will not only be able to attract more investors, retain and growth them with a clear road to value and wealth creation.