In 2022, startup investors moved away from naïve optimism and towards a more judicious realism
Like the famed fable of the hare and tortoise where the shelled dawdler won the race against his furry opponent by simply keeping his eyes on the prize, 2022 has been a year of the slow and the steady.
“This past year, we saw a paradigm shift in the startup ecosystem as investors were impelled away from naïve optimism towards a more judicious realism.”
Akin to what we at Tomorrow Capital have always advocated – backing real and sustainable businesses with strong fundamentals and a clear path to profitability – investors are today looking beyond vanity metrics like number of users or gross merchandise value that have no defined monetisation strategy.
Safety first
Since our inception in 2017, we have upheld profitability and sustainability in businesses. And this has afforded us the luxury of security and wholesome growth.
While our approach was seen as overly conservative in our early days, it has stood us in good stead as our portfolio companies have seen strong growth in a year that has been hard for the startup community in general. This is clearly demonstrated in the IRR that we have been able to achieve with our portfolio – while most venture funds consider a 35% IRR as a very good performance, we can proudly boast of an IRR of upwards of 100%.
Bonito Designs has had a fabulous year of expansion and growth, spreading its wings from its home city of Bangalore to ride a hugely successful launch in Mumbai – a market in which other interior design firms have struggled to make an impact. The collaboration with Gauri Khan and Manish Malhotra to make celebrity-designed homes accessible to all has carved a niche for Bonito establishing it as a brand to be reckoned with. With its sales order book increasing by almost six times during the course of the year to hit the Rs 50 crore monthly mark, Bonito is truly on a tear and we expect it to reach much greater heights over the next 12 months.
It has been a year of coming of age for Leverage Edu. They started with prodigious validation of what the team had built last year, closing a $20 million funding round at a pre-money valuation of $100 million – a jump of 8X in a year. This capital has helped the business scale up rapidly; the company is in line to generate over Rs 100 crore in revenue this year and emerge as a partner of choice for numerous UK universities. It has also enabled the opening of new channels and businesses. Leverage has already forayed into allied businesses like forex, education loans and test prep for students. And 2023 should be the first scaled year of admissions for new markets like Australia, New Zealand and Canada.
Easiloan has consolidated its position in the home loan space over the year, and has been ably supporting customers across the ecosystem – whether they are buying land, homes or interiors services – with the best financing options. BeyondSkool has seen positive traction with schools looking to make the program a mandatory part of their timetables from April 2023 – a great testimony to the quality of the educational content and curriculum that they have created.
What lies ahead
While rolling up our sleeves and working in depth with companies in our portfolio, we are always on the lookout for interesting new companies that we can partner with, build from ground up and help them grow. In the next few months, we are eyeing a couple of new investments in sectors like logistics, insurance, health and wellness, and agri.
This new year promises to be action-packed as we forge deeper and wider into the business building it ground up to reach the unending skies.
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