In the past 15 months, SoftBank’s investee companies in India have adopted a ‘total defence’ approach to combat the funding slowdown. These startups have implemented cost-cutting measures, reducing costs by 50-75 percent to extend their runway by at least 12 months. They have laid off employees, reduced benefits, and cut expenses like advertising.
SoftBank itself has taken a highly conservative strategy, cutting investments by over 90 percent between April 2022 and March 2023. It has not invested in any Indian company since July 2022. This approach has helped SoftBank’s portfolio companies navigate the funding downturn, with 94 per cent of them having a runway of at least 12 months. Indian companies in SoftBank’s portfolio have a runway of over 20 months.
Some companies, particularly consumer-focused ones, may halt cost-cutting by June to prepare for a crucial festival season. Late-stage firms may clean up their books and resume investing for growth, aiming to show growth in the coming years. However, this will depend on the macroeconomic situation. Investors worldwide have become cautious due to various challenging macroeconomic factors, such as inflation, supply chain disruptions, and tensions between major economies.
SoftBank is slowly transitioning from a ‘total defence’ to an ‘offence’ mode and is considering opportunities for positive investments. While the Japanese investor has been conservative in India, it has been preparing late-stage companies for potential listings. SoftBank has backed 27 companies in India, including 20 unicorns, and has invested over $10 billion through its Vision Funds in the past seven years.
