Startup founders prioritize fundamentals over growth, says Good Capital’s Rohan Malhotra.

Good Capital, a seed-stage India-focused VC fund, has noticed a shift in startup founders prioritizing sound business fundamentals over rapid growth. This change is not only due to the economic climate but also reflects the recognition of the long-term viability of ventures. The firm has recently launched a $50 million fund for early-stage startups, bringing its total capital to $100 million across three funds. The firm has seen success with investments in unicorns such as Meesho and LEAD School and has reported 8 successful exits. Despite a challenging funding landscape in 2023, with a 65% drop in funding compared to the previous year, there is still a significant amount of capital available for Indian startups. However, investors have become more judicious with their capital and are looking for startups with sound business models and clear paths to profitability. The venture landscape is going through a global shake-up, and stability post-election in 2024 is expected to bring more comfort and confidence in India as a place to invest. Good Capital focuses on investing in founders who understand their market, exhibit strong leadership skills, and prioritize sustainable growth. The firm prefers to lead pre-seed and seed transactions and looks for unconventional business models that challenge assumptions. The future of AI is seen as a horizontal opportunity, with startups that leverage AI intelligently having a competitive advantage in any sector. The success of tech businesses will depend on how they leverage AI, and startups that use AI to enhance productivity, customer experience, or personalization will see significant improvements to their operations.