From Garage to IPO: The Wild Ride of Startup Evolution

Ever looked at a startup’s growth chart? It’s usually a neat upward line or a misleading simplicity if you will. 

This polished graph omits the real grind. It doesn’t capture the sleepless nights, the close calls with potential failure, or the Eureka moments that come unexpectedly. We only see the glossy finish — the neat upward line — and not the gritty work-in-progress filled with passionate debates, makeshift marketing strategies, and the relentless pursuit of that next milestone. 

Here, every small win, even a successful product demo or a positive customer review, is celebrated as heartily as securing a major investor. The shared rides to networking events. The mix of anticipation and dread before launching a new feature. The thrill of seeing your brand mentioned for the first time in the media. 

Maybe it's for the best that we only get the highlight reel. After all, not everyone's keen on the messy, behind-the-scenes hustle.

So what’s the lowdown on India’s startup scene? 

It’s booming, to say the least. In the global startup league, we're sitting pretty at number three, with startups here raking in more than $146 billion in funding since 2014.

Startup Funding in 2023 in India

Sources: Inc42, Entrackr

Source: Inc42

Source: Inc42

Now, in most conventional conveyor belts, you might be able to see the beginning and the end in one frame. But this is the startup funding process we’re talking about — it’s anything but simple. 

Stage 1: Pre-Seed Funding

We start, of course, at the loading dock. This is where the ideas pour out of the truck, form a neat line and then take their place on the conveyor belt. At this point, the startup is an unintelligible blob of latent energy waiting to be activated. 

Pre-seed funding is generally used to create a rough prototype of the idea entrepreneurs can use for show-and-tell. In most cases, funding at this stage comes from friendly loans from their loved ones or even donations in good faith. The funding amount generally ranges between ₹50 lakh to ₹1 crore.

However, in some cases, startups can even reach out to external investors for pre-seed funding. In this case, the funding amount can be much higher.

Sources: Growth List

Stage 2: Seed Funding

After the loading dock, the massless blob moves ahead on the conveyor belt and reaches the assembly phase. This is where the startup begins to take form. 

Nuts and bolts are screwed to give a skeletal structure. Components like team members, products and services, and basic business models are added. Startups generally use seed funding to hash out important details like how to generate initial traction for their product and how to start generating revenue.

The amount of funding, in this case, can vary greatly depending on who the investor is. Entrepreneurs can approach angel investors or even early-stage VCs at this stage.

In 2023, startups in India received a total of $681 million in seed funding, down 72% from the previous year. As for the number of deals, that dropped to 467 from 737 in 2022.

Source: Inc42

Source: Inc42

Stage 3: Series A

This is where things start to get real. You can almost see the startup taking shape in front of your eyes.

Now that the base skeletal structure has already been created, the startup moves into the expansion phase. This means rigorous testing and evaluation to check if the idea is truly viable. 

This would probably be one of the loudest sections on the conveyor belt, where large machines hammer into the sides of the structure to test for durability. It passes through rains of fire and chambers of liquid nitrogen to simulate extreme conditions. 

After all, the market is not going to be kind to a hapless idea that can’t hold its form. Oh no, the world is savage – it can crush an entrepreneur’s dreams to dust with its strong jaws.

Over the course of this phase, the startup undergoes significant changes and refinement. It sheds its training gear and metamorphoses into a more market-ready format.

As you can imagine, investors at this stage scrutinise every aspect with a keen eye for detail. They’re like the quality control officers at the end of this stage – they will not let you pass unless you meet their standards for excellence. 

Source: Entrackr, Entrackr-Sarvam AI

Stage 4: Series B

Once the startup passes through Series A, the conveyor belt splits into different pathways. Each leads to different markets with new opportunities and challenges. Depending on the business model that has been optimised in the previous stages, the startup now opts for a more streamlined path.

In the acceleration zone of Series B, the conveyor belt speeds up, indicating rapid growth and expansion. This is all about scaling up – there are not a lot of structural changes. Instead, the aim is to increase the scope of business and revenue. The startup takes on larger, more powerful engines (funding) to increase output (scale operations, enter new markets). The focus is on boosting performance to meet increasing demand. 

Source: Matrix Partners, Economic Times, Growth List

Stage 5: Series C

Series C opens up a whole new segment of the conveyor belt. Each winding pathway leads into a diversification conveyor from the expansion zone. It's like adding new assembly lines within the factory to produce a variety of products. 

The startup is now a significant player in its original market and is looking to conquer new territories. Gone is the hapless noob. In its place is a force in its right, ready to take on the world. Investors during this stage are akin to strategic planners, focusing on long-term growth and sustainability, ensuring the startup's machinery is versatile and adaptive to changes in the market landscape.

Source: Economic Times, Techinasia, Matrix Partners India, Biospectrum India

Stage 6: Series D and Beyond

Once we enter the Series D zone, the world opens up. The winding pathways ultimately lead into a huge open space where the startup pumps its distribution network full of steroids. This is where the conveyor belt extends beyond the factory, reaching into ports and distribution centres worldwide. 

This isn't just a young venture anymore. Now, they're eyeing bigger moves, like snapping up other businesses or trying their hand in new fields. The cash flow at this point is all about locking in their lead in the market and making sure the money keeps rolling in for the long haul.

Please note that after this stage, startups can go for subsequent funding rounds like Series E, F and more. Alternatively, many startups also opt for IPOs.

Source: Economic Times, Series D and Beyond, TechCrunch, Growth List

Source: Inc42

Source: Inc42

Stage 7: IPO

This is the final stage of the conveyor belt. It leads to the delivery bay—the IPO. Here, the startup, now a fully formed product, is showcased to the world. By this point, they've transformed so much that they're hardly recognisable from when they started—what entered as a rough idea is now ready to take on the world. 

IPO or Initial Public Offering marks the end of the private funding journey that startups go through. After this process, the company can list on the public stock exchanges and obtain investments from retail and institutional investors alike!

A total of 57 companies launched their IPO in 2023. The table below shows the top ones.

Source: Chittorgarh

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