Nikhil Kamath warns Indian startups: raise now or risk dry spell

Zerodha co-founder Nikhil Kamath has publicly urged Indian startups to secure funding immediately, amplifying a viral warning on X that macroeconomic headwinds could choke off capital access in the coming months. His endorsement of the message—“100” with a fire emoji—follows a volatile quarter for Indian startup funding, where brief rebounds have been overshadowed by persistent gaps in large rounds and investor hesitancy.

The call to action isn’t abstract. Indian startups raised $954 million in August, a 44.3% jump from the prior month, only to see early September funding dry up again, with no major deals announced. Mid-September brought a modest rebound ($321.9 million across 20 deals), but the recovery remains fragile. Kamath’s intervention suggests that even these flickers of momentum may not last. His track record as a founder-turned-investor lends weight to the warning, positioning it as insider concern rather than generic market noise.

What makes this unusual is the specificity of the timing. Kamath isn’t merely advocating for fundraising as a best practice; he’s framing it as a now-or-never moment. The subtext is clear: startups waiting for more favorable terms or a clearer macro picture may find themselves locked out. That’s a shift from recent periods, when founders could still secure bridge rounds or extensions even amid downturns. The difference now is the absence of large, stabilizing deals—the kind that keep the ecosystem afloat during slow periods. August’s $954 million total, for instance, nearly hit the $1 billion mark, but the bulk came from a handful of outliers, leaving most startups scrambling.

The tension here is between two narratives. On one hand, August’s numbers and the mid-September uptick suggest a sector clawing back from earlier slumps. Investors may be sitting on dry powder, but they’re deploying it selectively, favoring certain sectors while leaving others in the lurch. That selectivity isn’t new, but the stakes feel higher now. A founder who might have raised a sizable round in the past could now struggle to secure funding, or worse, face down rounds with punitive terms.

For founders, the message is simple: prioritize fundraising over growth experiments. The advice isn’t without risk—dilution, valuation resets, or investor-friendly terms could haunt startups for years—but the alternative is worse. Kamath’s warning echoes a broader sentiment among operators who’ve seen this before: capital markets can slam shut faster than they open, and once they do, reopening takes time. The question now is how many startups will heed the call, and whether investors will reward urgency with fresh commitments or double down on caution. Either way, the next few weeks could separate the resilient from the stranded.

Sources: newsbytesapp.com