'Digital StartUps Vs MSMEs: Where Private Equity & VC Funding Is Actually Required' - Finance With Chinmay

Currently, MSME sector requires approximately 33 lakh crore of funding, it has managed to get funding of 12 lakh crore including all sources like banks, subsidies, private equity and private lending. Still, there is a huge funding gap of 21 lakh crore in this sector.

According to Goldman Sachs, Flipkart & Snapdeal collectively need 1.27 lakh crore of funding. If we consider their market share as 50% then digital start-ups require approximately 2.5 lakh crore of funding.

Hence digital start-ups have just 2.5 lakh crore funding gap against 21 lakh crore for MSMEs.

Main reasons for bare interest in MSMEs is low size, less margin and few exit opportunities digital start-ups provide large size and ample exit opportunities for private equity investors, although almost all the digital start-ups are reporting huge losses consistently.

Investments in MSMEs provide investments in core industries, less speculative valuations, less market and consumer sentiment volatility and steady and stable returns which are very unlikely in digital start-ups in the coming future.

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Chinmay Madgulkar is an Electronics & Telecommunication engineer from the University of Pune. He has completed his MBA in Finance from Xavier Institute of Management & Research and is a Management Trainee - Equity at Taurus Mutual Fund. He is also a Mutual Fund advisor.

You can connect with Chinmay on LinkedIn here.