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NEW DELHI : Venture capital investors have urged startups to focus on profitability and put off their rapid growth plans to tide over covid-19.

Leading VC firm Sequoia Capital (India) surprised everyone by announcing two new India-South-East Asia funds with commitments of $1.35 billion in July amid the global pandemic. Managing director G.V. Ravishankar, at Mint’s Pivot or Perish webinar on Thursday, said while deal activity had dropped in April and May, it picked up in June-July. Investors were initially trying to evaluate the startups, as they tried to gauge the impact of the pandemic on their businesses, he said.

“While it was all about reducing costs in the first two months of covid, the next step was thinking about how do we assess and survive and build through the future. The startup world has evolved and adapted. We never give up and are constantly evolving, innovating and thriving," he said.

However valuations and deal size remained almost at the same level. “It is interesting and surprising that valuations have not corrected much, but it also depends on the sector. Edtech and healthtech valuations corrected upwards, while you need to forget the last round for travel and hospitality, and relook at valuations today," he said.

VCs have shown a clear preference for edtech in the first half of 2020, with startups raising around $795 million, compared to $108 million in the year-ago. It is the only sector, apart from healthcare, to register growth in the number of deals, according to data from Venture Intelligence.

Ravishankar said there is a lot of capital flowing in tech-enabled sectors, globally, and in the next 12-18 months “we can find great companies to invest in and invest in fair prices". He added that the current crisis is different from the global financial crisis of 2008, and the pandemic is all about lower consumer demand.

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