The Indian startup ecosystem is definitely seeing a rush of capital giving rise to caution amongst many watchers of the industry, but the flow of capital is coming because over the last 12 months
Mumbai: While the covid-19 pandemic has caused severe pain for many sectors of the Indian economy, the rapid adoption of digital services seen in the last 12 months has made Indian startups highly attractive for global investors, a trend that has manifested itself in the creation of many multi billion dollar valuation startups in the last few months.
However, startup founders, speaking at the Mint India Investment Summit 20201 on Friday, said they believe that one must not get swayed by these numbers as these valuations are a function of supply and demand, with the demand for Indian startup investment opportunities clearly outstripping the supply of quality companies in the marketplace today.
“What you hear on the investment side, to me, it is inflationary. Too much demand, too less supply, so the asset gets repriced. It’s a great time if you are series C plus company; a lot of money is chasing you. Therefore, you have to be smart and efficient about raising money and most probably raise more capital that what you need at this point of time," said Ashneer Grover, CEO and Co-founder of BharatPe.
“But don't buy the valuation that you are being given. You still have to work and grow into that valuation irrespective of what that number is," he added.
According to Sujeet Kumar, co-founder of Udaan, eye-popping valuations are not the most definitive benchmark of success for a startup and in fact can come with a lot of threats.
“Valuation is definitely not success. Valuation also comes with a lot of threats. Because tomorrow if that number doesn't grow as fast as it was when you became a unicorn then internally the employees can get demotivated. True valuation is how big your opportunity is and how much money you need to build those capabilities," he said. .
Sumit Gupta, Chief CEO of CoinDCX added, "India is very hot right now. There are limited assets in the country who are leading their space. A lot of capital is chasing founders. It is easier to get capital now than it was before."
The Indian startup ecosystem is definitely seeing a rush of capital giving rise to caution amongst many watchers of the industry, but the flow of capital is coming because over the last 12 months, the startup ecosystem has demonstrated its resilience and has in fact built upon that to grow rapidly.
“You have seen incredible resilience. The digitization wave that started last year is continuing. Investors recognize that potential. They know this is a temporary setback. If anything, it is a permanent shift in the right direction for technology led businesses. We can clearly see investor enthusiasm around that," said Karthik Reddy, co-founder of Blume Ventures, an early-stage investor.
According to Ankit Agarwal, Partner, Alteria Capital, Indian startups were able to scale up rapidly after the onset of the pandemic because the ecosystem was already in place for digital adoption thanks to the mobile internet penetration of the country.
“India was ready for this fast-paced digital adoption. This has given a very strong push to the innovation ecosystem, and it has pushed technology to the center of most business models," he said.
Sumer Juneja, partner and head of India, Softbank Investment
Advisors added that Indian startups will continue to scale rapidly with their digital DNA and tech first approach that makes them much better placed to win in the post pandemic marketplace that the traditional industry
“There will shift from unorganized to organized but there will also be a material market share gain for digital first companies," he said.
According to Lavanya Ashok, partner at Trifecta Capital, the current deal activity in the startup ecosystem highlighted by mega investment rounds is a result of both demand and supply matching harmoniously.
“The late-stage companies that have been around for 5-15 years are now compounding at a very different scale. So, what you are seeing is that these companies are getting inbound interest from investors way before they are moving to raise a round. The companies themselves are raising a little bit ahead of what they planned to because they are seeing the investor interest.
There is incredibly strong interest in these breakout companies," she said.
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