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India has the unique opportunity to become the global leader in Web3, but needs to get its regulatory and legal frameworks in place, said Rajan Anandan, managing director, Sequoia Capital.

The concept of Web3 is a decentralized version of the Internet that runs on open-source code such as a public blockchain, the underlying technology for cryptocurrencies.

Anandan told the Hindustan Times Leadership Summit (HTLS) 2021 on Friday that he was delighted by the government’s decision to not ban cryptos and come up with a legal and regulatory framework instead.

However, he said, crypto is just one small part of Web3.

“Web3 is very, very important, whether it’s NFTs (non-fungible tokens), gaming, or Defi (distributed finance). The kind of innovation that we’re seeing in Defi is extraordinary," he added.

In the second half of 2021, Sequoia Capital India made 19 investments in Web3 startups, said Anandan.

He pointed out that many entrepreneurs from India, China, Korea, Japan, the US, UK and Australia are moving to Singapore because it has a regulatory and legal framework for Web3. Anandan said the startup ecosystem in India is no longer only about e-commerce, fintech, mobility, SaaS (software as a service) or development tools.

“Over the next five years, we are going to see a dozen unicorns in agri-tech, (and) we are probably going to see at least a dozen unicorns in digital health. We are going to see two or three dozen unicorns in ed-tech. In fintech, we’re going to have 100 unicorns," he said

Anandan expressed surprise at the number of initial public offerings (IPO) by tech startups in India. However, he cautioned that going public is just one of the milestones in the journey to building an enduring company.

“To be a truly enduring company, the real question is what’s going to happen in the next five years," Anandan said.

He urged startups to be very careful with their spending.

“It’s important to keep in mind that funding has cycles. We are definitely at the high part of the cycle right now, but cycles turn. We’re going to go through a period where it’s not going to be like this at all. It’s going to be very difficult to raise capital, and valuations are going to get adjusted."

According to Anandan, public market investors have very different expectations of a company’s performance.

“I think if founders can raise capital, they should do so, but they should be very prudent about how they spend it over the next few years," he added.

Upasana Taku, co-founder, Mobikwik, said: “Key learning from the IPO preparation has been that public market investors have a slightly different lens from private investors. Investors in the capital markets are looking for companies where the business model is very clear, and the financial performance has been demonstrated year over year for at least two to three years, and there is a clear path to profitability."

She added, having been following a sustainable growth strategy already for the last five years, it was a pleasure to bring that story to the market to the investors.

Taku said that the ecosystem is still very male-centric. However, she said it’s going to become easier as we go forward. There will be more women-led companies that come to the capital markets.

Mobikwik had filed for an IPO in July. Ahead of the IPO, the payment company had turned unicorn in October.

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