Dispatch from Bangalore, End of 2022 Edition • TechCrunch

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In 2014, Brian Swaroop made a pitch to Accel, the storied venture capital firm with which he worked as a partner, about India’s futures markets.

At that time, Flipkart and Snapdeal were the only e-commerce startups in India. Swarup said that as more Indians come online, opportunities will arise in several market areas such as food delivery, automotive aftermarket, warehousing, road freight and social commerce.

Swaroop, now a partner in the company, was right. Urban Corporation, which operates in the domestic aid sector, is valued at $2 billion; Zomato and Swiggy deliver food to millions of customers every month; Spinny and Cars24 sell hundreds of thousands of cars every quarter; Social commerce startup Dealshare is worth more than $2 billion and Meesho is less than $5 billion.

Millions of Indians have come online in the past decade, and more than 100 million are making online transactions and purchases every month. India, which has doubled its number of unicorns to 100 in the past two years, has attracted $75 billion in investments from tech giants Google, Meta and Amazon and venture funds Sequoia, Tiger Global, SoftBank, Alpha Wave, Lightspeed and Accel. Last five years.

Swaroop’s presentation from 2014. (Image credit: Accel)

But as the local startup ecosystem wraps up one of its toughest years, it’s now staring at another question it’s long been able to brush off as benign: exits.

About half a dozen consumer tech Indian startups have gone public in the last one-and-a-half years, and all of them have fared poorly on local stock markets. Paytm is down 60% this year, Zomato 58%, Nykaa 56%, Policy Bazaar 52% and Delhivery 38%.

Indian stocks have outperformed the S&P 500 index and China’s CSI 300 this year. India’s Sensex – the local stock benchmark – has risen 3.4% this year, compared with a 19.75% drop in the S&P 500 and a 21% drop in China’s CSI 300.

As the market changed its direction this year, several Indian startups, including MobiKwik and Snapdeal, delayed their listing plans. Oyo, which had planned to list in January next year, is unlikely to move forward with the plan, according to two people familiar with the matter.

Flipkart, valued at $37.6 billion and majority owned by Walmart, does not plan to list until at least 2024, according to a person familiar with the matter. Byjuice, India’s most valuable startup, isn’t planning to list in 2023 and is instead moving forward. Akash, one of its subsidiaries, plans to listNext year, TechCrunch previously reported.

Those looking to push ahead with their plans to go public will face another hurdle: several global public funds, including Invesco, which actively fund pre-IPO rounds, are pulling back from the Indian market this year after hammering China and other emerging markets. People who know things.

LPs have long been voicing concerns about India not taking off and the initial efforts from the industry in the past two years have been nothing to write home about.

Indian venture funds have historically received most of their exits through mergers and acquisitions. But even these exits are becoming harder to come by.

An analyst at one of India’s top venture funds said the VCs, which have long backed early-stage SaaS startups to the tune of $25 million, were a good exit opportunity. But as we’ve seen in a few cases in recent months, the exits themselves are valuing the startup below $25 million, making it difficult for SaaS investors to turn a profit.


At a private gathering of a few dozen industry figures at a five-star hotel in Bengaluru on a recent evening, several investors exchanged notes about deals they were evaluating. Partners complained that the quality of startups has decreased even as the volume of pitches has increased.

Two major venture funds, which run well-known accelerators or collective programs of early-stage investments, are struggling to find enough good candidates for their next batches, people familiar with the matter said.

I’d argue that it’s not just the quality of emerging startups that has suffered, but investors’ preferences and mental models of what they think might work in the future.

Take crypto, for example. Most Indian investors are too late to invest in the web3 space. (One of the world’s largest crypto VC funds, blockchain scaling firm Polygon, has very few Indian names on the local exchange’s cap chart.)

Several firms in India, which hired several crypto analysts and associates last year, are now pulling back from the web3 market and have asked employees to focus on different fields, according to people familiar with the matter.

Fintech is another area of ​​concern for investors. India’s central bank was pushed this year A series of drastic changes How fintechs lend to borrowers RBI is also increasing Examination of who will get the license The non-banking financial institutions in the country should be operationalized sent shockwaves through investors.

Many venture capitalists are now chasing opportunities instead of banks. Accel and Quona recently backed Shivalik Small Finance Bank. One of the banks that TechCrunch has actively partnered with in the South Asian market is SBM Bank, which many are considering investing in India. reported earlier this month.

One investor described the trend as a “hedge” against fintech exposure.

Investors’ enthusiasm in the edtech market has seen giants ByJuice, Anacademy and Vedanta fall after schools reopened.

According to market intelligence firm Tracxn, Indian startups raised $24.7 billion this year, down from $37 billion last year. The financial crisis and market dynamics prompted 20,000 layoffs this year.

I spoke to a dozen investors and while most investors are sitting on record amounts of dry powder chasing India, I believe the financial crisis won’t ease until Q3 next year.

As we enter the new year, some investors will reassess their beliefs, and many believe that more down rounds for large startups are on the horizon. But many star unicorn founders don’t want to take a haircut on their valuation because they believe it will drive away some talent. PharmEasy, valued at $5.6 billion, raised new capital this year at a valuation of less than $3 billion, according to two people familiar with the matter. (PharmEasy did not respond to a request for comment.)

“2022 started strong and for a while it seemed that the Indian venture capital market was subject to different gravitational forces than the US and China, which were witnessing a dramatic decline, but this was not to be. The Indian market eventually turned out to be subject to the same macro headwinds as the US and China venture markets,” said an investor at Bloom Ventures. Sajid Bhai said.

Pai said growth-stage deals accounted for the bulk of funding last year and saw a 40-50% drop this year. “The decline was primarily due to growth funds pausing investments, as leverages in the private markets were richer relative to their public counterparts, and the weak unit economics of development stage companies.”


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