Dispatch from Bangalore, finish of 2022 version


In 2014, Prayank Swaroop made a pitch to the storied enterprise agency Accel, the place he labored as an affiliate, about future marketplaces to guage.

At the time, Flipkart and Snapdeal have been the one two e-commerce startups in India that had proven a semblance of scale. Swaroop made a case that as extra Indians come on-line, alternatives will emerge in meals supply, automotive aftermarket, warehousing, highway freight, and social commerce amongst many different market areas.

Swaroop, now a companion on the agency, turned out to be proper. Urban Company, which operates within the home assist sector, is valued at over $2 billion; Zomato and Swiggy are delivering meals to hundreds of thousands of shoppers every month; Spinny and Cars24 are promoting tons of of 1000’s of automobiles every quarter; social commerce startups DealShare is valued at over $2 billion and Meesho simply wanting $5 billion.

Hundreds of hundreds of thousands of Indians have come on-line prior to now decade and over 100 million are making on-line transactions and purchases every month. India, which has doubled its pool of unicorns to over 100 prior to now two years, has attracted over $75 billion in investments from tech giants Google, Meta and Amazon and enterprise funds Sequoia, Tiger Global, DelicateBank, Alpha Wave, Lightspeed and Accel prior to now 5 years.

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

But because the native startup ecosystem closes one in every of its hardest years, it’s now gazing one other query that it has lengthy been capable of brush off as benign: exits.

About half a dozen shopper tech Indian startups have gone public prior to now 12 months and a half and all of them are performing poorly on the native inventory exchanges. Paytm is down 60% this 12 months, Zomato 58%, Nykaa 56%, Policy Bazaar 52%, and Delhivery 38%.

This is regardless of the Indian shares outperforming the S&P 500 Index and China’s CSI 300 this 12 months. India’s Sensex — the native inventory benchmark — stays up 3.4% this 12 months, in comparison with fall of 19.75% in S&P 500 and 21% in China’s CSI 300.

As the market modified its route this 12 months, many Indian startups together with MobiKwik and Snapdeal have delayed their itemizing plans. Oyo, which deliberate to listing in January subsequent 12 months, is unlikely to maneuver ahead with that plan, based on two individuals acquainted with the matter.

Flipkart, valued at $37.6 billion and majority owned by Walmart, doesn’t plan to listing till at the very least 2024, based on an individual acquainted with the matter. Byju’s, India’s most respected startup, doesn’t plan to listing in 2023 and is as an alternative shifting forward with a plan to listing one in every of its subsidiaries, Aakash, subsequent 12 months, Thealike beforehand reported.

Those trying to push forward with their plans to go public will face one other impediment: Several world public funds together with Invesco that finance the pre-IPO rounds are retreating from the Indian market after getting hammered in China and different rising markets this 12 months, based on individuals acquainted with the matter.

LPs have lengthy expressed issues about India not delivering exits and the early-attempts prior to now two years from the business appear nothing to put in writing residence about.

Indian enterprise funds have traditionally as an alternative gotten most exits by the way in which of mergers and acquisitions. But even these exits are getting more durable to come back by.

An analyst at one of many prime enterprise funds in India mentioned that for a very long time VCs who backed early-stage SaaS startups at sub-$25 million valuation stood an opportunity of constructing good exits. But as we now have seen in some instances in latest months, the exit itself values the startup at sub-$25 million, making it tough for SaaS buyers to show a revenue.


On a latest night at a personal gathering of some dozen business figures at a 5 star resort in Bengaluru, many buyers have been exchanging notes in regards to the offers that they had been evaluating. The companions complained that the standard of startups has dropped whilst the quantity of pitches has surged.

Two outstanding enterprise funds that run well-regarded accelerators or cohort programmes of early stage investments are struggling to search out sufficient good candidates for his or her subsequent batches, individuals acquainted with the matter mentioned.

I’ll argue that it’s not simply that the standard of startups which are rising has taken successful, it’s additionally buyers’ urge for food and psychological fashions for what they suppose may go sooner or later.

Take crypto, as an example. The overwhelming majority of Indian buyers have been too late to make investments within the web3 house. (You will discover only a few Indian names within the cap tables of native exchanges CoinSwitch Kuber and CoinDCX and till not too long ago, blockchain scaling agency Polygon, as a outstanding VC at one of many world’s largest crypto VC funds not too long ago pointed to me.)

Now many corporations in India that had employed a variety of crypto analysts and associates final 12 months are retreating from the web3 market and have requested workers to deal with totally different sectors, based on individuals acquainted with the matter.

Fintech is one other space of concern for buyers. India’s central financial institution this 12 months pushed a collection of stringent adjustments to how fintechs lend to debtors. The Reserve Bank of India can be more and more scrutinizing who gets the license to function non-banking monetary firms within the nation in strikes that has despatched a shockwave to buyers, making them severely nervous about how a lot conviction and underwriting believes they’ve for the sector.

Many enterprise buyers at the moment are more and more chasing alternatives to again banks as an alternative. Accel and Quona not too long ago backed Shivalik Small Finance Bank. Many are deliberating an funding in SMB Bank India, one of many banks that has aggressively partnered with fintechs within the South Asian market, Thealike reported earlier this month.

Investors’ enthusiasm within the edtech market has additionally cooled off after re-opening of colleges toppled the giants Byju’s, Unacademy and Vedantu.

Indian startups raised $24.7 billion this 12 months, down from $37 billion final 12 months, based on market intelligence agency Tracxn. The funding crunch and the market dynamics prompted startups to let go of as many as 20,000 workers this 12 months.

Over a dozen buyers I spoke with consider that the funding crunch received’t go away till at the very least Q3 of subsequent 12 months whilst most buyers chasing India are sitting on file quantities of dry powder.

As we enter the brand new 12 months, some buyers will probably be re-evaluating their convictions and plenty of are satisfied that a number of down rounds for main startups are on the horizon. Meesho rejected the concept of elevating cash at a decrease valuation earlier this 12 months. PharmEasy, valued at $5.6 billion, was provided new capital at a decrease than $3 billion valuation this 12 months, based on two individuals acquainted with the matter. (PharmEasy didn’t reply to a request for remark.)

“2022 started off strongly, and it seemed for a while that the Indian venture funding market would be subject to different gravitational forces than U.S. and China, which were seeing dramatic declines, but this was not to be. The Indian market eventually turned out to be subject to the same macro headwinds as the U.S. and China venture market,” mentioned Sajith Pai, an investor at Blume Ventures.

“Much of the decline was led by the growth segment cratering. Depending on which venture funding database you track, the total size of venture funding in 2021 was anywhere from $37b to $41b. Growth funding ranged from $32-35b, anywhere from 85 to 90%. This saw anywhere from a 40-50% drop over the previous year. The decline was led primarily by growth funds pausing investments because the multiples in private markets were rich compared to their public peers, and the weak unit economics of the growth stage companies.”


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