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Grab, Asia's largest ride-hailing and food delivery company went public seeking funds. This is not the only unicorn company that has given up in need of funds. Many Unicorn companies including Zomato, Freshworks, and Paytm are treading this path. Grab and Sea Limited both are down by 65%, Zomato by 49%, and Paytm by 53%. While Zomato and Paytm are listed in India, Freshworks a NASDAQ-listed software house is down by 40%. Apparently, these stocks have been hit by growing inflation and rising interest rates, inflationary conditions which call for quick loan expansion. startups depend on a strict expense management system and there is no room for uncertainty. And these are only a few of the many problems plaguing Indian tech startups. One among them is Indian VCs shying away from investing in start-ups.
Razorpay's acquisition by Ezetap, has taken more than the estimated time just because of market volatility. In recent months, except for Dailyhunt's $805 million funding round and Byju's $800 million funding, the market has not seen any significant deals. Meesho, an e-commerce player was planning to raise at least $500 valuation, at an $8 billion valuation, 60% higher than the previous one. Experts are of opinion that a new round of investments may not happen in near future.
The VC funding scenario has taken a sharp U-turn in recent months. While the Indian government announced setting up a VC funding committee to regulate the flood of VC funds, it tanked drastically. Thanks to the Ukraine-Russia war, things have escalated, for the Indian start-ups to seek financial support. In the period between April 1 to May 16, 2022, there were only nine funding rounds each garnering more than $100 million, adding up to $2 billion, while the period between January and March saw around 27 rounds.
Therefore, isn't there any hope left for Indian start-ups to hold on to the exuberance and the positivity they had in the beginning? Amit Anand, co-founder of Singapore-based Venture Capital fund Jungle Ventures said in an interview with CNBC, that Southeast Asia's E-Commerce ecosystem is still at a "very, very nascent stage. We've not even scratched the surface of that." Though this positivity cannot be rubbed on to the tech sector, definitely it signals a possibility. Very few investors have the wisdom to understand the potential of business ideas and the path they would take in the coming years and there is no better time than a start-up winter for these Marquee investors to watch men separate from boys. A global VC company, Sequoia India and Sequoia Southeast Asia has recently announced the closing of a $2.85 Bn fund, of which $2 Bn is for seed and growth-stage ventures in India. Currently, it has more than 400 companies under its umbrella of which around 15 have gone public in the last two years.
On the talent front, new outfits are being set up by executives having experience working with marquee VCs abroad. They say the idea is to control the funding from within the country instead of handing it over to people abroad. On the other hand, investors are ready to dish out smaller funds and follow up with operations to ensure returns. "We are a focused fund and we know the space we are in very well. We build a network of partners and vendors who can support these entrepreneurs," says Kanwaljit Singh of Fireside in an interview with Economic Times. As of now, only hurdles like Government regulations and limitations with Payment gateways are the hurdles in the otherwise fairly optimistic marquee investment capital market.
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