Indian Startups Might Face Big Valuation Reset

There is an estimation going around that Indian startups will go through a lot of turmoil and volatility over the next 12 to 18 months. The main possible reason for this could be that the funding crunch will start to affect the new-age tech companies somewhere around the early parts of the next year.

Indian startups need to understand their true value and revise their valuations in line with their counterparts in markets such as the US and Europe.

In the words of Sumer Juneja, the managing partner, India and EMEA, SoftBank Investment Advisors, “I think people got over capitalized in 2021 so that they have the comfort to wait it out. It has happened in the West, it has happened in Europe, it is going to come to India. If you do not realize what your true value is given the new cost of capital, it is a dangerous game to play.” According to him, the tech valuations have been hit hard globally across the private and public markets.

This could only be a temporary situation for the market and things may get better soon, but all startup companies must focus their attention on surviving this period.

According to Venture Intelligence, startups saw funding of USD 2.7 bn in the September quarter as against close to USD 12 bn in the same period last year.

A lot of startups, especially those in the ed-tech sector have fired a significant portion of their staff, to cut costs and extend the runways.

Juneja added that the companies that will be able to fix the cash burns and quickly move in the right direction will be able to survive this period but those who are not focused on unit economics and are not taking tough decisions will go through a rough time.