They have focused on the boom in Indian technology startups, which gained a record $ 35 billion in new funds in 2021, but the influx has reversed since then, as investors facing new uncertainty in global markets have high corporate governance concerns. .
“We have not experienced such a slowdown for at least five to six years. It will be brutal,” said Anand Lunia of venture capital India Quotient, which has been investing in more than 70 startups since 2012.
“I expect to see a lot of unicorn zombies. Companies that have become unicorns but have no business models have stopped hiring – they are not dying, but they will become irrelevant.”
Meesho is now trying to raise debt and cut spending after efforts to raise new $ 1 billion have failed, putting investors afraid of its $ 45 million monthly burn and stiff competition, two people familiar with the talks told Reuters.
Meesho did not respond to a request for comment.
But his struggles are among the first signs of a painful future facing many Indian startups.
The slump in Indian technology stocks is worrying, but investors frightened by corporate governance fears are intensifying control during due diligence, which is delaying funding rounds, two venture capital managers said.
And there are concerns that valuations in India are already too high, even though startup business models are driven by discounts and revenue prospects are poor, they added.
This could slow down unprecedented growth and dull the bait of Indian startups.
Eight venture capital managers and startups said there were growing concerns that the financial crisis would lower valuations and leave less money for growth and jobs.
Lunia said he told the companies his company had invested in to ensure they kept sufficient liquidity for at least 18 months, reducing spending and staffing if necessary.
Just last week, BharatPe, an Indian payment startup backed by Sequoia Capital, said it would revise management procedures after an internal review.
Another $ 1 billion-based Vedantu startup, which offers online tutoring courses and fired Tiger Global, fired 200 employees this month as part of a “burden rebalancing” based on growth expectations.
Tiger usually focused on larger Indian startups, but now told bankers he would only consider deals involving those worth less than $ 200 million in an effort to reduce risk, two direct-knowledge managers said.
Tiger did not answer Reuters’ questions.
“Prepare for the worst”
With more than 60,000 startups in India, Prime Minister Narendra Modi called the current decade “techade,” adding: “New unicorns appear every few weeks.”
However, April was the first month in more than a year that India had no new “unicorns,” a term for startups worth more than $ 1 billion.
Indian startups earned $ 5.8 billion in March and April, down 15% from the same period last year, according to Venture Intelligence.
At a recent private dinner in a technology city in South Bengaluru, US-based Insight Partners executives with more than $ 90 billion in assets told Indian founders that they will focus on more companies at an early stage and invest less due to the global technology trend. , said one of the participants.
Insight did not respond to a request for comment.
Many technology companies around the world have suffered in recent weeks as the conflict in Ukraine and rising interest rates hit investor sentiment.
Japan’s SoftBank, India’s largest technology investor with more than $ 14 billion in investments, reported a record loss of $ 26.2 billion in its investment subsidiary Vision Fund.
November brought India the first disappointment with the technology IPO, when the SoftBank-supported Paytm payment application fell 27% on its debut, sparking criticism that the company was overestimating without prioritizing profitability.
Paytm has since fallen another 62%. And while Indian food delivery company Zomato and cosmetics retailer Nykaa had blockbusters, their stakes fell 67% and 43% from their highs.
The three founders of Indian startups have said that their investors recently told them that the days of easy money making are over and they must now show a clear path to profitability.
The message, says one of the founders, is clear: “Prepare for the worst, hope for the best.”