Reality Check For Start-ups

A bevy of start-ups that rushed to nab sky-high public market valuations of 2021 is facing a reality check in 2022. Still early in the public market learning curve, these start-ups are now focussing on profitable growth while their peers revisit their IPO plans

- By Binu Paul

IN A YEAR of historic dealmaking, as much as $40 billion was raised by Indian start-ups in 2021. A bulk of these investments was pre IPO (initial public offering) rounds going into a bunch of growth-stage start-ups looking to ride on the pandemic-induced digital euphoria in the public markets. Subsequently, food delivery major Zomato became the first internet unicorn to hit the public markets in India, and it created such a buzz around start-up listings that a bevy of high-growth-but unprofitable-internet companies lined up to grab their share of fortunes at the bourses.

The Zomato IPO opened the floodgates. It signalled to the market 'ki apna time aa gaya (Our time has come)'. Its ₹9,375-crore IPO got bids of over ₹2 lakh crore, and it [valuation] almost doubled on the listing date. The company even went for an accelerated listing. At that time, markets were euphoric all across the globe, says Aditya Kondawar, Partner & Vice President of Key Accounts at Complete Circle Capital.

As the global economy reopened in 2021 after the Covid-19 restrictions, the digital economy boomed like never before and friendly monetary policies saw an influx of private capital into start-ups. Along with the growth of investments into start-ups and a less volatile market in 2021, a number of hyper-growth start-ups saw it as an opportunity to nab sky-high public market valuations. Consequently, 2021 marked a record-breaking year for IPOs globally, raising a total of $608 billion across 2,682 IPOS.