VCs' Startup Exit Momentum Slows Amid Market Volatility

VENTURE CAPITAL (VC) FIRMS' startup exit momentum has moderated in recent months, even though private equity (PE) players' stake sales have been consistent, aided by large strategic sales.

- S SHANTHI

"The softening is less about fundamentals and more about market conditions. Volatility in public markets, particularly mid- and small-cap segments, has limited IPO windows," Rajat Tandon, president of Indian Venture and Alternate Capital Association (IVCA), told FE. According to a recent EY-IVCA report, startup activity in India continues to rise gradually, but exit momentum has softened.

Tandon added that valuation expectations between buyers and sellers are still in a state of flux, which is stretching deal closures. Alongside public market volatility driven by geopolitical changes, another factor slowing the VC exit momentum is the prevalence of past down rounds.

Data from Pitchbook shows that nearly 20% of large VC deals between January 2023 and April 2024 witnessed steep valuation reductions, the highest since 2015. Startups such as PharmEasy, Udaan, Cred, and Byju's were among those raising funds at significantly lowered valuations. These down rounds have compelled founders to focus on profitability and recalibrate valuations before considering listing.