PROLONGED PURPLE PATCH

Even the recent market correction is working in favour of VC firms like Blume Ventures as capital is pulling out of public markets and flowing into early-stage startups

- Resham Suhail

INDIA WILL HAVE 122 unicorns in the next two to four years, according to the Hurun India Future Unicorns Index 2022 released by Hurum Research Institute. The projection is in line with the recent trends. In just one year, the number of unicorns has increased 65 per cent probably spurred by the pandemic.

As we celebrate India's emergence as the third largest ecosystem for startups after the US and China, we need to pause and review the emergence of unicorns and their impact on the capital market. The questions that naturally arise pertain to valuations and IPOs. However, leading investors feel that the valuation is between two-parties and has nothing to do with public money.

Valuation vs growth

Higher valuations are no longer a sign of healthy startup growth, especially so for a unicorn. However, since a number of unicorns are also some of the largest employers in the Indian market, a decline in valuation and business slowdown can be catastrophic, not just in terms of venture capital (VC) funds but by way of major job losses.

"We are in the middle of the year, Q3 or the second half of the year has just started. The Covid outbreak has been unfortunate but the last couple of years have been very healthy for venture capital. Just one word of caution is, of course, valuations. Indian ecosystem is creating digital tailwinds. What has happened in the ecosystem actually is not unhealthy, because one never wants over-valuations, but rather always wants companies to be rightly valued. I can see a silver lining in that companies get rightly valued and not richly valued," says Sanjay Nath, Founder, Blume Ventures, sharing his viewpoint on the current scenario.