CAPITAL CRUSADERS

As the foreign PEs/VCs that once fuelled India's startup boom are beating a quiet retreat, an ambitious breed of homegrown fund managers is out to reclaim the cap tables, chase global capital with a fresh India story and anchor the country's economic ambitions

- DEEPSEKHAR CHOUDHURY

Not long ago a logistics startup valued at a staggering $878mn was planning to go for a blockbuster initial public offering (IPO). Then things changed.

As the funding winter set in, the company unravelled. However, that isn't something new. Startups falter all the time.

“But what stood out was the nonchalance of the investors. Nobody cared. There was no effort to take stock of the situation,” says a senior executive who is on his way out after a fire sale of the company to a bigger rival.

“The thing is that the biggest shareholders were sitting thousands of miles away. And one portfolio company in India going bust didn't really matter,” he rues.

Many in the startup ecosystem echo his sentiment. The going was good for the better part of a decade as foreign venture investors like SoftBank, Tiger Global and Sequoia Capital pumped in billions of dollars. Startup founders were made to feel like celebrities, valuations skyrocketed overnight and unicorns blossomed.

Capital Crunch

However, once the music of the zero-interest-rate policy era stopped, these funds have quietly stepped back. While Sequoia shut shop in India after a string of governance lapses at its portfolio startups, Tiger Global and SoftBank retreated as a response to changing macros. The same goes for Alpha Wave which has turned its focus to mature late-stage businesses rather than startups in India.

“When you have a foreign PE [private equity] or VC [venture capital], they’re obviously subject to a fairly high degree of volatility over time. There could be sovereign risk, currency risk, political risk and geopolitical risk. That’s why it behoves every country to develop a local pool of private capital that won’t fly away in the face of volatility,” says Sanjay Nayar, president of industry body Assocham and a veteran private-equity investor.