The current scenario in the Indian startup ecosystem isn't a winter but rather a return to a "new normal", according to Peak XV Partners' Rajan Anandan.
The veteran venture capitalist, at a Redseer event on Thursday, called 2021 a "black swan event".
"Funding in 2021, and even the first half of 2022, was exuberant. In 2019, the entire funding amount stood at $14 billion in India. In 2020, it was $10 billion. In 2021, that jumped to $40 billion. As of June 2023, it's trending between $10 and $15 billion, which is back to 2019 levels," said Anandan, managing director at Peak XV Partners (formerly Sequoia Capital India & Southeast Asia). "We're back to a trendline, and that trendline is positive."
Anandan is responsible for scaling Sequoia Capital's flagship Surge programme, which is focused on early-stage startups in India and Southeast Asia. The number of investments in the space is growing, he said. "The early investments, which means the seed to Series A market is active."
The ecosystem is going through a cycle, he said. "But what we're seeing today is like the new normal, certainly than 2021 ... Growth will come back for high quality companies and those that are fairly priced."
Here are the checklist according to Anandan for taking a startup public in India.
Ebitda should be around 8-10%
Don’t need to be doubling revenue, growing at 30-40% year-on-year
Demonstrate strong return on capital employed
Have a meaningful scale of business
Founders would love for 2021 to come back, he said, but this is the new normal. "It’s a good time to start, there’s very little noise and 15 other competitors aren’t getting funded easily."
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