Business

India’s startup boom slows as investor fears over zombie unicorns grow

India’s startup boom slows as investor fears over zombie unicorns grow
Following a robust 2021, the Indian startup boom is found to have slowed down as corporate governance concerns loom among investors who are already facing new uncertainty in worldwide markets.

Indian tech stocks have plummeted significantly lately, with most investors fearing corporate governance that will step up the scrutiny, thus delaying funding rounds and potential stock market debuts over growing uncertainty.

There has been a budding concern that valuations for Indian startups are too high given their bleak revenue outlook. Experts believe that this could potentially end the unprecedented growth that Indian startups saw last year, thus creating zombie unicorns and being irrelevant.

For instance, the valuation of an Indian e-commerce startup Meesho, which intends rival retail giant Amazon, had doubled last year to USD 5 billion, with prominent investors such as Fidelity and Softbank making heavy investments.

However, Meesho is now looking to raise debt and reduce expenses after it failed to raise USD 1 billion in funding, further making investors wary of monthly cash burns as well as stiff competition. To that effect, experts claimed that a funding crunch would eventually lower valuations, thus leaving companies with less cash and job cuts.

The Tiger Global-backed Vedantu has already laid off 200 staff in May with an additional 400 expected to leave, a move that the company claims was based on growth expectations.

For those unaware, it was November 2021 that brought India’s first disappointment when payments major Paytm crashed 27% during its market debut, stimulating criticism of overvaluing the company without prioritizing profits. Paytm has dropped 62% since, while shares of other unicorns such as Nykaa and Zomato are down 43% and 67% respectively despite seeing blockbuster debuts.

According to seasoned analysts, Indian startups had managed to raise USD 5.8 billion in March and April, which is a whopping 15% off from the same time last year. It is also worth mentioning that most tech companies were found to have been severely impacted by the Ukraine conflict and surging interest rates.

Source Credits –

https://www.deccanherald.com/business/business-news/zombie-unicorns-indian-startups-go-from-feast-to-famine-1110443.html

About the author

Rashi Thakkar

Rashi Thakkar

Rashi started her journey in content when she was completing her MBA. Since then, she has helped well-known startups and businesses boost their online presence. Currently Rashi pens downs insightful articles for AlpenHornNews and various other websites, covering an array of sectors from finance and business to technology and healthcare.