Highlighting the resurgence in valuations among Indian venture-backed public firms, Arjun Sethi, co-founder of Tribe Capital, a Silicon Valley venture capital firm, cautioned about the marginal portion of global VC investments finding its way into India.
A recent report from Tribe Capital indicates that the collective market capitalization of these firms, encompassing big names like Zomato, Paytm, Justdial, Five Star Business Finance, and Nazara Technologies, has exceeded the $50 billion mark.
In a LinkedIn post, Sethi noted, "As we've tracked and delved deeper into the Indian VC landscape, our indicator 'Total Market Capitalization of VC-Backed Companies Public in India' has crossed $50B."
Expressing concern about the static global VC interest in India, Sethi highlighted the dwindling share of global VC investments in the country. "In 2019, when the market capitalization of VC-backed Indian public companies stood at a mere $4.9 billion, the global VC investment share in India was 5.5%. Fast forward to 2023, this share has shrunk to 3.3%," he pointed out.
The combined market capitalization of these companies had surged beyond $60 billion in 2021 amidst a bullish phase in both public and private investment arenas. However, this trend saw a correction as central banks globally tightened interest rates, prompting investors to exercise caution.
Sethi's remarks coincide with recent decisions within the investment landscape. Impact investment firm Omidyar Network announced a halt in fresh investments in India, and Sequoia Capital restructured its India and Southeast Asia partnerships, rebranding as Peak XV Partners.
Reflecting on Tribe Capital's investments in Indian ventures like Shiprocket, Khatabook, and Blackbuck, Sethi acknowledged skepticism regarding the Indian market's exit opportunities. "Back then, public market valuations from VC investments in India were under $5 billion. But similar doubts existed about China before the success stories of companies like Tencent emerged," he explained.
Sethi referenced 20 venture-backed companies that went public, including names like Zomato, Nykaa, Paytm, and Delhivery, to emphasize the market's growth.
While Indian public markets, exemplified by Sensex's milestone crossing of 70,000 points, have been thriving, global investors have been opting for exits from select venture-backed entities. SoftBank notably divested its stakes in Zomato, Delhivery, PB Fintech, and Paytm over recent months.
Similarly, reports surfaced about TPG, Matrix Partners, and Peak XV Partners aiming to divest their shares in Five Star Business Finance, reflecting a trend of global investors relinquishing positions.
However, the private investment landscape in India has seen a slowdown. Reports indicate a steep decline in funding for startups in 2023, marking a seven-year low since 2017, amid challenging global economic conditions due to geopolitical tensions.
This "funding winter" has witnessed a sharp drop in equity investments received by new-age ventures, indicating a challenging period for the ecosystem.
