Focus on fundamentals, ensure robust biz model to survive liquidity withdrawal: Info Edge founder

Startups need to stay focussed on business fundamentals and ensure that their model is robust enough to survive a liquidity withdrawal, Info Edge founder Sanjeev Bikhchandani said on Wednesday.

Addressing AIMA National Management Convention, Bikhchandani noted that several startups are expected to continue looking at the IPO route, reflecting the ''coming of age of the startup ecosystem''.

He said many companies like MobiKwik, Paytm and Policybazaar have filed draft prospectus with market regulator Sebi for a potential listing.

''There are several who have filed and are working towards an IPO, Sebi has to give the final approval and then they will go public if all goes well. Of course, the market has to stay intact but right now, it's not looking like it is going to stop anytime soon. So, there will be enough startups going public,'' he said.

A lot of capital will come into these companies through the IPO route, and therefore, come into India, he added.

Asked if there would be more unicorns (companies with over USD 1 billion in valuation), Bikhchandani said there would be business models that one hasn't heard of and unicorns will emerge from sectors like edtech, fintech and marketplaces.

He pointed out that the US Fed has put in USD 4 trillion of liquidity over the last 12-18 months, which is causing asset price valuation in many places around the world.

''A company may not have changed its fundamentals very much over the last 18 months because it's been COVID, lockdown...its profits may even be lower yet its valuation may be 2x-3x of what it was. A lot of it is liquidity driven,'' he added. He emphasised that the increase in the number of unicorns should be not mistaken as the success of fundamentals.

''...because if the liquidity dries up, startups have to ask themselves that if I don't get my next round (of funding), what will I do? And if you're building a business model that is robust enough to survive a liquidity withdrawal, then you are onto a good thing, even though your valuation may correct temporarily,'' he added.

He said startups should stay focussed on business fundamentals - customer satisfaction, value proposition, innovation, sales, revenue, cost and the consequent profits.

Bikhchandani - who founded Info Edge that runs platforms like Naukri and is an active investor in the startup space - said its principles around investing remain the same after the stellar listing of Zomato in July this year. ''This (Zomato listing) has simply proved what we have known for a long time, that there is value in startups. There's value to be created in startups. Identify the right ones, get in and be patient and be supportive...our strategy has not changed - get in early, write the first institutional cheque, stay for a long time, identify the good ones,'' he said. According to Abhishek Maiti, Director (Competitive Intelligence) at PGA Labs, more than 65 unicorn startups are operating in India as of September 2021.

''As per our recent analysis, sustained strong investment activity will catapult over 35 'Soonicorns' to the Unicorn club within the next 12-18 months," he told PTI. These soonicorns are engaged in sectors like fintech, logistics, edtech, and online gaming. Startups in defined sectors that are valued above USD 200 million have been termed as soonicorns. "Low-interest rates in the US have created excess liquidity in the market, some of which have come to emerging markets such as India. This has led to an abundant supply of capital and dry powder for most venture capitalists and private equity managers,'' Madhur Singhal, Managing Partner and CEO at Praxis Global Alliance, said.

He added that investor optimism has increased, as startups have exhibited a strong ability to take the primary market route via IPOs, giving massive gains for investors.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)