TThe startup sector in India is booming, but funding into the sector has slowed down a bit. The reasons for this are many, but it’s mainly due to the fact that investors are
now getting judicious about where they put their money. According to T V Mohandas Pai, the ex-CFO of Infosys, a lot of money flowed into the sector in 2015, but things have
changed now. Pai says that the e-commerce sector has entered a reality check phase. It isn’t hard to see why, especially given that interest rates in the US and Europe have dived. Investor can’t just parachute into India with bags full of money anymore. Now they want to assess performance and ask harder questions of entrepreneurs before decided whether to sink any
funds into the ventures or not. The focus is on profitability, not
just who has the bigger discounts. Valuation of companies is
another key aspect. Morgan Stanley recently marked down
their valuation of Flipkart from 15 billion dollars to 11 billion.
Their share price has come down too.
All this points to the fact that there is an overdependence on
VC funding, which could have been averted if the government
has stepped into the sector a little earlier. Hedge funds and
high net individuals should be allowed to invest in startups.
There is certainly capital available. StartUp India will boost
the startup sector but care needs to be taken to ensure that
this bubble doesn’t burst.
