india’s unicorn startups raising funds with lower valuation

India’s Unicorn Startups Raising Funds With Lower Valuation

Snapdeal owner Jasper Infotech is inching closer to securing a

lifeline from Japan’s SoftBank Corp, its largest shareholder, but

the transaction could drag its valuation to under $3 billion.

#DigitalErra Thought Corner

SoftBank is negotiating to invest $100-150 million in Jasper in

tranches, according to three people familiar with developments. A

fourth person said overall investment could be as high as $300

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million in Jasper, which is grappling with slowing sales and has

been forced to cut jobs.

Jasper and SoftBank have been going back and forth the last two

months on crucial terms of the deal, including on the investment

size and the valuation, these people said, declining to be

identified. Jasper’s board has held talks with SoftBank for raising

funds at a valuation of $1.5-2.5 billion, they said.

Unicorn Startups Facing Valuation Markdown

Just like Snapdeal, India’s taxi aggregator service, Ola too saw a

40% markdown in its valuation by US investment firm Vanguard

Group. The markdown indicates an overall valuation of close to

$3.5 billion. It had hit a peak of $5 billion when the company

raised USD 500 million in November 2015.

Last month, Ola got a new lease of life when it raised $350 million

from existing and new investors that include Softbank, Tiger

Global, Sequoia Capital and Matrix Partners.


Similarly, homegrown e-commerce major Flipkartis in the final

stages of raising its latest round of funding in the range of $800

million to $1 billion from both existing and new set of investors

but this is likely to come at a lower valuation of $7-8 billion.The e-

tailer had last raised funds in July, 2015, to the tune of $700

million at a valuation of $15.2 billion but since then the situation

has witnessed a dramatic change for both the company and

industry.

Markdown- A Reason To Re-Evaluate Business

An entrepreneur can consider markdowns as pointers to

fundamental problems in the business that needs to be solved. It

would push to become more realistic, pragmatic and action

oriented. Markdowns should be seen with similar sentiments in

Indian ecosystem.

We started growing our business much before the right economic

model and market fit was figured out. We also started diversifying

and starting new projects while we still hadn’t perfected the first

or made it profitable. We started building our team and


capabilities for a much larger size of business than what was

required with the present scale,”KunalBahlof Snapdeal wrote in

an email to his employees.

Markdown stories should push entrepreneurs to appreciate the

value of creating sustainable businesses. Rather than running

after raising truckload of money, entrepreneurs should resolve to

become a viable business with few rounds of funds. So, markdown

can essentially be seen in a positive way by entrepreneurs.

Latest talks of funding are also a good sign for e-commerce

industry where Snapdeal and Flipkart would have required these

much needed funds to stave off fierce competition from rivals like

Amazon and the latest entrant Alibaba. Amazon has already

committed $5 billion of investment in the Indian market.

“Regardless of valuation, the fact that money is available is a

good sign,” said Harish HV, partner, India Leadership team, Grant

Thornton India. “It means investors, whether new or existing,

haven’t yet given up on the company and that there is meat left.

It’s a sign of bullishness.”


The founders do not decide valuation as they are not the majority

shareholders. It is usually decided by the board. With the entry of

Alibaba, India’s e-commerce ecosystem will bring the best out of

its major stakeholders amidst tighter budgets and lowered

valuations.


india’s unicorn startups raising funds with lower valuation

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