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The industry benchmarking is no longer the case, the Internet investment aura has been picked, and the listing of Dongfeng has turned to a start-up in India with a profitable model.

The author of this article Mihir Dalal, original title: India’s unicorns find exit doors blocked

Point Tip:

• The hot spot of the past is no longer, the IPO winds have turned: Uber IPO lost on the first day, WeWork valuation has been swayed, the open market refused to pay for the expansion of market share, and companies with real profit models will go Hot

• Closed a window and there is a door: the exit mechanism is not limited to IPO, the old stocks still account for the bulk of the market, and the exit size is expected to exceed $4 billion this year

After cleverly packaging the sublease office space, startups that are in the fast-growing period WeWork is expected to be available in the coming months. Earlier this month, several media reported that WeWork’s initial public offering (IPO) valuation may be less than half of the company’s valuation of $47 billion when it was raised in January 2019. Last Friday, Reuters reported that WeWork is considering reducing its valuation to $10 billion, about one-fifth of its current valuation. Concerns about whether the company’s initial public offering (IPO) can proceed as scheduled are also increasing.

In May of this year, Uber Technologies Inc., one of the world’s most valued Internet startups, was listed in the US, one of the most anticipated IPOs in recent years. But the market leader of this transportation trip soon suffered from Waterloo: On May 10, when Uber went public on the first day of trading, its share price fell by nearly 8%. Then it plunged 22%. After Uber’s small rival in the US, Lyft Inc., went public in March, its share price also fell.

These events, especially Uber’s listing, may mark a turning point in the startup’s ecology – a wave of venture capital around the world is receding. Some people think that the era of high valuation, even if the company is currently in a state of loss, can be financed. This may affect many Indian unicorn companies, which have adopted a business strategy of trading at a high rate of growth at all costs and hope to be listed in the next few years.

Since Flipkart set a record for acquisitions in 2018, Indian investors have been speculating who will be the next high-priced Indian startup. However, as far as the current situation is concerned, no matter whether it is acquired or publicly listed, there is almost no indication that which Indian unicorn company can be short.Successfully withdrawn during the period. Investors have pushed up the valuations of several Indian Internet companies, hoping that the open market can also ignore the loss situation and see a high price in the market share they win. But when Uber experienced a disappointing initial public offering and WeWork’s valuation plummeted, it could be a fantasy.

Burning money wars evaporation high valuation

In May 2018, Walmart agreed to acquire a 77% stake in Flipkart, which would value the retail e-commerce at $21 billion. This is the first time an Indian startup has been acquired for more than $1 billion, and it has dwarfed the record of the largest company in the past – in April 2015, Indian e-commerce Snapdeal took the mobile payment company Freecharge for $400 million.

In the past 20 months, the number of unicorn companies has almost doubled, reflecting investor interest in fast-growing large Internet companies. But today, India’s highly valued unicorn companies such as Paytm, Oyo, Ola, Byju’s, Swiggy and Zomato are facing long-term challenges and seem unlikely to go public. In addition, the high valuation of these companies also means that there are very few investors with sufficient purchasing power.

Because rivals Google Pay and Walmart’s PhonePe are pushing hundreds of millions of dollars to increase their share of mobile payments, Paytm can only find ways to maintain its market leadership, and the profit and loss situation is not good. For the fiscal year ended March 31, Paytm’s parent company, One97 Communications Ltd, lost A$42.272 billion (US$591 million), more than the previous year’s Rs.16,434 million (US$225 million). The company’s revenue in FY 2019 only increased by 8.2%, totaling 35.967 billion Indian rupees (about 502 million US dollars). The company’s e-commerce business Paytm Mall also failed to shake the dominance of Flipkart and Amazon. Although Paytm Mall successfully raised $150 million from eBay in July, it is still a marginal player in the e-commerce market.

The takeaway startups Swiggy and Zomato are caught in a costly market battle without any signs of easing, and the losses suffered by the two companies have increased significantly. The growth rate of the taxi business at the core of Ola has fallen sharply, but other businesses such as take-out and payment have not yet started. Oyo has set off an unprecedented expansion boom around the world, but in the next few years, the company has to look around for huge investments. Some critics also pointed out that Oyo is from the essenceIt is a hotel, not a so-called Internet company, whose valuation is usually higher than that of a traditional counterpart. In any case, even in older markets such as India, Oyo has yet to prove that its business model can be profitable.

The only hope in the Internet startup ecosystem is Flipkart. When Walmart acquired Flipkart, it was announced that Flipkart would be available when the time was right. But considering that Flipkart will continue to invest billions of dollars to expand its business, investors believe that the company will be difficult to achieve profitability in the near future. At the same time, Flipkart is also facing the threat of Reliance Industries Ltd’s e-commerce business, and the road to listing is not easy.

“Consumer Internet Unicorn still hasn’t achieved good unit economics, so in the next two or three years, any company is unlikely to be listed,” said Anand Lunia, founding partner of venture capital company India Quotient. Said.

Uber “Rolling”, 殃 and the Internet

In addition to its own problems, there are other factors that have led to a bleak outlook for Indian Internet startups. The poor performance of Uber’s first day of listing has raised questions from global investors. Is this business model that grows at all costs wise? Over the past decade, Uber has been the source of the financing boom, leading the way for startups to remain private rather than seek listings. But now, the much-anticipated initial public offerings have performed poorly, and the pattern of losing money in exchange for high growth may not be attractive in the next few years.

” Uber’s IPO and WeWork’s upcoming IPO show that there is a big gap between private and open market valuations, especially for high-growth consumer Internet companies, maintaining growth means the company will consume a lot Investment,” said Ashish Sharma, CEO of InnoVen Capital India, a venture lending fund. “Unlike a few years ago, we now have public market valuations of many large technology companies in the areas of online car and take-away, as this will in turn affect the trend of private equity valuations in these areas. It’s still too early to make a conclusion for benchmarking companies such as Uber, and their future performance may surprise investors, but one thing is clear – open market investors have limited interest in companies that consume large amounts of cash. Because their profit path is not clear.”

SoftBank is the largest investor in Uber and WeWork. The two companies were seen as the first results of SoftBank’s massive investment in mature technology startups. Through its billion-dollar fund Vision FundSoftBank has invested nearly $20 billion in Uber and WeWork. The Japanese investment company announced in July that it had set up another 100 billion fund.

SoftBank is also a major investor in three highly valued Indian unicorn companies, Paytm, Oyo and Ola. For now, SoftBank’s desire to invest in India remains as strong as ever. However, if more companies invested by SoftBank are struggling after going public, the Japanese investment company may have to re-examine the current positive strategy. “SoftBank has been a major boost to the high valuation of consumer Internet companies,” said an anonymous local venture capitalist. “If the companies they invest in cannot be successfully exited, it will have a series of knock-on effects on the entire consumer Internet sector.”

The listing of Dongfeng has turned to

But whether the consumer Internet company is welcoming the winter, Freshworks (formerly Freshdesk) may be the best choice when investing in a large startup in India. Freshworks is preparing to go public in the US before the end of this year. Last year, Freshworks also hired former AppDynamics executive Suresh Seshadri (note: AppDynamics is a US software startup that was acquired by Cisco for $3.7 billion when it comes to market in January 2017). According to two people familiar with the matter, in order to prepare for the listing, Freshworks has begun recruiting other junior managers. The company may invite investment banks to conduct initial public offerings before the end of the year.

In August 2018, Freshworks received a $1 billion recent round of financing from Sequoia Capital, Accel Partners and CapitalG, which was valued at $1.5 billion. FreshWorks has not disclosed its financial position, but it is said to have a profitable business model, and software product companies usually require less external funding. A spokesperson for FreshWorks said: “We focus on driving growth in new markets and strengthening existing market positions. We will consider all investment options, including listings, if it is suitable for the current company.”

In addition to FreshWorks, another logistics unicorn company, Delhivery, has also considered listing. But after financing $350 million from SoftBank, the company shelved its listing plan.

Investors say that in addition to the unicorn startups, small companies that have raised venture capital and whose business is not limited to the Internet may get better listing opportunities in the near future.

“In terms of listings, in addition to Internet startups, you will also see companies that have venture capital, financial services or consumer sectors, and they have a better chance of going public,” Niren, general manager of Norwest Venture Partners India. Shah said. “These companies are not as big as the Internet unicorns, but they have real profits, and if a company wants to go public, it must have this.”

Even in Internet companies, small startups with more stable business models seem to be better suited to go public. In June of this year, IndiaMART InterMESH Ltd, a service platform for small and medium-sized enterprises, was successfully listed on the National Stock Exchange of India.

Exit mechanism is not limited to IPO

To be sure, not listing does not mean that investors’ investment liquidity is getting worse. Before Flipkart was acquired, the exit mechanism of startups has grown. Most of the transactions through the old stocks, worth hundreds of billions of Indian rupees, can help VCs return cash to LP and raise new funds. According to data from Venture Intelligence, venture capitalists earned about $2.8 billion in 2017, up from $1.8 billion in 2016. This year’s exit may exceed $4 billion, and half of this size has already been achieved through Oyo. In July, Oyo CEO Ritesh Agarwal announced that he would invest $2 billion in the company by repurchasing shares to early company investors Lightspeed Venture Partners and Sequoia India.

A deal as large as Oyo is not common, and old stock trading will continue to be a major source of investor liquidity. In addition, as large companies such as Reliance, Naspers and Walmart attempt to expand their territory, SME acquisitions may increase.

” Private equity and other late-stage investors have a strong demand for consumer Internet startups,” said Vinod Murali, managing partner of venture debt fund Alteria Capital. “They will buy stocks from early investors in the unicorn and other fast-growing companies. For the foreseeable future, most exit methods will be implemented this way, not listings or acquisitions.”

Top Tips for Top Ten Unicorn Companies in India

• Paytm is facing fierce competition from companies like Google, PhonePe, Amazon Pay, etc. in the short termListing is unlikely.

• Oyo is in a period of active expansion and will need to invest huge sums of money in the coming years.

• Byju’s is entering the international market and needs a lot of investment in the short term.

• Ola’s core network car business growth rate is declining, and other business lines are still in the development stage.

• Swiggy is engaged in a fierce market battle with Zomato for a loss increase.

• Zomato has suffered a lot from marketing, discounts and employee salaries.

• Paytm Mall is at the edge of the market dominated by Flipkart and Amazon.

• Delhivery put aside the listing plan after gaining investment from SoftBank earlier this year.

• PolicyBazzar changed its listing plan after focusing on SoftBank’s investment and focused on faster expansion.

• Freshworks is considered by investors to be the most likely startup to be successful.

Finance and valuation of the top ten unicorn companies in India ($100 million)

Edit | Guo Chen@出海

Picture | Vision China