Startups hope for better year, early-stage ones expect higher valuations: Report

Indian startups are hoping for a better year as the majority of them expect higher valuations from investors amid increased focus on profitability and sustainable operations, a recent report stated.

The latest edition of the India Startup Outlook Report by debt firm InnoVen Capital said a whopping 85 per cent, mostly early-stage founders, of the 100 VC/PE-backed startup leaders surveyed in the report stated that they expect higher valuations in their next round of funding compared to the last round.

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Out of these, around 44 per cent expect ‘significantly higher’ valuations in their coming round while 20 per cent of growth/late-stage founders expect a flat to a down round.

Notably in 2023, approx nine Indian unicorns lost 49 per cent value on average, according to a report by early-stage venture capital firm Orios Venture Partners.

Some of the big names were ed-tech startup Byju’s, with a whopping 86 per cent markdown in its valuation from USD 22 billion, while others in the list were Ola, Meesho, Pine Labs, Swiggy, PharmEasy, Eruditus, OYO, and Gupshup.

Speaking on the development, Ashish Sharma, Managing Partner, InnoVen Capital, said, ”while public markets, particularly tech, have seen a strong momentum (NASDAQ up 40+per cent), there will be downward pressure on late-stage private valuations. On the positive side, we are now seeing a higher appreciation for sustainable business models, a laser focus on unit economics/profitability and more realistic valuation expectations”.

InnoVen Capital report highlighted that 62 per cent of the founders have a higher bias on profitability versus growth this year, up from 55 per cent in 2023 and 17 per cent in 2022. In fact, 59 per cent expect to turn profitable in one to two years.

Moreover, 78 per cent said they are optimistic about the fundraising environment in 2024.

The report further mentioned that hiring good talent followed by fundraising and profitability were the top three challenges for startups.

A total 48 per cent of respondents anticipate some level of disruption to their business, due to rapid developments or use cases in AI capabilities with fintech and enterprise/SaaS founders identified the highest impact of AI on their business models.