VC investors anticipate a flurry of IPOs by Indian start-ups: Survey

Nearly two-thirds (65 per cent) of investors believe that there will be a spate of initial public offerings (IPOs) by Indian startups in 2021-22 across stock exchanges, according to a survey by venture capital fund 100X.VC. The ‘India Sentiment Outlook Survey’ said 19 per cent of them also held the opposing view while 16 per cent were unsure.

The survey is based on a sample size of 275 founders from diverse sectors and 77 investors who primarily engaged in early-stage ventures.

V-shaped (44 per cent) and U-shaped (42 per cent) recovery were observed by most of the stakeholders in the venture capital industry. 11 per cent also saw a K-shaped recovery and 3 per cent had an L-shaped recovery. In terms of unicorns, 40 per cent of the investors felt that there would be 75-100 unicorns in India by 2025. 35 per cent of them believed that the figure will cross the 100-mark. 25 per cent of them were unsure.

“Over the past year, we have seen the Indian startup segment giving a strong pushback to the Covid-19-induced market landscape,” said Sanjay Mehta, founder and partner, 100X.VC. “We believe that the optimistic outlook of both startups and investors, as also seen in the survey results, is an encouraging factor. It will give rise to more innovation and creativity to help the market and our nation at large.”

As many as 47 per cent of startup founders said that they were experiencing growth at present while another 42 per cent expected the same in the next 6 months, according to a study by venture capital fund 100X.VC. 10 per cent of founders are also expecting it after 6 months. In the past couple of months, several growth opportunities have emerged across sectors, especially across tier 1 and tier 2 cities. This is leading to deeper digital penetration and high user adoption.

At least 24 per cent of startup founders believed that video conferencing with customers is here to stay permanently. The vast majority of them (55 per cent), however, expected a shift for the coming 6 months. 21 per cent of the respondents also said that it will be there for at least 12 months.

Nearly two-thirds of the survey participants (65 per cent) expected seed-stage funding by angel investors to increase in 2021. 20 per cent of them said the opposite would be the case. 15 per cent also claimed that there would be no change in the current pattern. When asked about micro-VC’s sentiments, a similar trend was observed. However, more people believed that there would be fewer investments against those who expected no change.

Early-stage ventures planning to raise funds in the next 6 months stood at 88 per cent. It came as a pleasant surprise that over 40 per cent of startups have no change in their fundraising plans. However, 23 per cent of them delayed their fundraising initiatives while 12 per cent decreased their round sizes. 25 per cent were aimed to ask for more capital than before.

With the non-linear demand curve that the market is following at present, more businesses are inclined to expand into newer markets (33 per cent). They are also inclined to hire aggressively (29 per cent) and increase their product portfolio (21 per cent). Other key focus areas also included increasing runway and conserving cash.

Of the startup founders, 28 per cent revealed that their valuations have increased while 41 per cent of them expected it to increase in the near term. 19 per cent reported no change while those who felt it has decreased or is about to decrease stood at 6 per cent each.

Founders were also asked about how much time it takes to close a deal and receive the capital after the term sheet. A majority (almost 69 per cent) claimed that it takes anything between 1-4 months. 11 per cent of the respondents said less than a month, whereas, 20 per cent also said it took more than 4 months.

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