The Financial Express
Valuation markdowns of unicorn startups continue through 2023, with both Swiggy and Byju’s investors marking down the value of their holdings by 25% and 48%, respectively.
According to TechCrunch, BlackRock has cut Byju’s valuation, India’s most valuable startup, to half — from $22 billion to $11.5 billion. Meanwhile, Invesco has marked down the valuation of Swiggy, India’s most valuable food delivery startup — from $10.7 billion to about $8 billion.
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Other startups, including OYO, Snapdeal, Shopclues, Quikr, Hike and Paytm Mall, have previously experienced valuation cuts as investors adjust their estimates in the face of the weakening global economy. In September last year, Softbank, the largest shareholder in OYO, cut its estimated value for the firm to $2.7 billion in the June quarter from an earlier $3.4 billion after benchmarking it against peers with similar operations. OYO’s valuation had reached $10 billion in a 2019 funding round.
When SoftBank reported mediocre June quarter results last year, the Japanese conglomerate marked down fair valuations of more than 280 of its portfolio firms, which mostly included private startups. At that time, FE reported that this would set a worrying precedent for Indian fund managers and venture capitalists.
The valuation cuts come at a time when the current global economic climate has turned negative due to jittery markets and a funding freeze in the startup ecosystem. India’s startups are no exception, and many have had to scale back operations, cut costs, and even lay off employees to survive.
Byju’s, which provides online education to millions of students in India, recently raised $1 billion in funding from investors, including BlackRock. Swiggy, meanwhile, has diversified its business, launching new services like grocery delivery, and had also secured large funding worth $700 million led by investment firm Invesco in January 2022. Both companies had laid off staff this year, with Swiggy recently firing around 8-10% of its 6,000-strong workforce. Byju’s also laid off 900 employees in February, making it the third round of firing in the last year.
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The impact of the valuation cuts on Byju’s and Swiggy remains to be seen; however, both companies were expected to hit public markets. This could further be delayed due to the ongoing market conditions, as FE reported last week. A prolonged funding winter, coupled with a crash in growth and late-stage deals, may turn out to be a double whammy for unicorns, with investors and analysts warning that many startups could lose their billion-dollar status due to the impending down rounds.
According to a report by private market tracker Venture Intelligence, around seven Indian startups have lost their unicorn status in the last five years. From CY18 to CY22 (to date), around 105 startups had attained the unicorn status in India, but this has now reduced to 84 active unicorns due to various reasons, including seven losing valuations due to investor markdowns and another four getting acquired. Also, around 10 startups were listed in the public markets in the last five years and were excluded from Venture Intelligence’s unicorn tracker list.
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