Sequoia’s Rajan Anandan predicts Indian unicorns to become profitable in the next 24 months

• ByStartupStory     |    March 18, 2023

According to Rajan Anandan, the Managing Director of Sequoia India, a significant number of Indian unicorns will need to become profitable in the next 18-24 months due to the ongoing liquidity crunch in the private market. During the inaugural session of TieCon 2023 in Delhi, Anandan stated that many unicorns are currently unprofitable, but this is expected to change dramatically within the next two years. He further added that we will be amazed at the level of profitability these companies will achieve.

Rajan Anandan, the Managing Director of Sequoia India, stated that for an IPO in the current market, companies must have single-high digit EBITDA and their stock-based compensation must be reasonable. He added that startups in the late-stage have raised significant amounts of capital in the 2021-2022 period, giving them enough runway to work towards profitability over the next 4-5 years. Anandan also commented that the practice of tech startups offering discounts to attract more customers has come to a halt.

The Covid-19 pandemic accelerated digital adoption in India, resulting in Indian startups raising over $35 billion in venture capital funding in 2021. This is a significant increase from the $14 billion raised in 2019 and $10 billion in 2020. According to Rajan Anandan, the amount of venture capital raised by startups in India is projected to be between $2-2.5 billion in the first quarter of the year.

 

Anandan remarked that the funding for Indian startups is expected to return to a trend line between $10-15 billion this year, a significant growth compared to the under $1 billion raised in 2010. He also noted that the interest rate regime tightening in the previous year led to a drop in funding and a decline in valuations for tech companies. Anandan added that 2021 witnessed exuberance in almost every asset class, resulting in a $10 billion run rate.

Venture Intelligence data showed that Molbio Diagnostics had achieved unicorn status in September 2022 after raising $85 million at a $1.53 billion valuation. According to the technology startup conclave on March 17, early-stage funding activity was back on track, and deeptech and hardtech startups were gaining more interest in venture capital investments. Anandan noted that while valuations in the early-stage space had tempered down from 2021 highs, they were still higher than under a billion dollars in 2010.

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