Having unicorns is just the beginning. It is not the end. The company has to become sustainable and show growth. The primary driver is always the price to equity ratio, says Nimesh Kampani, President, Letsventure Plus. In the Indian market, six unicorns came up over the last four days. Is this just a coincidence or is it an indication of what lies ahead?Already 10 unicorns are coming up in India this year, compared to the entire last year when we had 11 unicorns. The biggest factor is obviously the entire behaviour change caused by the pandemic. A lot of businesses and consumers have moved on to the digital platform. That is where we are seeing the start-ups growing at a very fast pace. These are not only unicorns but the overall funding is also pretty robust in the first quarter, where we had 2.7 million funding rounds happening across the spectrum. For me, only the top 43-45 companies are not unicorns. I am closely watching the next 650 companies where there is a huge opportunity for having unicorns. Let us look at the breakup of the fundraising. Why is it still restricted to SAAS or tech enabling services? Why are we not seeing anything outside that so far?When the company is getting funded and it becomes a unicorn, it is seen as an opportunity. Also, the opportunity in India is vast and some of the large unicorns that are funded are yet to go pan India. They are largely focussed on urban areas. Take a food delivery app. Some of the fintechs have gone beyond that. Bharat has gone to edtech. The opportunity that India offers is huge and the difference here is that in public markets, you look at the next one year and see how the companies are going to perform. It is already a matured company. In the case of start-ups, we are looking at a 3-5-year horizon and the opportunity set that the company is going to deliver. If I were to just do that primary comparison, when it becomes a unicorn, it is a validation that the product market fit is right, execution has been pretty good and that is why this company has the potential to grow much higher much faster and become a sustainable business. And then profitability comes in as we speak. A lot of these companies are loss-making and Sebi rules currently make it quite challenging for them to list on the bourses. Are there incentives to ensure that these companies look to Indian bourses when they decide to list?If you look at the investor side of things,the evolution of the investor in India in private markets is still at a pretty nascent stage. It has progressed from what it was a few years back when there was only LP investment as now large family offices, ultra HNIs are moving towards direct investment. But the US is a very mature market when it comes to investment in start-ups. There is a lot of motivation, a lot of thinking that a founder goes through as he would get full value if they were to list outside India. There are a lot of incentives available. The investor base is very different. Some of the incentives are those that work in their favour but I think India will get there. The inventory environment will start becoming conducive and with the setting up of the IGP, many of these companies will like to come on the main board. So, you will see a mix of both. But as we stand today, a large part of them are moving towards a SPAC route or US listing primarily because the market depth is very huge there. The investor base is very huge as well as the balance sheets. They would understand the long-term theory. It is not a short term thinking that goes on when one invests in a startup. It is more of a 3-5-year journey. Having said that, having unicorns is just the beginning. If I were to draw a corollary, it is like the second session of the first day of the test match. It is not the end. That is where the real journey begins. The company has to become sustainable, show growth and if you look at the publicly distressed companies, the primary driver is always price to equity ratio. A lot of traditional investors shy away from loss-making companies. But that mindset is changing but we are still a little bit away and would want a lot of domestic capital participating in this because the next decade is for India. When it comes to private markets, a large amount of wealth creation will happen through IPOs or SPAC listing or any of those modes that are available out there. Personally I would want a lot more domestic capital to participate in that. In terms of some of the unicorns that we have, there is Groww. The stock market has been heating up and talking about competition from the likes of Zerodha, Paytm Money, INDMoney. What kind of opportunity or scale do you see in that segment?Tech and financial services play is always one of the most difficult businesses to be in. The first mover advantage is always there. The person who comes in first really captures a lot of the market, when they are B2C. It becomes more and more difficult to acquire customers as we go forward and that is why the comparison between Zerodha and Groww is not fair because Zerodha has the first mover advantage. It captured the market and is the largest player today. But having said that. India still has space for a few more. So the capital will help Groww to acquire more customers and that will help them to grow sustainably as we go forward. But yes, the fintech space has space for three to five players at the top. Global investment houses have been perhaps driving some of this momentum and this week Tiger invested quite heavily in some of the names that have been added to the unicorn list. What do you make of that? India is the third largest in the world in terms of the startup ecosystem. But we have just around 43 unicorns. The total number of unicorns is around 750 and the bulk of them are from the US and China. So we have a long way to go. The opportunity is huge, maybe just 5% of the ecosystem, In the next few years, that number will inch up. Secondly, Tiger has a very good strategy on funding the leaders in each of the niche spaces they are functioning in. Some of these names would be common across the board. So, they are betting on the future. They are betting on the India story. Most of these companies have just touched the tip of the iceberg. Quite a few of them would deliver a lot better. In the Indian market, six unicorns came up over the last four days. In the US, they had two unicorns every day in the last quarter. they had two unicorns every day. So it is a very normal thing for them. For us it is something that we are talking about a lot because we have never seen or heard before about the kind of liquidity that is there. Globally, venture funds are sitting on around $4 trillion and that money has to be deployed. Investors look at good companies which have their product market fit right and that is where we also work on those opportunities. That is where the next wave will come and you will see a lot of money coming in there. New players have been coming so Tiger Global for a very long time. One of them also announced a couple of names in the public listed space and is now looking at private markets in India. That is overall very good news for India.

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