Startups see drop in valuation amid concerns over economic slowdown

Bengaluru, 14 May Amid fears of economic slowdown globally, Indian startups have started to feel the pinch with drop in valuation of many of the established new age companies.

SoftBank Group Corp has marked down its investment in Paytm parent One97 Communications to $800 million, its annual report showed. The Japanese conglomerate invested $1.4 billion in Paytm via its Softbank Vision Fund 1, which was now come down to $800 million as on March 31, 2022 owing to steep drop in Paytm's valuation.

Apart from Paytm, other listed startups- Zomato, Nykaa, CarTrade, Policybazaar have also witnessed a 40-60 per cent plunge in their stock prices. This has led to drop in valuation of these startups.

Not only publicly-listed startups, even startups which are privately held are also facing valuation drop as of now.

According to reports, ride-hailing app Ola, which was aiming to list on the bourses this year, is now planning to raise a new funding round at a lower valuation of $5 billion. The mobility startup had raised its last round of funding at a valuation of $7 billion.

Similarly, some of the startups are buying back shares held by their employees at a discount to their previous valuation. This indicates that the next round of fund raise may not see valuation going up as compared to last round.

For instance, Tiger Global-backed Razorpay Inc offered to buy back stock options worth up to $75 million from 650 former and existing employees. However, the price of buyback would be 14 per cent less than Razorpay's December 2021 valuation of $7.5 billion.

While established startups are witnessing drop in valuation, many earlystage startups are finding it difficult to raise money from investors owing to liquidity crunch.

High inflationary environment, geopolitical uncertainty and tightening of rates are seen as the key factors driving this phenomenon.

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