‘New year will see corrections in valuation of start-ups’

Angels are keen to invest and so are venture capitalists, but if issues such as liquidity and exits are addressed, the start-up culture in the country is bound to be propelled to a new level, according to industry executives. The start-up culture is set to undergo a correction in 2020, they add.

Tarun Bhalla, CEO and founder of Avishkaar, said 2019 got off to a great start for a number of ventures, as early-stage investors appeared bullish about the start-up scene in India. “However, valuations will undergo a correction in 2020, which is not a bad thing in itself. Investors will look for start-ups having a strong core and fundamentals in place,” he added.

Ashish Bhatia, founder and MD of India Accelerator, maintained that 2019 was a good year for start-ups in India. Several measures were taken by the government to enhance the start-up story in the country, he said, with the major ones being the easing of FDI rules along with angel tax norms. The launch of a TV channel for start-ups was another great idea, he added.

“The next year will hopefully see more effective implementation of existing policies and the launch of new policies. More helpful would be measures to ease regulatory requirements for budding entrepreneurs and to help them in debt financing, the setting up of new incubators and accelerators, the deployment of the entire corpus of ₹10,000 crore fund-of-funds, etc.

All these will go a long way in making 2020 a watershed year for Indian start-ups,” he further said.

Education sector

Akhil Shahani, Managing Director of educational institution The Shahani Group, said: “2019 was a great year for investments into India’s education sector, with ed-tech firms like Byjus, Cuemath and Unacademy, among others, raising more than $500 million from venture capital funds.”

Additionally, with KKR purchasing the Eurokids school chain, there were exit options available for private equity investments into the core school and college education sectors, he added. Overall, Shahani said, there is vast potential for great returns for investors in the education sector. Given that a third of artificial intelligence (AI) jobs are being created by start-ups, the sector has received a lot of attention from VC funds.

However, a new study has noted that though India doubled its AI workforce in 2019, more than 2,500 vacancies remain unfilled.

The study, by ed-tech company Great Learning, indicated that the jobs being created in AI have outpaced the talent available in the sector. This year, close to 2,500 positions related to AI remained vacant due to dearth of talent despite the number of AI professionals in the country almost doubling from 40,000 in 2018 to 72,000 now, it said.

This indicates the massive pace at which AI related jobs are getting created in the country with over 3,000 companies claiming to work on AI projects in 2019, a growth of 200 per cent over 2018. The Indian AI industry has also doubled in size with revenues of $415 million in 2019, compared to $230 million a year ago, the Great Learning study noted.

Fintech sector

Fintech start-ups also saw a great run, with the sector emerging as the favourite of investors. Last year, it had played second-fiddle to e-commerce.

Among the fintech firms that got funded in 2019 was Indifi Technologies, a SME-focussed lending platform that completed a ₹145-crore Series C funding led by the UK government-owned development finance institution, CDC Group. Existing investors including Accel, Elevar Equity, Omidyar Networks and Flourish Ventures participated in the round.

Another fintech start-up, Lendingkart, raised a fresh equity round of ₹212 crore led by existing investors Fullerton Financial Holdings Pte Ltd and Bertelsmann India Investments.

Mumbai-based NBFC InCred raised ₹600 crore in Series A funding led by Dutch development finance institution FMO.

NBFC NeoGrowth Credit raised $17 million through debt financing from France’s Proparco SA. Last year, the company had raised equity funding of ₹300 crore.