Indian Startups Worth Betting On, Even Though Still Few Years Behind China: FB Cofounder

Facebook cofounder and investor Eduardo Saverin has said that the Indian startup ecosystem is ‘worth betting on’ despite still being ‘a few years’ behind China’s.

“I think India is a huge market with just tremendous potential…and I think as the market continues to mature, and as you get into a better macroeconomic environment, it is a market to bet on, combined with Southeast Asia,” Saverin was quoted as saying by CNBC. 

He, however, further added that the pace of evolution of India’s startups was behind startups in the neighbouring country in areas such as ease of asset exits and the liquidity of the market.

Saverin also said that much of the growth in India will come from enterprisetech startups, adding that his venture capital (VC) firm B Capital had invested in startups in India and was exploring long-term success of new companies in the country.

Speaking during Forbes Global CEO Conference, Facebook cofounder also pinned India’s entrepreneurial success on its large population and said that the country along with Southeast Asia would soon have more people than China. 

Founded in 2015 by Saverin and Raj Ganguly, B Capital has $6.5 Bn worth of assets under management and over 125 companies in its portfolio. Its Indian foray has seen the VC firm invest in a clutch of startups and raise an additional fund to focus on the burgeoning Indian startup ecosystem. 

It had participated in a $192 Mn funding round in social commerce startup Meesho in September last year. Since then, it has invested in a range of startups including leading a $20.6 Mn Series A funding round in healthtech startup Mojocare. 

In July, the US-based investment firm B Capital also announced the final close of its $250 Mn Ascent Fund II which will also invest in pre-seed Indian startups. The early-stage vehicle’s India operations are overseen by Karan Mohla who serves as a partner at the firm.

Funding Winter Chill Grips India

Saverin’s statements come at a time when the Indian funding numbers are witnessing a major slide. According to the latest available with Inc42, the Indian startup ecosystem saw a decline in funding for the fourth straight quarter.

In the third quarter of the calendar year 2022 (CY22), Indian startups raised a measly $3 Bn, down 50% than the previous quarter. In stark contrast, funding raised in Q3 2022 was down 82% lower than the astronomical $17.1 Bn raised during the same period last year. 

Deal numbers also fell more than 33% from 506 in Q1 CY22 to 334 in Q3 CY22. Average ticket size dropped to 2020 levels, tanking 54% YoY to $11 Mn in Q3 CY22. 

Earlier, Saverin had noted that the funding will continue to persist till at least 2024 and that it would make it difficult for startups to raise funds owing to the ‘turbulence in the financial markets.’

On the other side, venture capital firms have accumulated a lot of dry powder. In total, VC and PE firms have raised $16 Bn between January and September 2022. 

Sequoia India led the pack, reserving $2 Bn for Indian seed and growth-stage startups. This was followed by Elevation Capital bagging $670 Mn for its Fund VII to focus on early and growth-stage startups in India. 

On similar lines, the markets have also been hit hard by the ongoing market volatility. Shares of all major new-age tech stocks including Zomato and Paytm have seen a steep decline in stock prices, up to 50-60% in some cases. 

This has made these startups wary of listing on markets. Many startups including PharmEasy have postponed plans to list while many have shelved their plans altogether to list on bourses. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.