India's unicorns' next test: Delivering investor exits
India’s startup ecosystem, despite producing 139 unicorns by 2022, has struggled with liquidity events, with only 77 achieving exits like IPOs or acquisitions, while 26 lack a clear path. Experts cite underdeveloped exit routes compared to the US, where strategic buyers and IPOs dominate, and secondary markets remain nascent despite growing demand for returns from investors." "article": "India’s venture capital and private equity firms are facing pressure to deliver returns on investments made during the 2018–2022 funding boom, as limited partners demand liquidity from the country’s unicorns. An analysis by Mint of 139 VC- and PE-backed startups valued over $1 billion by 2022 revealed only 77 have generated liquidity events—such as IPOs, mergers, or acquisitions—while 34, including BharatPe and boAt, are pursuing public listings and 26, like Apna and Dream11, show no clear exit path. Of the 77 startups that achieved liquidity, 44 went public and 29 were acquired, including deals like Unacademy and Rivigo. However, experts argue India’s exit ecosystem remains underdeveloped compared to the US, where large companies like Google and Capital One frequently acquire startups for cash or stock. In India, strategic buyers are fewer, and M&A activity is limited, forcing investors to rely more on IPOs or secondary sales. Early-stage investors often face prolonged holding periods due to limited alternatives, according to Rohit Bhayana of Oister Global. Secondary markets are emerging but remain in early stages, with firms like Kenro Capital noting that PE and VC funds struggle with liquidity cycles. IPOs remain the primary exit route for tech and consumer internet companies, though exits to buyout funds are increasing. Market volatility from the West Asia war has further complicated exits, though the analysis focuses on structural challenges rather than geopolitical risks. The pressure on investors highlights a need for India’s startup ecosystem to evolve, with secondary markets and strategic acquisitions playing a larger role in unlocking value for backers.
India’s venture capital and private equity firms are facing pressure to deliver returns on investments made during the 2018–2022 funding boom, as limited partners demand liquidity from the country’s unicorns. An analysis by Mint of 139 VC- and PE-backed startups valued over $1 billion by 2022 revealed only 77 have generated liquidity events—such as IPOs, mergers, or acquisitions—while 34, including BharatPe and boAt, are pursuing public listings and 26, like Apna and Dream11, show no clear exit path. Of the 77 startups that achieved liquidity, 44 went public and 29 were acquired, including deals like Unacademy and Rivigo. However, experts argue India’s exit ecosystem remains underdeveloped compared to the US, where large companies like Google and Capital One frequently acquire startups for cash or stock. In India, strategic buyers are fewer, and M&A activity is limited, forcing investors to rely more on IPOs or secondary sales. Early-stage investors often face prolonged holding periods due to limited alternatives, according to Rohit Bhayana of Oister Global. Secondary markets are emerging but remain in early stages, with firms like Kenro Capital noting that PE and VC funds struggle with liquidity cycles. IPOs remain the primary exit route for tech and consumer internet companies, though exits to buyout funds are increasing. Market volatility from the West Asia war has further complicated exits, though the analysis focuses on structural challenges rather than geopolitical risks. The pressure on investors highlights a need for India’s startup ecosystem to evolve, with secondary markets and strategic acquisitions playing a larger role in unlocking value for backers.
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