The Indian startup ecosystem is set to see massive growth in the coming years and by 2025, India will have more than 100 unicorns serving multiple sectors, Venture Capitalist and former Infosys executive Mohandas Pai told DH in an interaction.
Pai is bullish about the success of the Indian startup ecosystem and states, "There are three large innovation systems in the world, in the US, China and India, with some activity in cities such as London, Berlin and Singapore. Data suggests that there are about 45,000 startups in India, employing 7,50,000 people. By 2025, the number of startups could go up to 100,000 with 100 unicorns creating $500 billion in value."
According to Pai, the startup scene continues to be buoyant, with more than 6,000 new startups coming up every year, and capital continuing to flow into a majority of these companies. His venture capital firm, Aarin capital has made investments in startups in multiple sectors, ranging from ed-tech startup Byju's to pharma firm Pharmeasy among others.
One of the most frequent questions that most investors and founders come across is how are startups valued. Pai says that most of the talk about high and low valuation is bunkum. According to him, people invest in something that will create value. He states that this value is what the purchaser is willing to pay, not what the theorist says he should pay.
According to Pai, huge losses happen mostly because the startups try to scale much quicker than traditional companies. However, he states, it is important to spend money on creating things that would add more value to the enterprise, not blindly offering deep discounts. "It is the lesson that many e-commerce companies learnt after the initial years of deep discounts and so on."
Another major area that interests startup watchers is on whether and when would Indian startups go public and get listed as an IPO. With more investors looking at cutting down on their cash burn, there is growing pressure on many of the big companies to list soon. He says, "I see multiple companies in this space listing soon. The SEBI has also changed the rules that make the listing of startups easier."
Pai warns that the mere listing of startups on the stock exchange should not be seen as a success story. "It is very important to hire a good CFO who can market your company well. One also needs to keep on meeting more investors and so on to ensure that your stock performs well. In 1994, I used to meet multiple investors every day. "
On the talk of the slowdown impacting the startup and IT industries, Pai is dismissive. He says that the IT industry has shown very good growth over the years. According to him, layoffs that are happening is quite commonplace and happens every three to four years.
Arguing that most of those laid off in the IT companies will be quickly reabsorbed in other sectors of the industry and sectors, especially in the financial space and startups, Pai states, "In fact, other sectors in the economy should be thankful for the IT sector ensuring that so many highly skilled workers go on to join their companies."
Pai states that like in most other professions, it is very important to keep on learning and upping skillsets. "If you do not keep up to date with technology, there is a good chance that you would become redundant."