Unicorn valuation of startups, a motivation: NRN

Catamaran ready to provide angel to Series B funding

Lauding the growing entrepreneurial culture in the country, and the government’s commitment to support them, Infosys co-founder N R Narayana Murthy said the unicorn valuation of Indian startups is really a motivation.

In  an interaction with Deccan Herald, Murthy said that the valuation of startup takes place as per the demands of the market.

“First of all, it is all based on numbers... Valuation in terms of numbers which the buyer tells to the seller. It is determined by the market forces. When the market determines the price, the buyer feels there is value for his company and the seller feels that his firm has certain value,” he said.

Murthy said there is nothing wrong in the valuation taking place in the country, and around the globe.

“In some ways it is good, as youngsters are excited about it. Youth are ready to take risks in their entrepreneurial journey,” Murthy, who is currently Chairman Emeritus of Infosys, said.

Commenting on the recommendations of Sebi’s committee on Alternative Investment Funds (AIFs) headed by him, Murthy said venture capital (VC) and private equity (PE) funds should be given due importance.

“Last year, listed companies raised $2 billion funds via by IPO, while VC and PE attracted about $20 billion. According to another statistics, the jobs created by IPO-funded companies rose to 2.3 per cent, and VC-funded rose to 8.7  per cent,  last year,” he said.
Murthy said if these companies are nurtured well, they have the potential to contribute 30 per cent growth in income tax, and 40 per cent growth in jobs .

As of now, the tax structure of VC, PE companies are, in some sense, in a disadvantaged position, compared with the secondary market.

“If we want to hold them for longer time, we need a reasonable tax structure. Besides giving tax exceptions, we have to harmonise tax laws in all regulatory bodies,” he said.
Commenting on Catamaran Ventures, he said it is ready to fund a wide variety of sectors.

“All we look for is that whether the entrepreneur has an idea which has a differentiating business value, compared with the competition. He should also have a competent team as it has an enduring value,” he said.

He also emphasised that these startups should have carried out a simple and inexpensive test in the market to validate their product.

“Right now, we are focussed on Indian entrepreneurs only. It they are committed value-based entrepreneurs, we are ready to go for angel investment, right up to series A and series B funding,” he said.