Several US-based investors, including BlackRock and Invesco, have recently reduced their valuations of Indian Ed-tech giant Byju’s and food delivery platform Swiggy. BlackRock reportedly reduced Byju’s valuation to $11.5 billion, while Invesco reduced its Swiggy investment by more than 25%. The move comes amid a global correction in tech valuations, exacerbated by rising inflation and interest rates.
Many investors are wary of investing in high-growth startups with lofty valuations, fearing that such firms will be unable to sustain their growth in the face of macroeconomic headwinds. Byju’s, which offers online learning solutions to students all over India, has benefited greatly from the pandemic-induced shift toward online education. However, its rapid growth has raised concerns among some investors about its ability to maintain long-term profitability.
Byju’s has raised over $2 billion in funding to date, with notable investors including Sequoia Capital, Tiger Global, and SoftBank. Similarly, despite its massive scale, Swiggy, which competes with Zomato in India’s highly competitive food delivery market, has struggled to turn profitable. The recent markdowns by BlackRock and Invesco are likely to reverberate throughout the Indian startup ecosystem, which has seen a surge in funding activity in recent years.
As more consumers turned to online services in the aftermath of the pandemic, the valuations of many startups, particularly those in the consumer tech and Ed-tech sectors, skyrocketed. However, the recent correction in valuations may indicate that buyers will be more cautious in the future. Many startups may find it more difficult to obtain funding at high valuations, and there may be a greater emphasis on profitability and long-term growth rather than rapid growth at any expense.
While the recent markdowns by BlackRock and Invesco are undoubtedly a setback for Byju’s and Swiggy, they may also serve as a wake-up call for the Indian startup environment as a whole. Startups that can show profitability and sustainability may continue to attract investment, but those that depend solely on high valuations and growth-at-all-costs strategies may struggle to find backers in the current climate.
