2024’s Buzz: Indian Startups Make Waves with $5 Billion in Exits!
The Path to LiquidityIt’s not just the late-stage startups making headlines; even the rising stars in the startup ecosystem are gearing up for a wave of secondary deals ahead of their IPOs, as part of broader funding strategies. In a secondary transaction, existing investors sell shares to new investors, with the proceeds not benefiting the company directly. Following the funding winter of 2023, which followed a whirlwind of dealmaking in 2021, these transactions have become a vital lifeline for investors, allowing new players to step into fast-growing firms poised for profitability in the near future.
With private funding details often kept under wraps, it’s noteworthy that top startups clocked nearly $1.5 billion in secondary deals alone, according to estimates from insiders. These substantial transactions, many exceeding $100 million, also included primary funding components. Compare this to last year, when the total was significantly below $1 billion, hovering around $700 million.
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“Every investor who’s been in the game for a decade recognizes that exits are essential. The constraints of fund cycles mean that options are limited. However, the landscape is changing; the rise in IPOs brings fresh opportunities. Share sales during IPOs and pre-IPO funding rounds will remain a focal point, as these rounds aim not just to set valuations but also to provide liquidity to private investors,” stated TCM Sundaram, founder and vice chairman of Chiratae Ventures—an early backer of Lenskart, which has emerged as a leading player in secondary deals.
Companies like Swiggy, which celebrated its monumental $1.3 billion IPO in November, witnessed a whopping $808 million in offers for sale (OFS) during its IPO, complemented by pre-IPO share offloads that amounted to hundreds of millions of dollars.
Startup IPOs generated approximately $1.6 billion in investor exits through OFS from several companies, including Awfis, FirstCry, and Go Digit. An additional $2 billion exchanged hands during block deals involving popular firms like Zomato and Mamaearth’s parent, Honasa Consumer.
“Funding is expected to persist, albeit with more discipline, as there’s sufficient dry powder available. Hyper valuations are likely a thing of the past, especially with the upcoming IPO landscape shaping expectations for public market valuations,” Sundaram elaborated. Notably, Chiratae Ventures-backed FirstCry has successfully listed and is trading at a significant premium.
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A leading venture investor shared that at least six of his portfolio companies are gearing up for public offerings next year, with preparations already in full swing. In the realm of high-profile deals, companies like Rebel Foods, Lenskart, PhysicsWallah, and Purplle are set to continue this trend into the next year.
“The ecosystem will likely see smaller IPOs emerging, which is a positive development. Not every company needs to follow the path of Swiggy,” said the investor. “This evolution will provide fresh choices for new investors looking to dive into the small to mid-sized startup wave, thereby unlocking liquidity for existing stakeholders.”
Numerous executives noted that new funds being launched by top venture capital partners are also adopting this approach, focusing on smaller fund sizes and targeted investments to maximize potential outcomes.
The year has also seen the advent of two new venture capital firms dedicated to secondary investments: Kenro Capital, headed by former Peak XV Partners managing director Piyush Gupta, and Oister Tribe Ace Fund, a collaboration between Gurgaon’s Oister Global and Silicon Valley’s Tribe Capital.
Kenro Capital recently made a $40 million investment in K12 Techno Services, while Oister Tribe Ace Fund has been acquiring stakes in the B2B e-commerce player OfBusiness, as reported recently.
“Over the last few years, substantial primary capital has flowed into the Indian market, and investors are actively seeking exit opportunities. Firms specializing in secondary offerings are stepping into this vital role,” noted an executive from one such investment firm.
Prominent companies like Bluestone, Ather Energy, and Ecom Express have officially filed for their public offerings, while others like Boat, OfBusiness, and Shadowfax are poised for IPOs next year, many already in advanced stages of readiness.
“We aim to finalize our banker selections in the first two months of 2025 and move forward from there. Our goal is to achieve a listing within the calendar year 2025, or at the very latest by FY26,” shared a senior executive from one of the IPO-bound firms.
In parallel, the exploration of secondary deals remains a priority for high-performing companies.
Startups in India have raised $10.9 billion this calendar year, slightly more than the $9.6 billion collected during the same period last year, according to Venture Intelligence data. In 2022 and 2021, the funding figures soared to $24 billion and $36 billion, respectively.
This marks a notable revival in funding for 2024, but as insiders report, only a select few assets are currently in demand, with just five new unicorns emerging this year. Moreover, many startups that achieved unicorn status in 2021 and 2022 may not qualify for that title in subsequent rounds, industry experts caution. A unicorn is defined as a privately held startup valued at $1 billion or more.
