The crises involving Byju's and Paytm deal a serious blow to India's once-thriving tech industry.
The number of unicorns in India rose to 83 in 2021, when a record 44 Indian firms were valued at $1 billion or more.
Tracking from the international startup tracking platform Tracxn shows that venture funding into Indian businesses reached a record of $41.6 billion in 2021.
However, things have since changed.
After reaching a record high of $7 billion in 2021, financing for Indian startups fell by 83% in 2023 as a result of a decline in global venture capital due to growing macroeconomic uncertainty, including higher interest rates.
After investors pulled out of Byju in many rounds, the company’s worth fell by 95%. According to media reports, BlackRock reduced its investment in Byju’s previous month, resulting in the most recent cut of $1 billion.
Early in February, Paytm’s market value had dropped by $2.5 billion due to the regulatory crackdown on Paytm Payments Bank. Compared to its almost $20 billion valuation upon listing in November 2021, that is a significant drop. According to Wadhwani of IvyCap Ventures, “there is no doubt that valuations were very stretched in 2021 and early 2022.” “The market experienced significant stress as a result of certain companies’ IPOs at valuations that were simply unsustainable.”
Due to financial difficulties, Byju’s announced in January that it would raise $200 million through a rights issue of shares to pay off “immediate liabilities” and other running expenses. It is said that the company is having trouble making debt payments and paying employee salaries.
Wadhwani stated, “Companies that don’t have cash are being forced to do down rounds,” a reference to funding rounds where businesses raise money at a lower valuation than in an earlier round.
“Clearly, businesses without a viable business plan will fail as investors will not support them at exorbitant prices,” he continued.
