What's Next For Startups Following Valuation Cuts for Byju's & Swiggy?

It seems like the Indian startup ecosystem is feeling the heat of the global economy, and some of the biggest players are taking a haircut in their valuations. Investors are adjusting their estimates faster than you can say 'chai time'. The world of startups is a case of high risk, high reward. Sometimes you hit the jackpot, and sometimes you come up empty-handed. But that's the name of the game. 

What was the valuation cut for Byjus? 

Byju's, the crown jewel of the Indian startup ecosystem, has also been affected by it. The startup was valued at a whopping $22 billion, making it India's most valuable startup. But hold your horses, as BlackRock, the big daddy of investors, has cut down the valuation of Byju's by almost half! That's right, folks, it's been chopped down to $11.5 billion. The news first broke out on The Arc, an Indian news outlet, and has sent shockwaves across the startup community.

What was the valuation cut for Swiggy?

But wait, there's more. Swiggy, the food delivery giant and India's most valuable food delivery startup, valued at $10.7 billion, is also facing a similar fate. It's like getting a buzz cut as Invesco, the American investment management company, has marked down the startup's valuation to about $8 billion. These startups are the poster boys of the Indian startup ecosystem, and their valuation cuts are sending out warning signals. Will they be able to weather this storm, or will they fall by the wayside? Only time will tell. 

Byju's, the edtech giant, raised a whopping $22 billion last year and has now topped up with more financing on a convertible note. Word on the street is that the previous valuation was set as the cap. Looks like they're not settling for anything less than the best! BlackRock even spilled the beans about its valuation adjustment on Byju's in their annual report. Talk about putting it all out there!

But wait, there's more! Swiggy, the food delivery service, climbed to a $10.7 billion valuation in January 2022, led by none other than Invesco itself. They were on top of the world! But by the end of October, things took a nosedive, and the Atlanta-headquartered firm slashed the value of its Swiggy holdings, valuing the firm at only $8 billion. That's quite the tumble. 

These valuation cuts are a new twist in the tale of dwindling market conditions on the Indian startup scene. Funding activity has slowed down, but many larger startups raised capital on convertible notes or didn't raise capital at all. This means their valuations have largely remained unchanged, thanks to pushing the price discovery to a later date. Smart move. 

But Masayoshi Son, the big boss of SoftBank Group, had a warning for the Indian startup ecosystem. He cautioned that the funding winter for startups may continue for longer because some unicorns were unwilling to accept lower valuations in fresh funding deliberations. Sounds like someone needs to learn that you can't always have your cake and eat it too. 

What is funding winter? 

"Funding winter" is a phrase that strikes fear into the hearts of many startup founders and investors alike. Funding winters can be especially harsh. Investors become more cautious, startups become more desperate, and everyone is watching the horizon for any signs of relief. It's a waiting game, and the stakes are high.

Funding winter is a term used to describe a period of time when venture capital firms become as scarce as hen's teeth when it comes to investing in startups. It's a time when entrepreneurs are left out in the cold, their dreams of launching their businesses left high and dry like a fish out of water. 

Picture this: You're a farmer and you've been tending to your crops all year long. You've worked hard to make sure everything is just right - the soil is fertile, the seeds are planted, and the irrigation system is in place. But then, just when your crops are starting to grow, the rains stop. The sky is clear and blue, but your fields are parched and dry. That's what it feels like during a funding winter - you've put in all the effort to build your business, but the funding just isn't coming in.

What does the future hold for other startups? 

Just because one backer makes a value adjustment doesn't mean that others share the same views. In fact, sometimes even the startups themselves may not agree with the valuations. So let's not jump the gun and assume that one investor speaks for all!