Zomato IPO is a seminal event for the world of start-ups in India. Irrespective of one’s view on the valuation, this event will have a significant positive influence on start-ups and the broader economy.
First, this sets a new benchmark for a role model for founders and start-ups. While we have had successes in the first wave of internet and tech start-ups like MakeMytrip, Info Edge, Matrimony etc., we have not seen mega IPOs in the last 10 years.
Flipkart was a huge exit for shareholders but it was still a private sale. A private sale or a financing is a 'one customer market'; the seller needs to get one buyer to agree and that is the benchmark for pricing. In a public issue and subsequent listing, a vast number of investors play a role in deciding the price. Price changes every day. It takes a certain maturity of the company to go public and command shareholder value.
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While Zomato’s public valuation journey has just begun, the very act of going public is a huge statement of self-confidence and the confidence in the capital markets that India has to offer.
Second, a few years ago, the common wisdom was that India was not a good market for the 'new-age' technology companies as Indian markets do not “understand” these business models. The most common advice floated around the start-up circles was to “flip” the company - a short code for moving the company headquarters outside India. This event proves that Indian capital markets have come of age and are very receptive and open to innovative business models.
Third, founders have new role models. Indian businesses were dominated by large families till the liberalization of 1991. Infosys and Wipro were the first set of founder led companies to create large scale shareholder value. Then came the wave of internet based companies like MakeMytrip and Info Edge. Finally the third wave of consumer mobile start-ups. Zomato (and the other upcoming IPOs in the next 12 months) for many first generation founders to aspire and build innovative businesses.
This can unleash the potential of thousands of smart entrepreneurs solving varied consumer problems. Indian economy is fraught with inefficiencies and offers opportunities of expanding access, product innovation, superior customer experience, disintermediation, cost reduction etc. across multiple industries to create large scale companies.
Finally, private and public markets are willing to reward and provide capital to companies that solve customer problems at scale. This is both from domestic and international sources of capital. This is great news for all entrepreneurs to build companies without the fear of losing due to shortage of capital.
The innovation ecosystem can only get better from here. This IPO augers extremely well the Indian economy.
@Subramanya_SV
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