India Internet Day 2021: Navigating startup funding bubble

Some of India’s top technology investors disagreed over whether India is in the middle of a startup bubble, but they all agreed that these are heady times, a time of massive change and could be the first sign of India’s digital future in the decades to come.

With startup funding crossing a record $20 billion in 2021 and 27 unicorns (billion dollar valued startups) created so this year so far,, investors at TiE Delhi-NCR’s India Internet Day 2021, investors spoke about navigating a bubble, why startup funding is so high and things that founders should look out for.

Speakers included Anjani Bansal- founder, Avana Capital; Rahul Khanna- managing partner, Trifecta Capital; Anirudh Singh- managing director, Alpha Wave Incubation and Rajat Agarwal- managing director, Matrix Partners India. The session was moderated by Rajan Anandan, partner at Sequoia India.

“There is a lot of liquidity and valuations are higher than ever. But India has a massive talent pool and massive digitisation. I’m not sure this is a bubble,” Bansal said.

Investors disagreed over whether India is in the middle of a startup bubble, but they all agreed that these are heady times. “This seems like a bubble, but also a once in a generation takeover of the internet. Hopefully India can become what China was for technology all these years,” Singh said.

Trifecta’s Khanna defines valuations in three stages- when it is a headache, migraine and a nosebleed. Despite unprecedented amounts of money for unproven business models, he felt valuations are more towards a migraine right now.

“I think we are in a bubble, but it is going to last for sometime,” Agarwal said. He however added that companies are showing great unit economics and that the Indian internet market is clearly deepening, somewhat justifying the frenzy.

Bansal said that publicly listed companies have been trading at 75-80 times revenue in India, while the same companies trade at 15-20 times in other countries, but relative to private markets, whether it is a bubble is unclear.

While the funding boom and rapid deal-making has surprised many, this is not an overnight success, it has been 2 decades in the making,” Khanna said.

All investors however agreed that the current momentum will not last endlessly, and entrepreneurs should be watchful. They could not decide however, when the momentum would change. It will depend on the US Federal Reserve hiking interest rates, which leads to less money going to other countries seeking returns. That’s when the bubble could burst, Singh said.

“Entrepreneurs should raise money now, because it is a great time, but please don’t spend it all, because the music will stop some day,” Anandan said.