Unicorns, or startups that are valued at $1 billion or more, are like adolescents who have demonstrated their potential but haven’t built their full muscle yet and still have to discover some things about the world, Peak XV Partners managing director Shailendra Singh said during the CNBC-TV18 and Moneycontrol Global AI Conclave.
“Many unicorns are yet to discover free cash flow (FCF), plenty of them have to realise that there is no endless stream of capital raising. Many unicorns also have to discover that good governance will get them a better multiple in public markets, so on and so forth,” Singh said on December 16.
His comments come at a time when capital has become difficult to access and investors are asking several late-stage companies to ditch the growth-at-any-cost path. Investors are demanding that companies become more prudent and prioritise profitable growth instead of burning cash to show exponential growth.
Singh said the startup funding would pick up in the coming months as publicly traded tech stocks continued to rally, largely on the back of the US Federal Reserve signalling that the rate tightening regime was largely over.
During the discussion, Singh also drew parallels between adolescents and unicorns. Just like kids can’t fully control their emotions, get easily upset and throw tantrums even unicorns “haven’t gotten to enough of a steady cadence in life”, he said.
Peak XV Partners, formerly Sequoia Capital India and Southeast Asia, is one of the most active investors in the country. It backs more than 50 unicorns and several portfolio companies have gone public.
“We don’t like the word ‘unicorn’ because it doesn’t tell us if a company is good or bad,” Peak XV’s Singh said, adding that companies should be compounding consistently over several decades to become larger corporations.
Palo Alto Networks presents the CNBC-TV18 Moneycontrol Global AI Conclave, in collaboration with EY as the Knowledge Partner and Google, Yotta Infrastructure, and Reliance Industries Limited as Associate Partners, with Townhall serving as the Technology Partner.
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