Startups consider IPO as likely exit mode: Survey


Chennai: With public markets going strong, and the pandemic stressing on the significance of sound unit economics, startups are increasingly looking at Initial Public Offering (IPOs) as a likely mode of exit for its investors.
47% of founders surveyed by InnoVen Capital as part of their annual sentiment check of startup founders said an IPO looks like a realistic exit scenario for them — up from 43% last year and 39% in 2019.
Respondents from the logistics sector were most bullish towards going for an IPO in India with almost 83% saying they prefer the route.
The financial architecture of a lot of startups improved in the initial shock period brought about by Covid-19 and around 15-20 companies are on a credible path to go public in the next two years, Ashish Sharmachief executive officer (CEO), InnoVen Capital, India, said. However, how this pans out will depend on public markets trends going forward and the Indian markets’ readiness for high-growth, low-profit companies, he added.
Gaming company Nazara Technologies, which filed offer documents in January 2021, has kicked off India’s tech IPO rush.
Zomato, Nykaa, PolicyBazaar, Delhivery, Freshworks and others are a few Indian late stage tech companies said to be considering an IPO in India or abroad in the next two to three years.
The survey also noted that while customer growth and demand continues to be key focus for Indian startup, more founders are also batting for profitability over growth, as per the survey.
When asked about what their “bigger focus for 2021” was, 23% startups picked profitability compared to 15% in 2019 and 21% in 2020. 42% of the startups said they were now in a path to turn EBITDA-profitable in one to two years. 23% said they were already profitable.
Improving unit economics and talent management came out as top priorities for founders.
Startups have also seen a strong recovery after major disruption in operations due to Covid-19.
Two-thirds of surveyed founders said they are above pre-Covid revenue run rates in December 2020 with e-commerce, logistics, B2B platforms, enterprise software, and D2C brands seeing the strongest recovery.
Edtech emerged as the most overhyped sector by a large majority with 56% of respondents indicating so. Logistics and consumer brands were considered the two most under-hyped sectors
InnoVen Capital’s annual survey is conducted among founders and senior leaders of around 100 leading startups across early, growth and late stages to gauge the sentiment prevailing in the startup ecosystem.


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