With thousands of layoffs, plummeting valuations, salary freezes, a fundraising winter and ugly public controversy, it’s been a difficult year for startups. The Christmas holidays should then be a time of rumination rather than revelry. Looking at recent trends, the problem is far from over. Consolidation continues, with 230 merger and acquisition deals reported so far in 2022. The bad news is that many start-ups are cash-strapped and investors are hesitant to fund them at current valuations. Tracxn data shows startup funding has fallen below $25 billion between January and November, down about 35% year-over-year. Additionally, the number of funding rounds this year is down 30% from his 2,647 last year to his 1,841.
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At least 10 companies have abandoned plans to raise capital from the public markets because they may not be able to sustain their valuations. Unless they can make their business viable, a fundraising winter could push more promoters to sell to larger peers. increase. This explains the layoffs, the latest tally putting him at over 18,000, most of them in the education technology sector. Indeed, in the context of the total workforce in the startup field, that number may not be large. I hear about 60-70 startups have real problems. Nonetheless, these show just how difficult it can be for businesses that don’t become viable anytime soon. But now investors appear to be cautious. Even companies that have been around for a while can’t convince investors to continue supporting them. , down 45% year-on-year to $16.1 billion.
Part of that may be the impact of the disastrous performance of publicly traded startups. Most startups to go public in 2021 and 2022 continue to trade well below their initial public offering prices. Even other new-age technology stocks, such as , have lost value since then.Stocks have seen price of Rs306 compared to its IPO price of Rs 487. Private equity (PE) investors may value companies based on how promising they are, while the public market tends to value companies based on their ability to generate returns. You must have noticed.
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PE players could have sold some of their investments through secondary transactions or IPOs, but some of their portfolios may suffer losses. Given the performance of these stocks, it is unlikely that the next round of startup IPOs will be as highly valued as the previous lot.
That would lead PEs to rethink valuations when funding companies, which explains some of the down-rounds. They would also have recognized that in a competitive and challenging regulatory environment, building a profitable business takes time and money, no matter how promising the opportunity. Having reported ebitda losses in the last three quarters, most other NATC companies are still unprofitable. If the big players are struggling, the smaller players are even harder. Winter is going to be long and hard for the startup world.
