American venture capital firm Sequoia is bullish on funding opportunities in India despite the Covid-19 pandemic and the preventive lockdown affecting the business and economy.
A combination of low venture capital penetration and changing financial health of start-ups would fuel the demand of capital from 2022 onwards.
According to the Rajan Anandan, managing director of Sequoia Capital India, who has joined the firm from his earlier assignment as vice-president of India and Southeast Asia operations of Google, there is no dearth of global capital, with an estimated $20 trillion available in negative interest rate economies.
At a session of the Global Fintech Fest organised by the NPCI, Payments Council of India and Fintech Convergence Council, Anandan said that India has over 40,000 start-ups but only about 10 per cent has raised venture capital.
He said the majority of these start-ups were unprofitable. And among those who have not raised venture capital — only 40 per cent are profitable.
The Sequoia India boss said the trend was gradually changing. “In the last four months, every Indian start-ups have materially improved their underlying business. We are seeing many companies now actually getting into profitability,” he said.
The start-ups, concerned on raising capital in the current market, have been able to restructure cost with demand going soft.
“High quality companies don’t need insane amount of capital. Google built a trillion dollar company on $25 million Series A funding,” he said.
According to Anandan, by the end of 2021, the underlying health of the start-up ecosytem will be much better.
“As a result, Indian startups will generally require less capital. But whatever capital they may need, they will be able to get,” Anandan said.
“The world is awash with capital. It is just looking for interesting places to invest. I think next year slower. But by 2022, India will see more capital flow,” he said.
Sequoia has invested in several startups in the country including major ones such as Byjus's, Oyo and Ola.
