Reality check for startups soon: Flipkart’s Krishnamurthy; down rounds can save firms: founders, CEOs

During a panel discussion at The Economic Times Startup Awards 2022 in Bengaluru on Saturday, Flipkart group CEO Kalyan Krishnamurthy said Indian startups must focus on surviving the next 12-18 months as the effects of the current funding crunch will only start to hit home in early 2023. He also said Flipkart’s IPO plans – announced last year – are on hold.

Credit: GiphyAlso in this letter:
■ Down rounds an acceptable option to extend runway: founders, CEOs
■ Sneakerheads abound as guests don ‘comfy casual’ at ETSA 2022
■ Sebi asks angel funds to reveal names, origins of investors

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Big valuation reset coming next year: Flipkart’s Kalyan Krishnamurthy

Kalyan Krishnamurthy, CEO, Flipkart Group

Flipkart group CEO Kalyan Krishnamurthy said at The Economic Times Startup Awards 2022 (ETSA) that Indian startups will go through a lot of turmoil and volatility over the next 12-18 months, as the funding crunch will start to affect new-age tech companies only by the early part of next year.

He added that things will get better after that, and that companies should focus on surviving this period.

Driving the news: “It is going to be tough next year. I think a lot of people will hit the market (for fundraising) between April and June next year. That’s probably the moment of truth for all of us in the ecosystem,” Krishnamurthy said during a panel discussion on ‘The Great Reset: tracking the profitability versus growth conundrum amidst the tech winter.’

(From left) Samidha Sharma, editor, ETtech, Harsh Jain cofounder & CEO Dream Sports, Kalyan Krishnamurthy, CEO, Flipkart Group, Nithin Kamath cofounder & CEO, Zerodha, Smita Deorah cofounder & co-CEO, Lead and Sumer Juneja, managing partner, India & EMEA, SoftBank Investment Advisers

Downturn: His comments come at a time when venture funding has been hit hard across stages in India and around the world.

According to Venture Intelligence, startups saw funding of $2.7 billion in the September quarter as against close to $12 billion in the same period last year. There were only four $100 million-plus deals compared to 17 in the June quarter and 30 in the March quarter.

IPO on hold for now: Flipkart, which was actively looking to tap the IPO market last year, is unlikely to take that route for now. Krishnamurthy said he does not entirely subscribe to the view that if a company performs well, it has to go for an IPO.

(From left) Harsh Jain cofounder & CEO Dream Sports, Kalyan Krishnamurthy, CEO, Flipkart Group, Nithin Kamath cofounder & CEO, Zerodha, Smita Deorah cofounder & co-CEO, Lead and Sumer Juneja, managing partner, India & EMEA, SoftBank Investment Advisers

SoftBank exec cautions startups: Meanwhile, Sumer Juneja, managing partner, India and EMEA, SoftBank Investment Advisers, said at ETSA 2022 that Indian startups will need to understand their true value and revise their valuations in line with their counterparts in markets such as the US and Europe.

“If you do not realise what your true value is given the new cost of capital, it is a dangerous game to play,” Juneja said.

Also Read | ETSA 2022 panel discussion: a moment of truth awaits Indian startups

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Down rounds an acceptable option to extend runway: founders, CEOs

Panel of founders, CEOs and investors at the ET Startup AwardsAt a time when venture capital funding for startups has slowed down significantly, top founders, CEOs and investors said raising funds in a down round is a completely acceptable option for entrepreneurs if it provides them with much-needed liquidity and extends their cash runway.

Jargon buster: A down round is when a private company raises capital at a lower valuation than in its previous funding round.

Driving the news: During a panel discussion on ‘The Great Reset; tracking the profitability versus growth conundrum amidst the tech winter’ at The Economic Times Startup Awards 2022, these executives said entrepreneurs should do “whatever it takes” to save their firms, including layoffs, slashing marketing budgets, and other measures that would cut costs.

In fact, Krishnamurthy said he was one of the architects of a similar event at Flipkart in 2016-17, when the ecommerce firm raised new funding at a 30% lower valuation compared to its previous financing round “We reset the whole cap table and we grew from there so it is not a problem,” said Krishnamurthy, who has previously worked at eBay and Tiger Global.

‘Whatever it takes’: Harsh Jain, cofounder and CEO of Dream Sports, which runs online fantasy gaming platform Dream11, said he would take every hard decision right to the bone, without worrying about the optics of it.

Nithin Kamath, founder and CEO, Zerodha, which won in The ET Startup Awards Bootstrap Champ category in 2016 and in the coveted Startup of the Year category in 2020, echoed Jain’s view. According to him, when a founder is pushed to the edge, he or she will do whatever it takes. “I think entrepreneurs have to do what is right for the business and if it means convertible rounds, so be it,” he said.

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Sneakerheads abound as guests don ‘comfy casual’ at ETSA 2022

Flipkart chief executive Kalyan Krishnamurthy and Dream Sports cofounder and chief executive Harsh Jain stepping up their sneaker game at the ET Startup Awards 2022.

Comfortable casual was the dominant theme at the ET Startup Awards 2022 ceremony as many guests kept up with the current craze for sneakers to make a statement with their swanky kicks.

Also Read | ETSA 2022: India may ride out global storm

Driving the shoes: Harsh Jain, cofounder and CEO, Dream Sports, made a quick remark when his fellow panellist Kalyan Krinamurthy walked into the ceremony, saying how glad he was that the top boss at the Flipkart group was also wearing sneakers.

Meanwhile, Miten Sampat of credit card payment platform Cred decided to wear what his wife gifted him – an On Running Roger Federer edition shoe.

Also Read | ETSA 2022: Whole world seeking FTAs with bright spot India: Piyush Goyal

Seen and heard: While the main events of the evening were a panel discussion on ‘The Great Reset’ and speeches by three ministers, ETSA 2022 also facilitated discussions on tech news and policy, not to mention a host of after-parties.

Click here to read some sidelights from India’s most prestigious startup awards night.

Also Read | ETSA 2022: India shouldn’t isolate itself by restricting data flow: Ashwini Vaishnaw

Twitter debates: The drama at Twitter under new boss Elon Musk was also a subject of debate at ETSA 2022. Over a million users have quit Twitter since the billionaire took over, but prominent members of the Indian startup and business community said they were not planning to leave the platform anytime soon.

Also Read | ETSA 2022: CM Basavaraj Bommai’s advice: make profit, earn punya too

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Sebi asks angel funds to reveal names, origins of investors

India’s capital market regulator has asked several angel funds to disclose identities of their investors and whether these investors are based abroad.

The funds have to share the information, along with the Permanent Account Numbers (PAN) of their investors, with the Securities & Exchange Board of India (Sebi) by November 21.

Why? It is unclear what the regulator plans to do with the data, but industry persons said it could well be to check whether the comparatively easier regulations of angel funds are being misused to overcome restrictions on foreign direct investment (FDI) or indirectly acquire an equity stake in a company.

Tightening: Sebi has been collecting information across the funds industry. On occasions, such queries have followed complaints from investors.

In May, the regulator asked angel funds to spell out “in what manner the pro-rata rights of all investors is maintained in all the investments.” The funds were told to also share the number of investors in the pool, whether investors can exit before the tenure of the fund expires, the ‘commitment period’ till when a fund can cut deals to buy into startups, the target corpus, and the timelines for initial and final closings of a fund.

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Musk may fire more Twitter employees on Monday: report

Elon Musk may fire more Twitter employees on Monday, this time targeting the sales and partnership side of the business after mass resignations among engineers last Thursday, Bloomberg reported, citing people familiar with the matter.

Take it or leave it: Musk had offered Twitter employees an ultimatum last week – either stay on and work long hours in a more “hardcore” version of Twitter, or leave with three months severance pay. More employees in technical roles opted to leave than expected, compared to those in sales, partnerships and similar roles, Bloomberg’s sources said.

Leaders quit: On Friday, Musk asked leaders in those organisations to agree to fire more employees. Robin Wheeler, who ran marketing and sales, reportedly refused to do so, as did Maggie Suniewick, who ran partnerships. Both lost their jobs as a result, the report said.

On Monday, Twitter’s head of France also announced his departure in a tweet.

Goenka backs Musk: Amid the chaos, RPG Group chairman Harsh Goenka came out in support of Musk and urged people to give Twitter some time before predicting its death. “We are underestimating the genius of Elon Musk. There must be a method to his madness,” Goenka wrote to his more than 1.7 million Twitter followers.

Also Read | Musk welcomes Kanye back to Twitter after inviting Trump’s return

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Siddharth Sharma in Bengaluru. Graphics and illustrations by Rahul Awasthi.