By Lee Kah Whye Last week, Accel (formerly Accel Partners) announced the launch of a $650 million fund that will invest in Indian and Southeast Asian startups. This is the seventh time the venture capital fund has invested money in the region and is the largest to date.
Based in Palo Alto, California, the US-based company specializes in working with early stage and early growth stage startups. It also has offices in San Francisco, London and India. Among his brand investments are Facebook, Dropbox, Slack and Spotify. In India, Flipkart, Freshworks and Swiggy are some of the most famous companies she has invested in.
India has witnessed a dramatic expansion of its startup scene over the past few years. Over 52,000 entities are officially recognized as startups by the Department of Promotion of Industry and Internal Trade (DPIIT) as of July 2021. DealStreetAsia estimates that 30 companies in India reached $1 billion in valuation last year , which makes the total number of these “unicorns”. companies affect 50 in the country. While it is important and indeed requires a great deal of skill, experience and foresight to choose a business correctly at an early stage, it is equally important to be able to “walk out” with a profit. The most common way for a startup to exit is via an initial public offering (IPO). However, being listed on the stock exchange does not guarantee success.
One of the world’s largest venture capital funds, Japan Soft Bank’s Vision Fund, posted a quarterly loss of 825.1 billion yen ($7.3 billion) in the three months to the end. completed in September 2021. This was due to the fall in value of recent quotations. like South Korean e-commerce company Coupang Inc. and Chinese app Didi Global Inc. Softbank’s failed 2019 attempt to list US shared workspace services company WeWork is still fresh in the minds of many people.
Investors were concerned about issues of corporate governance, valuation and future profitability. Although it eventually managed to go public after merging with a SPAC (Special Purpose Acquisition Company) in October 2021, with a valuation of around $9 billion, it was still far from valuation. of $47 billion announced to investors in the 2019 IPO attempt. Its closing price last Friday was $4.77, about 68% off its October high. Another Softbank bet that is not doing very well is Singapore Grab. Southeast Asia’s largest ride-sharing and food delivery company is listed on the US market in December 2021 through a SPAC. Its SPAC host, Altimeter’s stock price was $11 the day before its IPO, but on the first day after listing, it closed at $8.75. Currently, last Friday, it was trading nearly 62% lower at $3.36.
Grab last week reported disappointing results – its first since listing – with fourth-quarter revenue down 44% to $122 million, well below analysts’ average estimate of $167 million. of dollars. Its quarterly loss increased by $465 million to $1.1 billion, including expenses related to the listing of Grab. The company cited higher driver incentives and promotional offers as the reason for the heavy loss. Its stock price has now lost nearly three-quarters of its value since its IPO, valuing it at $12.6 billion, down from its $40 billion value when it first went public.
Another ubiquitous Singapore new economy company and regional e-commerce giant Shopee, which operates as Sea Limited, has also seen its value plummet in recent weeks. Its stock price closed the week at a post-pandemic low of $97.44, valuing it at $54.35 billion. Last October, NYSE-listed Sea Limited was valued by investors at $208 billion when its stock price hit an all-time high of $372.70. This has made it Singapore’s most valuable company and its value is almost three times higher than Singapore’s second most valuable company, DBS Bank, which had a market value of $71 billion at its peak.
Last week, the Tencent-backed company announced a larger net loss of $0.88 per share than the market had expected, which estimated it would lose $0.59. The quarterly loss per share is similar to that achieved in the same quarter last year. Although total revenue rose 105.7% to $3.2 billion year-on-year, beating analysts’ expectations of $2.91 billion, the market focused on its weak earnings, leading to a share price fell 31% over the week.
Sea’s problems weren’t limited to lower incomes. In January, Tencent sold $3 billion of its shares to reduce its stake in the company from 21.3% to 18.7%. Tencent, however, reiterated its commitment to retaining its substantial controlling stake in Sea for the long term. Additionally, its gaming arm Garena, has had its popular survival shooter “Free Fire” banned from app stores by Indian authorities for unknown reasons. India was Garena’s top market for gaming, but only accounted for 2.6% of its net mobile game sales in 2021.
Indian fintech company Paytm, listed as One97 Communications, is another of Softbank’s troubled investments. India’s biggest IPO, which raised $2.44 billion, fell 27% on its November 2021 debut and never recovered. Since last Friday, it has been trading at a discount of more than 63% from its issue price of INR 2,150. Its value is now $6.66 billion from its IPO value of $20 billion. Restaurant aggregator and food delivery company Zomato made a better start, reaching 65.6% above its IPO price of INR 76 in July last year. However, its current price is only a little above its IPO price at INR 79.85 and 52% below its November high of INR 169.
Accel has backed software company Freshworks which started in Chennai but is now based in San Mateo, California, listed on Nasdaq in September 2021. Priced at $36 when it went public, it has raised more than 1 $.03 billion and jumped 33% on its debut. However, it has since retreated to $17.02, a drop of nearly 53% valuing the company at $4.81 billion from its $10 billion IPO. The above examples of declining valuations must of course be seen in the context of rising interest rates which have driven down the price of growth stocks. On top of that, there is considerable uncertainty in the market due to the ongoing war in Europe.
For comparison, over roughly the same period as the examples above, the SENSEX is down 11% and the tech-heavy Nasdaq is 17% lower. Most growth companies that have listed recently have yet to make a profit and in today’s uncertain market, investors are favoring value stocks which offer greater earnings certainty. The months following the COVID-19 outbreak, when the value of growth stocks skyrocketed, appear to be over and venture capitalists should expect less success with the startups they have worked with. .
However, the stock market is cyclical and there may come a time when growth stocks come back into vogue and make some of these investments look better. (ANI)
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)