Investments

The long wait for India's first $100-billion startup success

Nikhil Patwardhan

December 09, 2024 | 13 Min Read

As venture capital firms chase quick returns and modest exits, India's startup ecosystem yearns for its first $100-billion breakthrough. What will it take for India to deliver outcomes that stack up against global startup success stories?

Key Takeaways

India’s VC strategy emphasises a consistent stream of smaller wins, maintaining a cautious stance on losses
This approach pushes startups toward exits via acquisitions, secondary fundraises, or IPOs—often at conservative valuations—as investors face growing pressure to deliver returns
Even foreign investors like Prosus, which invest directly from their balance sheets, are adopting this model to navigate the distinctive dynamics of India’s market
With India’s ecosystem still nascent compared to mature markets like the US or China, it could take a while yet for India to achieve the scale of returns seen with tech giants like Tencent or Alibaba

Last month, Swiggy raised $1.3 billion in one of India’s largest public listings. The SoftBank- and Prosus-backed company debuted on the bourses with a valuation slightly above $11.3 billion, making the Bengaluru-based company the second largest VC-backed firm to list on the Indian bourses by market capitalisation.

The IPO was especially crucial for Prosus, Swiggy’s largest investor and a major technology backer in India. It sold 109 million shares in Swiggy during the IPO, generating Rs 4,255 crore ($500 million) and reducing its stake to 25.9%, just under the promoter threshold.

Having invested $2.7 billion in the country—roughly the worth of its remaining stake in Swiggy—Prosus leveraged Swiggy’s listing to offset losses from other significant bets, such as Byju’s and PharmEasy. Prosus had written down its $500 million investment in Byju’s to zero and reported a negative internal rate of return (IRR) of 40% on its $250 million investment in PharmEasy as of September.

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