Rs 220cr Seed Funding at Rs 800-1k crore Valuation!
So, are we back in the exuberant times?
Mega seed funding rounds are back as days ago, Myntra and Cult founder Mukesh Bansal raised a seed round of $26mn for his new venture- Lyskraft.
That’s about Rs 220 crore! So, are we back in the exuberant times?
Let’s deepdive into what this means.
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First, some theory:
Ten years ago, India had about 51 major VCs, PE or Family Office entities which invested in startups
Now that has grown fiercely competitive, with the figure being north of 1.2k such entities
That explains why the average seed round in 2014-2015, or even 2017-2018, was under $1 million, which has now grown to about $2-2.5mn, which is raised at ~$8-10mn valuation (Rs 65-85cr).
When a good founder or startup comes around, VCs go all in, chasing them for an allocation.
FOMO is a powerful driver here.
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And when we say good founders, the category which tops the list is that of seasoned and repeat founders.
These guys command a big premium in the market when they go out raising funds for their new ventures.
And that too makes sense.
But, Rs 220 crore funding at Rs 800-1k crore valuation for something at the seed stage?
That’s 10x of the average we just talked about!
Leaving aside some star startups, in most cases, mature, scaled and proven startups also don’t get valued that way, irrespective of how seasoned and pedigreed the founder may be
How does this make sense? Especially when we have already lived through those crazy times when we saw it happen first during COVID-19?
Before Covid, there was only one major instance, when Cred’s Kunal Shah raised a $30mn seed round in 2018
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I get it. Mukesh Bansal's track record does carry significant weight.
The valuation reflects the investor confidence in his capabilities, more than the specific business model at this early stage.
Yet, how are such inflated valuations being arrived at valuations right out of the gate, regardless of the actual traction?
That too for a startup in a space where nobody except Reliance’s AJIO has begun to make profits after years of investment and burn, including Myntra, Tata Cliq, Nykaa Fashion etc
As a newbie to angel investing and VC space overall, I find it deeply unsettling and crazy
Are we back to the days where 'potential' outweighs 'proof'?
I may be wrong. But, this feels like déjà vu.
Like we setting ourselves up for another cycle of overvalued startups followed by harsh corrections? Lessons from the past seem to be forgotten quickly.
Probably dividing that Rs 220 crore into Rs 20 crore cheques for 11 startups at the seed stage would have sparked more sense for someone like me.
But then, what does a newbie know? Here to learn!
What do you think?
Best,
Jayant Mundhra