Smart money is just dumb money that’s been through a crash - –Naval Ravikant
In Indian startup scene, the dichotomy of divergence from an entrepreneur and an investor perspective has been widening. Thought process needs a course correction especially in terms of business valuations. In my last year’s write-up on Zomato IPO, had deliberated the valuation concerns on new-age startups in general. As an investor, I had my reservations in terms of over-valuations and things haven’t change much!
The question is how long will this wealth erosion for retail investors last? What are the lessons to be learned? What can SEBI or industry do to have meaningful valuations during the IPO process?
Apart from retail investors, the trend of Mutual funds (so called experts and Fund managers whom we pay a performance fee etc!) also subscribing to startup IPOs at hyped-up valuations is worrying. There are already murmurs that these are potentially deliberate ploy by some fund houses to provide exits to private equity folks! Lessons still seems to be not learnt and anchor book of Delhivery IPO is a case to be debated (see below)
The paradox of Value creation Vs Valuations (pricing) needs to be debated more vigorously in a India startup context and media can play a big role. We need more Deans of Valuation who can bring saneness to markets and as well as celebrate real entrepreneurs and not hyped up funding/cash burning unicorns or soonicorns!
Startup valuation is all about the story. It's like finishing a book someone else started writing, except the author has died during the first chapter itself. - Aswath Damodaran
Do check-out this master class on Valuation by Dean of Valuations!
Also, Rajiv’s take on current on nexus between VCs and Investment bankers etc is very insightful. It really resonated with me on the need to educate people about not falling for hyped-up valuations and need to recognize “real” entrepreneurs! Its the need of the hour so that we can stop erosion of retail investors wealth!
