Unbox: The IPO Beeline to Liquidity

Hi and welcome to the July 2024 edition of Unbox. Public market outings are currently all the rage with startup companies, fueled until now by private capital. We talk about the liquidity season in India’s startup market; the good, bad and ugly from the Union Budget that just went by; going-ons at The Cafe Upstairs; and more. Dive in.

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India’s buoyant public markets have lately become the destination of choice for companies backed by private capital. In July, Mumbai born InMobi, the country’s first venture capital-backed unicorn, unveiled plans to relocate its corporate headquarters from Singapore to India as a precursor to listing on the bourses here. InMobi joins a long line of PE/VC backed companies headed to the local public markets in the next 12-18 months, signalling growing confidence in the economy’s long term growth prospects.

So far, as many as 10 PE/VC backed companies have already gone public – quite the rebound compared to just eight such IPOs in all of 2022 and 2023. The 10 companies cumulatively raised over $3 billion, per data collated by Inc42, from private investors during their lifetimes before going public.

For PE/VC investors, the IPO beeline spells liquidity that’s been long pending in most cases. The current boom in the public markets is an obvious draw for investee companies. But, it’s also pertinent to note that the ongoing downturn has been an important catalyst. The long drawn funding winter forced by the withdrawal of free money has compelled stakeholders in the startup ecosystem to go back to basics and focus on generating real value. 

With several big-ticket IPOs still waiting in the wings over the next several months and private capital trickling back, we feel optimistic that the hard work put in by companies and investors over the last two years into building sustainable businesses will eventually pay off across venture capital portfolios.

Union Budget 2024, unveiled in late July in the aftermath of the general elections, was a mixed bag for the private equity and venture capital industry. Among the positives, the abolition of the so-called ‘Angel Tax’, a thorn in the side for startups and private investors for over a decade, was cause for much celebration within the ecosystem. The move, coming as it does at the tail-end of a long-drawn and painful funding winter in India’s startup arena, will boost entrepreneurial spirit and innovation.

Apart from the ‘Angel Tax’, the Budget also touched upon buybacks and long-term and short term capital gains tax. Spacetech got a boost with the Budget making a provision for a Rs 1,000 venture capital fund to kickstart capital flows into the nascent sector.

Lightbox CFO and General Counsel Rashmi Guptey unpacked the key takeaways as relevant to the startup and venture capital ecosystem. Read the article.

Indian startups fired fewer employees in the first half of 2024 compared with the previous six months and a year earlier, an indication that the worst of the layoffs may be over for the sector though it is still not out of the woods, The Economic Times reported.

Rebel Foods, the operator of dark kitchens under the Faasos, Behrouz Biryani, Mandarin Oak and Oven Story brands, is set to invest ₹100 crore to ₹200 crore to open more such facilities and expand its food court format EatSure as dining out makes a comeback after the pandemic, Mint reported.

Continuation funds are gaining momentum in India’s venture capital market as fund managers look to deliver liquidity to limited partners and improve potential returns from existing portfolios, Mint reported.

Building a powerful, relatable brand is almost as challenging as building a business. Companies, especially startups often struggle with the former largely because the process of building a brand takes much more than cold data and statistics. Yet the two are inextricably related.

In the latest session of Lightbox Espresso, Raja Ganapathy joined us to talk about his learnings from building multiple brands over a nearly three-decade career. Ganapathy founded Spring Marketing Capital in 2019 with Arun Iyer and Vineet Gupta to help startups think through their brand journeys in a holistic fashion rather than in isolation to company building.

Watch the session in the video below:

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