Indian startups clock $9.5 billion via exits, among its largest ever

Exits, partial or full, by existing investors of startups through initial public offerings (IPOs), mergers and acquisitions (M&As) and secondary share sales jumped nearly eight times this year up to December 10 from just $1.2 billion, or about Rs 8,900 crore, in 2020, according to data from Venture Intelligence, which tracks startup deals data.

The data shared with ET is as of December 10.

This is the highest amount of exits Indian startups have been able to give investors in recent years barring 2018 when the Walmart-Flipkart deal happened.

The exit number for 2019 was $2.9 billion across 82 deals while the same in 2017 was $2.4 billion through 88 deals. In 2018, $14.8 billion worth of exits happened across 113 deals.

Founders and investors told ET that the biggest question Indian startups have had to answer over the past decade has been about the sparse exits. But with IPOs and large-scale M&As being struck, those concerns are getting addressed.

“LPs (limited partners who invest in venture funds) always wanted visibility on exit timelines from investors. While the Walmart-Flipkart deal in 2018 went through, it is not a common occurrence often in India,” said Ashish Dave, CEO at Mirae Asset Venture Investments (India). “But now with IPOs, secondary and strategic sales, there are multiple avenues opening up. These are pure-play exits as the big question gets addressed.”

Mirae’s portfolio includes food delivery major Zomato, egrocer BigBasket that has been acquired by the Tata Group, and taxi aggregator Ola.

Dave said the increasing number of exits will help investors reinvest into the ecosystem.

Besides a flurry of IPOs, 2021 also saw the mega
$4.7-billion merger of PayU and BillDesk through which investors like General Atlantic, Temasek, and TA Associates snagged an exit of $2.2 billion, the data showed.

ETtech

Online fantasy gaming platform
Dream11 and omnichannel kids-focused retailer
FirstCry executed secondary share sales of around $400 million and $300 million, respectively, to give many of their investors partial or full exits.

Huge IPO outcomes


Around $2.5 billion worth of exits came through IPOs this year, up from $113 million in 2020, as per Venture Intelligence data.

ETtech

“This is an outcome of the overall funding coming to India, which is enabling these exits,” said Siddarth Pai, founding partner at early-stage venture fund 3one4 Capital.

“Early on, most exits were stock swaps as opposed to cash buyouts,” he said. “Mid 2010s saw cash exits in the sub-$100 million range, culminating in the major Walmart-Flipkart deal… The last missing piece in the exit story was IPOs. With the IPOs of Nykaa (and)
Zomato and their resounding reception, it is clear that IPOs will be the way forward.”

Pai said stock markets judge these companies on their future prospects and fundamentals, reward them for progress, and reprimand them for any slack. “The markets are as unforgiving as they are rewarding,” he said.

As ET reported on December 24, $36 billion have been invested in Indian startups this year.

Rising Secondary Sales

While IPOs and big M&As were standout themes this year, secondary share sales in large financing rounds also occurred, triggering liquidity for investors and founders, too, in some cases.

Ashwin Damera, cofounder and CEO of edtech startup Eruditus, said the trend of increasing exits would have a positive outcome for entrepreneurs and as a result pre-money valuations of startups are also increasing. “In many cases now, first institutional funding is happening at closer to $10 million and it’s even higher for second-time founders. Investors are coming in at higher valuations because they think an exit is possible,” he said.

Eruditus closed a $650-million funding round in August this year led by Accel US and Japan’s SoftBank Vision Fund II. It included a $220-million secondary share sale, giving a part exit to its investors like Bertelsmann. ET had reported at the time that Damera and the Eruditus management may have also liquidated shares worth nearly $100 million in that round, after which the firm was valued at $3.2 billion.

In a secondary share sale, new investors buy shares from existing investors giving the latter an opportunity to cash out in parts or full as the money doesn’t go to the company coffers.

Close to $3 billion of secondary share sales were executed in 2021 compared to $453 million in 2020 and $780 million in 2019, the Venture Intelligence data showed.

Strategic sales led to exits worth over $4 billion this year compared to $620 million last year and $578 million in the year before.

“Thanks to real outcomes – the gap between wishful thinking and reality is sharply narrowing,” said Sanjay Nath, cofounder and managing partner of Blume Ventures. “What is also happening more frequently is the recycling of cash via these exits. Money-in, money-out is an important outcome of the venture lifecycle, and creates a positive virtuous flywheel,” he wrote in a blog post.

Soon after the PayU-BillDesk deal, Bob van Dijk, group chief executive of Dutch conglomerate Prosus that owns PayU, had told ET that being at scale is “incredibly important in the payments business” and that in some cases companies are better off joining forces and doing an M&A.