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HomeBusinessExclusive: Unreasonable premium imposed on unicorns, hurting startups, says TiE founder

Exclusive: Unreasonable premium imposed on unicorns, hurting startups, says TiE founder

TiE founder member Kanwal Rekhi

Image Credit source: Social Media

( News Source: tv9 ) India has now become the third largest startup capital in the world. The number of unicorn companies has crossed 100. But what is the condition of this sector at present, Kanwal Rekhi, a tech entrepreneur and founder member of The Indus Entrepreneurs, had a special conversation with TV9’s Rakesh Khar… ( News Source: tv9 )

Indian startups (Indian Startups) How are you these days? After the encouraging boom of 2021, when India created 100 unicorns (Unicorns In India) Crossed the mark, so now the current calendar year has seen an all-round decline in this sector. Profits are shrinking, valuations are not looking good and the funding position is also bad. What the hell is going wrong? About Tech Entrepreneur and The Indus Entrepreneurs (TiE) Founder member Kanwal Rekhi exposed many things. What did he say after all?

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Kanwal Rekhi says the central government has adopted an “unfair premium” on unicorns. This is causing a lot of damage to the startup ecosystem in the country. He says that apart from the government, entrepreneurs, investors and the entire value chain are also responsible for the current “funding crunch”.

Company listed on NASDAQ in 1987

In 1987, Kanwal Rekhi listed Smart Ethernet card maker Excellan on NASDAQ. He is the first Silicon Valley-based Indian-American to do so. He is currently the managing director and co-founder of venture capital firm Inventus Capital Partners.

The veteran angel investor, who was in India recently, spoke at length to TV9 Network. He told what is lacking in the startup space. He advocated a change in the mindset of the major shareholders.

Government is also the reason for startup’s problem

Rekhi says, “Part of the problem is the government putting a very high premium on unicorn status. A unicorn is a fictional figure and we must remember that valuations keep on changing. Rekhi says she saw a unicorn wave at an Indian embassy in Dallas, where success was measured on the basis of unicorns.

However, the central government says that the success rate of startups in India is relatively higher as compared to the rest of the world. To promote the startup ecosystem, the government launched the Startup India initiative on 16 January 2016 and an action plan was also prepared.

Startup success isn’t just about ‘unicorn’ status

The TiE founder’s take is that the current status of a unicorn is not a “very smart scale”. When asked what best reflects valuation, he argues, “Factors other than valuation are responsible for telling the success story of a startup.”

For Rekhi, the current model, where investors are pouring money into a particular idea, is flawed. He says, “The basic problem is that you have investors giving money to entrepreneurs and asking them to scale up. No one is paying attention to the creation of a positive economic unit. It is not a happy situation if you suffer a loss every time you sell. Unit economics is very important.

It is very important for startups to make profits

Talking about developing a better model, he said, “The current valuations are based on the money raised. We need to create companies that are stronger and more profitable and let the market determine their valuation.”

When asked what potential should be identified for profitability, the angel investor said “It is the potential of the entrepreneur. This is its balance sheet. He has to change.

Assessing the current startup landscape, Rekhi says, “India is a young nation with a lot of talented youth. They are not going to waste their opportunity. We have to instill confidence in our entrepreneurs. There are some bad people, the market should weed them out. The market has its own way of punishing wrongdoers.

This renowned investor is a firm believer in India’s growth story. He sees democracy as the main strength of India and supports America to cooperate with India, as both the countries are linked by a certain set of values.

News Source: tv9

(This is part of a four-part ‘The C-Suite’ series of short interviews with CEOs/co-founders and some VCs/consultants on business in the post-pandemic era. This conversation ranges from the inspiration behind a business idea, to the challenges , and covers the way to success.)

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