The next big idea is called India, says Rajan Anandan

Rajan Anandan, MD, Sequoia Capital India, says that in 2021, the startup ecosystem is going to be much healthier than it has ever been across revenues, across user growth and also across underlying unit economics and profitability.

What are your expectations regarding vis-a-vis the startup ecosystem in 2021?
As we go into 2021, the Indian startup ecosystem despite a very challenging three months — April-May-June — has largely recovered. We are exiting the year with much stronger underlying unit economics thanks to faster adoption of digital.

As we go into next year, first of all, we should expect accelerated growth across many sectors like e-commerce on both users as well as monetisation perspective. Secondly, continued focus on improving underlying unit economics. We will now begin to see two things that have been quite elusive in the Indian startup ecosystem; one is revenues which have been quite elusive. We have had plenty of user growth. We have actually been quite strong on investments but revenue and absolute revenue growth at scale has been quite elusive.

We started seeing this about two years ago but this year we saw an acceleration of revenue and next year we are going to see continued acceleration of revenue growth and companies that are going to get a significant scale on revenue.

Secondly, we are going to see continued improvement on the underlying unit economics. We are still in the middle of Covid as we exit 2020, but in 2021, our startup ecosystem is going to be much healthier than we have ever been across revenues, across user growth and also across underlying unit economics and profitability.

In the last couple of months, we have seen very strong statements from the larger startups about how they want to go in for IPOs. IPOs are considered to be the best exit for investors but could 2021 be that defining movement for the startup ecosystem?
In 2021, we will embark on a new era for India’s startup ecosystem that will be defined by scale, revenue, companies that have much better underlying unit economics and second, IPOs.

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2021 will mark as an ecosystem, as an industry the first set of sorts and it is not going to be for one or two years, Every year, we have had one or two IPOs. IndiaMART was the last big Indian tech IPO. but we will start seeing quite a number of Indian companies going public. Many of them will go public on the Indian exchange but the single biggest unlock for our ecosystem at this stage is the ability of Indian startups to list on international exchanges.

The government has been very progressive on this front and they are working on the final details of this change and we are hopeful that over the next couple of months, we will see this coming to effect and once it comes into effect, Indian companies will go public on international exchanges and then Indian companies will be able to decide whether they want to go public on the Indian exchanges or not. We are going to see several Indian startups go public on the Indian exchanges next year but we will also see going public on international exchanges and most likely on exchanges like Nasdaq. So, a new era is coming upon us in 2021 across many dimensions.

What would your advice be? Should it really be up to the startup founder to decide whether to list on NASDAQ, Singapore or Hong Kong or list back home in India? What would be beneficial for the ecosystem?
It should really be the option of the startup whether they want to go public in India or whether they do it outside of India. Keep in mind that the companies that list outside India are doing it for a reason. They are doing it because they have a certain growth and profit trajectory which would make it viable for that particular company to go public outside of India. It really should be up to the startups to decide if they want to list in India or do so directly outside of India.

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Sanjeev Bhikchandani of InfoEdge India recently spoke about how we are seeing the likes of Y combinators or others getting founders and start-ups flip, to change the domicile status. He is not against foreign investors but feels this is not good for the India growth story. Your view?
At Sequoia Capital India, we do not require any founder to flip their companies. In fact, at Sequoia Capital India portfolio, we are very fortunate to have several of hundred companies in our portfolio in India and many of the marquee names of the Indian start up ecosystem. There are companies like Byju’s, OYO, Zomato and Unacademy. They are all incorporated in India; they are domiciled in India. In our portfolio we are very clear that we have to do what is right for the founders and we have to do what is right for the company. At Sequoia Capital, we do not really require our companies to fillip.

There are always events which define the evolution of the ecosystem. Going forward, what is the next big event?
The next big idea is called India. We are seeing innovations across sectors. When I say it is called India, what I mean is that across many segments, it is building for India, it is building for the world. I do not think it is isolated. In 2016, it was about payments and that was triggered by UPI; maybe 2018-19 was about EdTech. But going forward, I do not think the next decade is going to be focussed only one or two sectors. In health tech, we are going to see many large companies being built out. In fintech, we have already had many large companies. We are going to see that number grow very rapidly.

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We have six SAAS unicorns and that number is going to triple very quickly. Across many different sectors, we are going to see accelerated innovation and that is very special and it is no longer about only one or two sectors.

In order to have a very healthy start-up ecosystem that is firing on many cylinders, anytime you have only one or two cylinders, you are at risk. Even in e-commerce, there is say Flipkart, Amazon, Nykaa. We have got a few vertical players. A company like Meesho which is leading the social commerce wave or companies like Bulbul and others which are leading into a wave. So, in some of these established spaces, we are seeing the birth of a new generation of companies and in other spaces, we are seeing the first generation of mega companies that are going to get built.



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