Thread by @jshilanjanm

Byju’s. Ola. Oyo. Swiggy- Why have investors slashed their valuations like crazy? 📛📛

Why should this be taken seriously? And why were they valued so high before?

Here’s why these questions deserve more attention! 👇

👉 @BYJUS
Before: $22.5bn
Now (As per Prosus): $5.9bn
Now(BlackRock): $11.5bn
Cut down twice.

👉 @Swiggy
Jan 22: $10.7bn
Now (Invesco): $5.5bn
Cut down twice.

👉 @Olacabs
Before: $7.4bn
Now (Vanguard): $4.8bn
Cut down thrice.

👉 @oyorooms
Before: $10bn
Now (Softbank): $2.7bn

But, why should these be taken seriously?

🔆 SoftBank Group Corp. is $60bn Japanese tech giant operating 2 Vision Funds cumulatively holding startup assets worth ~$130bn

🔆 BlackRock is the world’s largest investment firm managing assets (AUM) of $8.6 Trillion- 3x Indian GDP!

🔆 Invesco is also a global asset manager with AUM of $1.5 Trillion- A little over half of Indian GDP!

🔆 Prosus is meanwhile a tech investor, with assets worth $170bn!

Each of these long-term investors are listed companies with shareholders to keep happy- Or their own share price falls!

They have every reason to show that their investments are doing well.

And yet they are slashing their valuations again & again. What does that say?

📛 That they can no longer justify those lofty blue moon ‘claimed’ valuations 😓😓

📛 And, if the world’s biggest listed investors can no longer do that, then are these startups really that big at all?

That raises the question:
How were these companies valued so much anyway?

Invesco says:

🔆 Valuations are determined using SIGNIFICANT UNOBSERVABLE INPUTS

🔆 When observable inputs are unavailable (when there is little or no market activity), unobservable inputs are used

Now, what does that mean in layman's terms?

Storytelling & Vision.

Say, a guy runs a Kirana shop that does Rs 5cr revenues per year, they could get a valuation of maybe Rs 10cr.

Now, read this:

🔆 Scaled a Kirana shop to Rs 5cr sales, growing 30% annually

🔆 Aiming to build 50 such outlets across Delhi NCR to grow sales

🔆 Will offer not just Kirana stuff with private labels, but to also offer concierge services to gain a bigger share of customer’s wallet

I’m not suggesting that this is an idea that’ll get funded. What I am suggesting is this 👇

🔆 VCs, angels or startup investors are not in the biz of betting on businesses

🔆 They PRIMARILY bet on a founder & his vision. Those are the unobservable inputs

About the above-mentioned startups:

With successive rounds, the founder's storytelling & vision got more convincing & audacious backed by solid execution since the previous round was raised.

That's how the world of startups works 💰💰

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#byjus #swiggy #ola #oyo #startups #indianstartups #valuations #blackrock #softbank #invesco #prosus