SoftBank and Sequoia warn of impending correction in private tech markets

Bangalore/ Mumbai: Two of the world’s most influential tech investors have signaled an impending drop in private valuations amid a major US public market correction, which has hit tech stocks. SoftBank Vision Fund CEO Rajeev Misra at a virtual event hosted by US news site Axios on Thursday said private markets are “overvalued” relative to public markets and rebalancing is on the cards . “If public markets stay where they are, then private markets, which are overvalued, need to rebalance. And we are already seeing that,” he said.

Echoing Misra’s sentiments, Sequoia India Managing Director Shailendra Singh said on Twitter that he was looking forward to a much-needed correction in the startup funding environment and that thankfully the conversations are returning to focus on income, products, unit economy and savings.

The potential slowdown in deals and valuations this year follows a record funding year in which Indian startups
raised over $36 billion in capital as ETtech reported last month. Over 40 new unicorns were minted in 2021.

The unprecedented year for Indian and global tech startups, which also saw a large number of companies go public, began to show signs of slowing down as investors rushed out of top-flight tech companies in the States -United. This decision was taken in anticipation of an increase in US interest rates by the Federal Reserve to control inflation in the country.

India’s software-as-a-service (SaaS) leader, Freshworks was cut to half its market capitalization after listing on Nasdaq in September last year. Currently, the company’s market capitalization is $5.8 billion, having hit an all-time high of $13.5 billion in early November.

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Misra and Singh’s comments are important as their funds power a significant number of deals in India and overseas. It also means that companies will have to readjust their assessment requests. “I think some (of the correction) is visible (and the pace at which deals close will slow down as well. Startup valuations have been overheated throughout the last year and a correction was overdue,” he said. said a founder of one of India’s most valuable startups, which counts Sequoia Capital among its investors.

Tiger Global, the New York-based investment fund that has been instrumental in boosting the number of unicorns in India, said it posted losses in 2021. This was attributed to the plummeting of tech stocks in the last two months of the year. .

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Tech stocks in the United States have taken a severe beating as part of the broader track in public markets. The tech-focused Nasdaq 100 fell 1.3%, 10% lower than last year’s November peak, Bloomberg
reported Friday. Elsewhere, Peloton, the exercise bike maker, which has gained massive traction driven primarily by the pandemic, saw an erosion of more than $2.5 billion in market capitalization following reports from CNBC. that it was temporarily suspending production of new equipment amid reduced demand.

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