The valuation markdown of unicorn startups continue with asset management firm Invesco cutting down foodtech startup Swiggy’s valuation by 48% to $5.5 billion, down from $10.7 billion in January 2022. Earlier in April, Invesco had also marked down Swiggy’s valuation by 25% to $8 billion. The back-to-back valuation markdown of the foodtech unicorn is in line with its closest competitor Zomato which is currently trading at a market cap of around $6.8 billion.
Swiggy had breached the $10 billion decacorn valuation in January 2022 when it raised $700 million in a fund round led by Invesco and others. The markdown of Swiggy’s valuation by its key investor also comes at a time when the company has been restructuring its workforce and shutting down unprofitable products to improve its unit economics. In March, Swiggy sold off its cloud kitchen business, Swiggy Access to Kitchens@ in a share-swap deal. The move is part of the cost rationalisation measures undertaken by the company, which had earlier laid off 380 employees, with the market turning tough in terms of raising fresh venture funding.
Several unicorns have faced similar markdowns by their key investors including Byju’s, OYO, Snapdeal, Shopclues, Quikr, Hike and Paytm Mall as investors adjust their estimates in the face of the weakening global economy. In April, BlackRock cut India’s most valued startup Byju’s valuation to half — from $22 billion to $11.5 billion. In September last year, Softbank, the largest shareholder in OYO, cut its estimated value for the firm to $2.7 billion in the June quarter from an earlier $3.4 billion after benchmarking it against peers with similar operations. OYO’s valuation reached $10 billion in a 2019 funding round.When SoftBank reported mediocre June quarter results last year, the Japanese conglomerate marked down fair valuations of more than 280 of its portfolio firms, which mostly included private startups. At that time, FE reported that this would set a worrying precedent for Indian fund managers and venture capitalists.
The valuation cuts come at a time when the current global economic climate has turned negative due to jittery markets and a funding freeze in the startup ecosystem. India’s startups are no exception, and many have had to scale back operations, cut costs, and even lay off employees to survive.The impact of the valuation cuts on Byju’s and Swiggy remains to be seen. Both companies were expected to hit public market but this could further be delayed due to the ongoing market conditions, as FE reported in March.
A prolonged funding winter, coupled with a crash in growth and late-stage deals, may turn out to be a double whammy for unicorns, with investors and analysts warning that many startups could lose their billion-dollar status due to the impending down rounds.According to a report by private market tracker Venture Intelligence, around seven Indian startups have lost their unicorn status in the last five years. From CY18 to CY22, around 105 startups had attained the unicorn status in India, but this has now reduced to 84 active unicorns due to various reasons, including seven losing valuations due to investor markdowns and another four getting acquired. Also, around 10 startups were listed in the public markets in the last five years and were excluded from Venture Intelligence’s unicorn tracker list.