Most Startup Exits In India To Happen Via IPO, Says Peak XV's Rajan Anandan

Most startup exits in India, which lead to windfall gains for founders and provide multiples on returns for investors, will happen via the initial public offering route and not through mergers and acquisitions, according to Peak XV Partners' Rajan Anandan.

"In the U.S., an exit for a vast majority of founders would be through mergers and acquisitions, for example, in Google, Facebook, Cisco and many more," Anandan, managing director at the venture capital firm, said while speaking at a fireside chat at the IAMAI India Digital Summit.

"In India, we think most exits will happen with IPOs. If you're a profitable company and you can get to a reasonable level of profitability—about Rs 30–50 crore—I would strongly urge you to go for an IPO. Because the market right now is open, and we'll see how it holds up. In India, we haven't had a large amount via M&As," he said.

Anandan opined that 2024 will see an uptick in the overall startup funding scenario compared to 2023. "In the last year, seed round funding was active, but still a tad down year-on-year. The Series A market was down about 30%, and the growth market was also down," he said.

Growth market, here, refers to funding at the Series B stage and beyond, which is usually characterised by bigger ticket amounts than seed or Series A rounds.

Comparing it with the first two months of 2024, Anandan said seed stage funding has continued to be active and Series A is also back, but the bar for funding is higher and access to capital isn't easy. "The growth market will still take some time to come back."

Indian startups don’t have enough research and development, according to former Google and Microsoft executives. "There's not enough technical depth and we don’t have enough startups building foundational models in AI, for example. As a nation, we don’t have a culture of research and development," he said.