Heavy is the Head That Wears the Crown

Indian unicorns are raising more venture capital than ever before at pricey valuations. But are investors just betting on the status quo?

Neil Arora

October 24, 2019

Heavy is the Head That Wears the Crown
An employee retrieves products at Amazon's newly launched fulfillment center on the outskirts of Bangalore. (Getty)

Riding on a wave of optimism, investors have poured capital into Indian late-stage private tech companies to bet on their continued success. And the multiples (how pricey a company is, in relation to its metrics like earnings, revenue, or users) paid are impressively high by international standards. 

But these expensive bets might be the wrong ones, and high valuations leave little margin of error for any hiccups: slowing growth, increased competition, an influx of new internet users, and platform shifts. India’s tech scene today is eerily reminiscent of China’s in the mid-2000s, where the outlook was similarly bright, but all four trends rattled some of the presumed Chinese tech champions, resulting in surprising outcomes for investors. China’s saving grace was that entry valuations were lower. In India, however, investors have seen how well China tech bets worked, and are paying up in India in hopes of rebottling lightning.

Some of India’s biggest deals in the past couple of years include Walmart’s $16 billion purchase of a controlling 77% stake in India’s Flipkart, and over $3 billion of venture capital into Ola. Flipkart’s unit economics and burn rate were concerning to the point that early investors were debating whether their positions would go to zero. Walmart nonetheless entered the fray because the potential prize of a dominant market share in Indian e-commerce was too strategically significant to ignore — especially when Amazon was already making inroads in India.