According to an ET Now exclusive interview with Info Edge India Founder & Executive Vice Chairman Sanjeev Bikhchandani, the Indian startup ecosystem is approaching its next major inflection point. Speaking about the IPO market, Bikhchandani stated that "I think it may take a few months, but the IPO market will return." He emphasized that "a key factor is the return of foreign institutional investor (FII) capital to India. If we can attract those flows again, markets will recover, and IPO activity will pick up." While acknowledging that India currently lacks major foundational AI or semiconductor plays compared to markets like Korea, Taiwan and Japan, he noted that "if enthusiasm around AI investments overseas moderates, we could see capital flow back into India, which would be beneficial for our markets." The latest data shows that over 60% of mainboard IPOs listed at a profit in 2024, indicating strong market performance and investor confidence in the current economic climate.
As reported by ET Now, Bikhchandani highlighted the significant maturation of India's startup ecosystem over the past 17 years since Info Edge started investing and 36 years of entrepreneurial experience. He noted that "the startup ecosystem has matured significantly over the last 17 years since we started investing, and over the 36 years that I have been an entrepreneur. Markets are much larger today, many more entrepreneurs are building businesses, funding is available, and IPOs have become a viable exit route." According to the interview, this maturation has resulted in India now having one of the top two or three startup ecosystems in the world, representing a major achievement for the country's entrepreneurial landscape. The ecosystem has also seen the emergence of mini-IPOs, offerings where startups go public at valuations between $500 million and $1 billion, indicating a shift towards more sustainable public-market expansions.
According to the ET Now exclusive, Bikhchandani acknowledged "a great deal of promising activity in AI and deep-tech startups" but emphasized that "most of these companies are still at an early stage and relatively small." He explained that "it will take time for larger companies to emerge. While there is substantial innovation happening in AI applications, there are comparatively fewer companies working on foundational AI technologies. Building those capabilities will take several years." The interview noted that while there is promising activity in AI and deep tech, the ecosystem is still in its early development stages with substantial innovation occurring but limited companies working on foundational AI technologies. AI is revolutionizing sectors like finance and healthcare by enhancing efficiency and decision-making, with the technology expected to redefine industry standards as it matures and integrates into everyday operations.
As reported by ET Now, Bikhchandani outlined the approach to valuing AI startups, stating that "We evaluate AI startups much like any other startup. At the earliest stages, companies are valued based on their promise rather than cash flows, because there are no meaningful cash flows yet." He explained that "traditional valuation methods, such as discounted cash flow (DCF) analysis, are often not applicable. Instead, we assess the founding team, the quality of the idea, and the size of the opportunity. If those factors are compelling, we invest." This valuation methodology reflects the early-stage nature of AI startups and the focus on potential rather than current financial performance, ensuring that promising companies receive appropriate funding despite their nascent revenue streams.
