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Startup binge stirs bubble memories

columns Updated: Feb 08, 2015 22:36 IST
N Madhavan
N Madhavan
Hindustan Times
Silicon Valley

Once bitten, twice shy. I think back on the heady days of 1998 and 1999, when India’s internet penetration was very low and yet there were mushrooming companies aiming to go public or get acquired like their counterparts journeying from the Silicon Valley to Wall Street. Then most went bust, starting rougly in 2000. Now, there is a funding binge again.

In the past couple of weeks alone, leaving aside the big funding news last year centred around companies like Flipkart, Snapdeal and Zomato, there have been some eyecatching investments showing a deep investment appetite for young technology-driven Indian companies.

Mumbai-based baby products e-commerce firm received $26 million in funding,. Cab aggregator TaxiForSure confirmed talks to raise $80 million. Digitial video seller Aleph Group got $18 million. Discount coupon generator FreeCharge raised as much as $80 million — nearly `500 crore. NewsHunt, a regional language content provider for mobile users, raised about $40 million.

The biggest of them all was a 25% stake in Noida-based One97 Communications from an affiliate of Chinese e-commerce giant Alibaba — and this is estimated at $500 million or so. No doubt One97 was already set for an initial public offering (IPO) of shares years ago and now has a hot payment unit called PayTM. Still, an estimated valuation of $2 billion (`12,000 crore) is no mean number.

The funding is broadly aimed at a surging e-commerce and mobile content boom as hundreds of millions of Indian customers get on to various kinds of internet access from cheap “smart feature phones” to high-speed 4G and broadband links.

In the absense of clear numbers, a lot will depend on “the growth and consolidation story” these companies sell — first to venture capitalists and then to retail investors. Profitability is not on top of the mind. Wonder what legendary investor Warren Buffett would have to say on this.