From the CapTable The IPO domino effect big money is quietly betting on The offer was tempting—a chance to buy into Razorpay at a price that might be a shade lower than the fintech major’s last $7.5 billion valuation. With an IPO pencilled in for the next 12–18 months, it seemed like the kind of bet a secondaries investor would usually jump at. But this one walked away. Even at a discount, the price still felt “too much” for the secondaries-focused venture capital firm, especially if there was no clear path to a sustainable—and substantial—exit. For funds in the secondaries business, timing is everything. They typically back companies that are no more than two years away from going public, with the aim of selling in the IPO or eventually after. And with dozens of Indian internet-first companies eyeing listings in the past 18 months, such deals have been on the rise. In fact, the government’s own Rs 10,000 crore Fund of Funds reportedly plans to focus on secondaries. Secondaries are typically part of late-stage funding rounds. Not too long ago, late-stage investing was a well-rehearsed play. Crossover and hedge funds—think SoftBank, Tiger Global, Insight Partners, Alpha Wave Global—would swoop in once a startup had scaled, cut big cheques, and let early investors cash out some of their stake. The rest went in as fresh capital, giving the company bigger shoes to fill ahead of a splashy IPO. The playbook was simple: get in late, ride the final growth spurt, and walk out with public-market gains. However, for such investment deals to make sense, there has to be a window to sell, and more importantly, a price that delivers a “meaningful” return. On the first count, India’s startup market—the world’s third-largest—looks ready as tech IPOs have become a reality. On the second, however, the jury’s still out. That uncertainty was enough for the Razorpay deal to be passed over. Continue Reading
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