Edtech, healthcare valuations have corrected upwards: Sequoia’s Ravishankar

The Sequoia Capital Logo is displayed on an iPhone screen. Photo: DEALSTREETASIA

Venture capital (VC) investors have been cautioning startups to focus on profitability and contain rapid growth plans to tide over the crisis due to the covid-19 outbreak.

Leading VC firm Sequoia Capital (India) surprised everyone by announcing two new India-South-East Asia funds with commitments of $1.35 billion this July in the middle of a global pandemic.

Managing director GV Ravishankar, at Mint’s Pivot or Perish webinar on Thursday, said that while deal activity saw dropped in April and May, it picked up in June-July as initially investors were trying to understand how they should evaluate startups, while the latter were gauging the impact the pandemic had on their business.

“…While it was all about reducing costs in the first two months of covid, the next step was thinking about how do we assess and survive this period and build through the future. The startup world has evolved and adapted. We never give up and are constantly evolving, innovating and are thriving,” Ravishankar said.

However valuations and deal sizes largely remain unchanged, he said.

“It is interesting and surprising that valuations have not corrected that much but it also depends on the sector. For instance, edtech and healthtech valuations have corrected upwards, whereas for travel and hospitality, you need to forget the last round valuation and relook at valuations today,” he said.

VCs have shown a clear preference for edtech startups in the first half of 2020, with $795 million raised compared to $108 million in the year-ago period. It is the only sector apart from healthcare to report a growth in number of deals, according to data from Venture Intelligence research.

Sequoia’s Ravishankar said theoretically, valuations should correct as globally there is a lot of capital flowing in and tech-enabled sectors should see positive growth and acceleration.

“From our perspective there will be nothing dramatic (in valuation drops), we aren’t seeing any global trends also to suggest that,” he added saying, what we are looking is, in the next 12-18 months can we find great companies to invest in and invest in fair prices.”

He added that the current crisis is different from the global financial crisis of the past. While those were rooted in funding issues, the current pandemic is all about consumer demand problem.

However, it is clear that those who will survive and thrive are startups that take swift corrective actions, correct their cost structures, take tough calls like slashing salaries and thus have made their business more sustainable.

“They have gotten leaner, meaner, and better and this will make them sustainable companies post this crisis. I am optimistic that start-ups are doing the right thing and they will come out winners,” Ravishankar said.

The article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.