Startups must be cautious in burning cash as funding sources could dry up in the next six months, said Aakash Moondhra, global CFO of Naspers-backed PayU.
Moondhra, who was Snapdeal CFO before joining PayU, joins a growing list of industry executives who believe that startup valuations are overstretched.
Speaking at VCCircle's training workshop on e-commerce valuation, Moondhra said: "There are 24 companies that have been funded in the hyperlocal space so everybody is on a bandwagon. It's going to be brutal in six monthsâ€¦only a few will survive the next 12-18 months."
Addressing a gathering of about 50 delegates, Moondhra said that majority startups are being overvalued in seed funding/Series A rounds. "I don't think we can digest higher valuations for too long," he added.
Times are changing and the market could take 'an ugly turn' if fewer streams of capital are available in six months, he added. Hence, firms should have checks and balances in place to monitor their spending. Recently, SoftBank's president and chief operating officer Nikesh Arora had expressed concern that some of the Japanese conglomerate's investee firms in India are overspending as they scale up.
A chartered accountant with an MBA from Southern Methodist University (the US), Moondhra had previously worked at Baring Private Equity Partners (India), Bharti Retail, Bharti Airtel and AT&T. He quit as Snapdeal CFO in April year after a three-year stint where he was also responsible for legal, corporate affairs, internal controls and risk management. He joined online payments and mobile wallet company PayU, which has operations in 18 countries, last month.
In addition to managing finance operations at PayU global, Moondhra will also play a role in shaping Naspers' fin-tech business. Founded in 1915 and headquartered in Cape Town, Naspers, together with its subsidiaries, is a worldwide provider of e-commerce, pay-television and print media services. In addition to Ibibo, Naspers also has positions in Indian firms OLX and Flipkart.
While listing do's and don'ts for startups, Moondhra pointed out that firms should be flexible with their business model/plans and make changes if required.
Conviction, passion and a right team are pre-requisites for any startup to be successful, he said.
"A lot of people would be giving you advice but you have to filter it out. Conviction and passion are important," he added.
Rising investor count
Interestingly, data shows that more and more investors are getting attracted to Indian startups. The Indian startup ecosystem is being propelled by a 123 per cent rise in the country's active investor count, IT industry body NASSCOM and Zinnov Consulting said in a new report.
"Number of active investors grew from 220 in 2014 to 490, (reflecting a) growth of about 123 per cent over 2014," the report titled 'Start-up India â€“ Momentous Rise of the Indian Start-up Ecosystem', said.
The number of accelerators/incubators in India grew by 40 per cent to 110 this year as compared to 2014.
On the other hand, the country's angel investor count grew by over 150 per cent to 292 from 115 last year, the study found.