Indian startups need to deliver good profits in 3-5 yrs: Accel's Prakash

The top venture capitalist also predicted that at least 25 Indian unicorns will go for IPO in the next 3-5 years

At a time when about 100 unicorns or start-ups valued at $1 billion or above each have emerged in India, the startups also need to deliver good profits in the next 3-5 years, said Prashanth Prakash, Partner at venture capital firm Accel, on Wednesday. He said that though Indian startups have shown their ability to get great valuations,  it is only profits that will create multi-generational companies and great initial public offerings (IPOs). It is only then one can return the $150 billion invested in India, back to the investors.

“If we don't return money to our investors, we are not going to get new capital into this country,” said Prakash, who is also chairman of Karnataka's Vision Group for startups, at the Bengaluru Tech Summit.

As a key member of Accel’s India team, Prakash is known for leading investments in companies such as Agrostar, BlueStone, BookMyShow, Glowroad (acquired by Amazon) QwikCilver (acquired by Pine Labs), Rentomojo, and TeaBox.

India is expected to witness a massive supply chain of IPOs. Prakash predicted that out of 100 unicorns, at least 25 of these unicorns will go for IPO in the next three to five years. He said through this, one would be able to create the multiple billion dollars of exit that is required to return the money back to the investors globally and in India.

“This will create a virtuous cycle of more investments coming into the startup ecosystem,” said Prakash.

Prakash’s comments about profitability come at a time when top tech unicorns, especially edtech companies, are witnessing steep losses and are laying-off employees in an attempt to conserve cash amid a funding winter.

The startup ecosystem is expected to create a value of over $200 billion by 2027. Prakash said Karnataka and Bengaluru are becoming the engine for creating this value.

Indian startups which have mainly remained domestic and focused on solutions within the country are now getting global recognition for delivering great value. These are led by the software-as-a-service and enterprise firms. Many business-to-business and e-commerce companies are starting to expand across Southeast Asian Nations and the Middle East and North Africa. Prakash predicted that in the next 3-5 years, a massive portion of the startups would show more global ambitions and garner a larger pie of the global economy.

Small tech firms have been largely focused on urban India. But there is a larger opportunity of serving about 500 million people in Bharat who are digitally enabled but have very different problems and unique solutions. For instance, in the agricultural ecosystem, there are 150 million farmers with cell phones today, but less than 10 million farmers are being served. Prakash said there is a need for agri-tech startups to focus on providing the right agronomy support and market linkages to the farmers.

“My prediction is that in the next five years, a major portion of our of our farmers will be able to double their income,” said Prakash.