Catamaran Ventures, the private investment firm founded by Infosys co-founder Narayana Murthy, has expressed concern over current valuation trends in India’s startup ecosystem, highlighting steep discounts of up to 40% as early investors seek exits. The cautionary note comes at a time when the sector is grappling with shifting global capital flows, tightened liquidity, and a renewed focus on profitability over growth at all costs.
Valuation Reality
Check According to industry sources, several high-growth Indian startups are facing challenges in securing fresh funding rounds at their previously lofty valuations. Many venture capital (VC) and private equity (PE) investors are offering secondary shares at significant markdowns, reflecting both a global correction in tech stocks and local concerns about business fundamentals.
Catamaran Ventures underscored that the exuberance of the last decade, where startups commanded multi-billion-dollar valuations often without proven revenue models, is giving way to more sober assessments. In some cases, valuations have been cut by as much as 40%, leading to a mismatch between founders’ expectations and investors’ willingness to pay.
“Valuations must be aligned with reality, sustainability, and long-term value creation. Over-optimism benefits no one—not founders, not employees, and certainly not investors,” said a senior executive at Catamaran Ventures.
A Changing Investment Climate
India’s startup ecosystem, once the darling of global capital, is now navigating a period of recalibration. Rising interest rates, geopolitical instability, and inflationary pressures have reduced the availability of cheap global capital. International funds, particularly those from the U.S. and China, have adopted a cautious stance, prioritizing portfolio consolidations and profitable exits over aggressive new bets.
This global reset has had a ripple effect on India. Startups in sectors such as fintech, edtech, and quick commerce—which once attracted soaring valuations—are now facing tougher scrutiny. Investors are demanding stronger unit economics, clear paths to profitability, and transparent governance structures before deploying capital.
Catamaran Ventures emphasized that this phase, while painful, could ultimately strengthen the ecosystem. “The current environment is not a crisis but a correction. It is an opportunity for entrepreneurs to reorient their businesses around fundamentals, rather than chasing inflated valuations,” the firm noted.
Discounted Exits: A Wake-Up Call
The trend of discounted exits has become increasingly visible in secondary market transactions. Early backers of unicorns and growth-stage companies are selling their stakes to newer investors at prices significantly below peak valuations.
For instance, a number of marquee investors have reportedly sold stakes in late-stage startups at 30–40% discounts to their last funding round valuations. Such deals highlight the widening gap between paper valuations and realizable value in the secondary market.
Catamaran Ventures cautioned founders against being blindsided by headline valuations, urging them instead to focus on sustainable growth metrics. “A discounted exit is not just a number—it is a reflection of market sentiment, business performance, and the credibility of long-term projections,” the firm said in its communication
Implications for Founders and Investors
The correction has several implications for the Indian startup ecosystem:
- Fundraising Challenges: Startups will face longer fundraising cycles and greater scrutiny during due diligence.
- Down Rounds Ahead: Many companies may be forced to raise capital at lower valuations, leading to “down rounds” that dilute founder equity and unsettle employees.
- Exit Recalibration: Investors looking for exits through IPOs or acquisitions will need to temper expectations.
- Focus on Profitability: Companies with proven revenue models and clear profitability roadmaps will attract premium valuations, while others may struggle.
A Call for Discipline and Resilience
Despite the headwinds, Catamaran Ventures reaffirmed its confidence in India’s long-term entrepreneurial story. With a large digital consumer base, supportive government policies, and a growing appetite for innovation, the fundamentals of the Indian market remain strong.
“The current reset is a much-needed filter. It will separate sustainable businesses from speculative ones. Entrepreneurs who embrace discipline, governance, and innovation will emerge stronger,” the firm stated.
Analysts note that valuation resets are a natural part of any maturing ecosystem. Silicon Valley experienced similar cycles during the dot-com bust and again after the 2008 financial crisis. India, now the world’s third-largest startup hub, is undergoing its own phase of consolidation.
For founders, the message is clear: focus on building enduring businesses rather than chasing sky-high valuations. For investors, patience and prudent risk assessment will be critical.
As Catamaran Ventures concluded, “We must remember that valuations are temporary, but value creation is permanent.”
