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Jayant Mundhra
•
Dexter Capital Advisors • 8m
Startup investing is glamourous, but not easy. And this may be the best example to explain. .. Trell was once one of the hottest and fastest growing startups around in India. And today, it's in really bad shape, hit by a dramatic loss of business and alleged financial frauds led by the founders and their associates. In FY23 alone, the revenues dropped by ~95%, crushing the prospects and the business economics. I don't know any business which made a comeback from that. .. Now, think about the people who invested there. On Trell’s captable, there was a big investor. An ace founder, seasoned investor and evangelist, she is a much-admired lady in the Indian startup ecosystem. She had inbound interest from investors, looking to buy out her stake in Trell for $250mn (as per The Morning Context)! But, like many others, she too could not time the exit right. She was bullish. And today, that $250mn is worth what? .. This is why timing your exit in the world of investing is so important, especially in the case of illiquid asset classes like startups. And that’s where regular audits, due diligence and checks and balances become so important here. Because anyway, very less disclosures are available. And what’s available, is also often curated by the founders themselves. Most founders don’t hold ill intentions, but some do. And those can cost investors a fortune. .. And that is what makes venture investing so tough. After all, most companies you invest in don’t always survive the tide of time. And for the ones which do, what matters is not how big the valuation of a portfolio firm has gotten, but how feasible the exit looks like at a given valuation. Yet, mostly, we talk about the valuations alone. .. As Nikhil Kamath days ago, there is a difference between real money and paper money. Until you score an exit, the paper money means nothing. Like, there are thousands of ESOP millionaires, most of whom never really saw that money in hand. That’s the tough deal about startup valuations. What matters is exit valuations. And the exit, itself. What do you think?
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