It’s valuation- reckoning reckoning Hindu Businessline Funding winter. Late-stage startup valuations slashed by 40% Read more time at Indian startups. In September, Japanese venture-capital (VC) giant Softbank slashed the value of its stake in hospitality company OYO Hotels OYO Hotels The Ken What SoftBank’s US$700M valuation cut means for OYO, its investors, employees Read more *. In the same month, healthtech PharmEasy’s PharmEasy’s Inc42 PharmEasy May Raise $300 Mn At 50% Valuation Cut Read more fundraise was said to be at a 50% valuation cut. In public markets, big internet technology names like Zomato, Paytm**, Nykaa, and PB Fintech have faced punishing losses losses The Ken A year after IPOs, internet companies feel the pain of creating value for public investors Read more  a year after listing.

The funding and valuation boom that came during the pandemic is now being reversed with a vengeance. And there may be more pain in store for startups. Aswath Damodaran, professor of finance at New York University’s Stern School of Business, told The Ken that if the companies’ pricing does not reflect reality, then reality has to eventually catch up. 

Since private company holdings are based upon appraisals, rather than transactions, it will take a while for VCs to mark down the pricing of their holdings, but that too is unavoidable

Aswath Damodaran, professor of finance at New York University’s Stern School of Business

Hard questions are being raised about why startups were assigned excessive valuations earlier. How did the companies manage to get such valuations? Who were the valuers? Did investors question these? 

The Ken dug into valuation reports at the ministry of corporate affairs’ (MCA) portal filed by a few startups. The findings are striking.      

For instance, could the fair value fair value Fair Value Fair value is the estimated price at which an asset is bought or sold when both the buyer and seller freely agree on a price. of a startup’s share zoom 8,000% in 17 months—Rs 11 lakh ($13,510) in July 2022 from Rs 13,000 ($160) in February 2021?