Elevation Capital: ET Startup Awards 2024: Mukul Arora surpasses exit metric to bag ‘Midas Touch’ award

A reboot in the risk investment The industry after the exuberance of 2021 is bringing the sector back to basics, with companies that have compelling business models, customer value propositions and strong results. corporate governance growing rapidly and capturing the attention of investors, Mukul Aroraco-managing partner of Lifting capitalhe told ET in an interview.

“Due to capital availability “In 2021 and early 2022, a lot of fundamental assumptions were questioned… Now, this consolidation has brought us all back to basics… saying that all those laws remain in place and it’s just that they were temporary,” he said, adding that The longer the 2021 window had lasted, the more capital would have gone to companies that did not meet the basic criteria of business models and good governance.

Arora, an IIM-Lucknow alumnus, who rose from associate to co-managing partner at Elevation Capital (formerly SAIF Partners), has written checks to some of India’s most valuable consumer internet startups, including omnichannel retailer FirstCry. , public market-bound food and grocery delivery company Swiggy, edtech company Unacademy and used car sales platform Spinny.

Arora was proclaimed winner of the coveted Midas Touch category for best investor at the ET Startup Awards 2024. The select awards jury praised Arora’s investment acumen, based on his bets in a wide range of sectors, as well as his ability to exit at the right time.

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“People are now seeing where great businesses are being built and for us as an ecosystem that is great news. From an investor’s perspective… people look at India and say how much capital has come in and how much we have gone out. This fix ensures that most of the incremental capital and talent goes to high quality companies. “This is a great blessing for us,” he said.

In a year where venture capitalist exits have been in the spotlight, Arora said that in terms of timing of exits, it was better to be in a position where an investor exits and the company continues to operate. well instead of falling shortly after. an exit.

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“Our general philosophy is that if we invest in the right companies… every time we exit, we will look bad in 2 or 3 years because, by definition, they are high-quality companies,” he said. “If we go out and those companies go down… we don’t want to be in those situations… and we’ve seen it in India. Our opinion is that we would prefer to look bad 3 to 5 years later because those companies are still doing well,” he added.

Arora has made partial exits from companies like Swiggy, FirstCry, Unacademy and Xpressbees. Elevation Capital is also involved in the offer for sale component of Swiggy’s upcoming IPO.

Great results

Over the past 12 to 15 years, as India’s venture capital ecosystem has matured, the focus has increasingly shifted to the ability to earn big returns on bets made by these venture capital investors. .

When asked how he sees the performance of the venture investment industry, Arora said, “Overall, the venture ecosystem in India is still very early days. Therefore, if I look at the entire performance of the industry, I think it has been okay and not great. But like I said, we’re still in the early innings.”

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He stressed that the country is reaching a turning point and the multiple IPOs of new economies that have hit the markets since 2021 “have been very important.”

“Some of them, which are performing well, will set a very strong path for many other companies in the coming years,” Arora said.

“You can’t advance or accelerate some of these things artificially. Zomato today it is a 30 billion dollar company…we could not have imagined these results before. So, the ecosystem is getting there,” he said, adding that the 2021 boom resulted in an overcapitalization of the global technology system, causing results to be disproportionate.

“If the inputs are in line with the maturity of the ecosystem, then I think the returns will be better. If inputs advance a lot like they did in 2021, then obviously the returns on that capital will not be great,” he said.

Exuberance of public markets

While expressing concern over valuation multiples in the broader public markets, which in India have been on a bullish streak, which has also led to new-age companies heading straight for IPOs, Arora said that Most of the money that came into startups through IPOs went into high-quality companies.

“If I look at India’s fundamentals, we are in a very favorable position: be it our growth rates among all major economies, our stable currency, low inflation, stable government… there are many things in our favor, which is boosting investors. interest. At the same time, valuations are also rich,” he said.

“In terms of IPOs specifically, the largest dollar share goes to high-quality companies, so I’m not too worried about that. But I doubt that the current valuation multiples for the broader market can be maintained in the long term,” he added.

Investors across the board have also pointed out the frenzy in the stock markets, where startups, even in the growth stage, prefer to approach public markets in search of higher valuations than those they get through private investments. .