Mukul Gulati on Shifting Dynamics in the Indian Startup Ecosystem

In a conversation with Business Insider, Mukul Gulati, President and Chief Investment Officer of Zephyr Management, discusses the evolving landscape of the Indian startup ecosystem, shedding light on founder behavior, investment trends, and exit strategies.

Navigating India’s Business Terrain

With over 30 years of global business experience, Zephyr Management, headquartered in New York, has established a significant presence in emerging markets. In India, the firm’s journey spans 17 years, marked by a nuanced approach tailored to the local context. Gulati emphasizes the importance of execution in India, where management teams play a pivotal role in driving business success.

Adapting to Market Realities

Reflecting on the recent funding climate, Gulati observes a shift in founder behavior, attributing it to the waning allure of inflated valuations. As the funding frenzy subsides, founders are recalibrating their focus towards sustainable growth and profitability. This newfound pragmatism among founders signifies a maturing ecosystem, where sound business fundamentals take precedence over fleeting valuations.

Challenges and Opportunities in Exits

While exits remain a perennial challenge, Gulati acknowledges the improving exit environment in India. Public markets are maturing, albeit with a heightened emphasis on financial performance. Similarly, sales to financial sponsors have gained traction, driven by the influx of private equity funds seeking investment opportunities in India. Despite these advancements, strategic sales remain relatively scarce, signaling a need for increased investor confidence and strategic alignment.

Looking Ahead

As India’s startup ecosystem continues to evolve, Gulati remains optimistic about the prospects of value-driven investments and strategic partnerships. By fostering collaboration between investors and entrepreneurs, Zephyr Management aims to catalyze sustainable growth and innovation in India’s dynamic business landscape.