India’s recent startup valuation boom was simply too good to last? | Mint Primer | Mint

Updated: 12 May 2023, 12:23 AM IST
Team Mint

The zero interest rate policy (ZIRP) adopted by ce… moreThe zero interest rate policy (ZIRP) adopted by central banks worldwide, led by the US Federal Reserve, pushed investors to seek higher returns, resulting in global rallies in stock markets, real estate, crypto tokens, digital art, and luxury goods. Venture capitalists were driven to invest in startups with uncertain business models, hoping to sell off the companies to new investors. However, with high inflation in the rich world forcing central banks to raise interest rates, money became more expensive, causing cash-burn business models of highly-valued startups to unravel. But in 2022, unlisted startup valuations did not immediately respond to central banks raising interest rates. A year later, the valuations have started to fall.