Zerodha Chief Nithin Kamath Advises Startups To See Public Markets As Entry Point Not Exit Kamath further noted that the possibility of future IPOs would likely become tougher soon

Stock trading platform Zerodha's founder and CEO Nithin Kamath believes that Indian founders and executives mustn't see the public markets as an exit but an entry point, according to a report in The Economic Times.

"The problem with the startup ecosystem is that everyone is looking at the public market as an exit but really it is an entry as in you are getting retail investors who can take the least risk [of any investor] on your cap table. So you should leave some value on the table for that, right?" asked Kamath during his address at The Economic Times Startup Awards, recently held in Bengaluru.

There was a sense of bearishness in the stock markets in March and April because the first set of Indian startups to go public in 2021–such as Zomato, Paytm, Nykaa and Delhivery–have performed poorly on the bourses, stated the report.

"Memories in public markets last much longer than in the private markets and unless a few companies cannot make money, it is hard to see how a lot of new startups could come and raise money from the public market," Kamath said, adding that he'd do "anything it takes", including raising money at a lower valuation, were his company left with merely a 12-18 month cash runway.

Kamath further noted that the possibility of future IPOs would likely become tougher soon. "The thing about retail investors is all those IPOs, the tech ones, did not have too much retail subscription. It was just 15-20 per cent at max, so most of them were institutional investors," he said.

"If a company lists at say Rs 100 and it comes down to Rs 70, that is when retail investors get sucked in because they are kind of benchmarking [Rs 100] as the right price for this thing, and as soon it becomes cheap, they buy it. So, I think retail investors lose more money when a company lists at a specific high price and then starts its downward journey," Kamath explained.

He also highlighted the increased scrutiny on startups from various regulators, including the Reserve Bank of India and the Securities and Exchange Board of India, which would quite possibly increase the pressure on investors.