In late October, Silicon Valley venture capitalist Bill Gurley, speaking to The Wall Street Journal about technology start-up valuations, said, “All these private valuations are fake. They’re all on paper."

Gurley, managing partner at San Francisco-based venture capital firm Benchmark, has been openly critical for a while of the dizzying valuations attributed to technology start-ups in recent years. His criticism is directed in particular at unicorns, the common term for technology start-ups privately valued at $1 billion or more.

Until a couple of months ago, Gurley’s criticism had few takers in India’s start-up ecosystem. In fact, back in October, few venture capitalists and even fewer entrepreneurs would concede to a valuation bubble.

Sure, there had been a few upsets. Zomato, the restaurant discovery platform backed by Info Edge India Ltd and Sequoia Capital, had fired 10% of its staff as part of a cost rationalization drive. Food ordering start-up TinyOwl, backed by Matrix Partners and Sequoia, had laid off more than 100 people and shut down offices in some cities as it battled a cash crunch. Property search and listings platform Commonfloor was on the block as it failed to draw fresh capital despite having investors such as Tiger Global Management and Google Capital on board.

But, unlike elsewhere in the world, where unicorn valuations were being marked down with alarming frequency by mutual funds, India’s unicorns held their mythical valuations. E-commerce bellwether Flipkart was still going strong at $15.2 billion. Rival Snapdeal was cruising along at about $5 billion. Budget stays aggregator and unicorn aspirant OYO Rooms had just snapped up $100 million from Japanese investor SoftBank and others, taking its valuation to a reported $400 million. Even seed-stage start-ups were raking in $1 million rounds. What bubble?

In the past two months, however, some of that exuberance has tempered. People still aren’t talking in bubble terms, but they admit that a correction is underway in India’s start-up funding market. The correction is evident from the numbers for the concluding quarter of 2015. A KPMG report, based on data compiled by research firm CB Insights, shows that venture capital-backed firms in India raised $1.5 billion in October-December 2015, down 46% from the $2.8 billion raised in the July-September quarter. The volume of deals also declined to 114 from 139 in the preceding quarter.

The numbers are down primarily because of a correction in later funding rounds, specifically in the Series B and C stages where valuations were most frothy. A quick survey of deals reported across media shows that after September, there has been a marked decline in Series B and C stage deals, especially in terms of value. Compared with the past, only one deal crossed the $100 million mark—hyperlocal delivery service Grofers raised $120 million in a Series B round led by SoftBank.

The ticket sizes of the remaining 15 deals in those stages were well below the $50 million mark. After Grofers, the three largest deals involved e-commerce company Naaptol ($52 million), PepperTap, another hyperlocal delivery service ($40 million), and ethnic products marketplace Craftsvilla ($34 million).

Apart from the decline in deal ticket sizes, later-stage rounds are also in a somewhat different complexion in terms of the investors involved. Out of the 16 deals reported, six were led by strategic investors such as SoftBank, Paytm, Snapdeal, Amazon, Mitsui, and even a local family office backed by the Murugappa Group. Venture capital firms have been less visible, preferring to divert their resources to younger companies at the seed and Series A stages. Not because their resources are running scarce—India-dedicated venture capital funds raised a little more than $2 billion in fresh capital last year, according to data compiled by the Emerging Markets Private Equity Association.

Most venture capitalists believe that valuations will correct further. In January, Mint reported that practically every leading venture capital fund in the market expects valuations for mid-stage deals to be between 25% and 50% lower than the 2015 levels. That, most reckon, will take another 6-8 months to play out, and they’re willing to wait. They can afford to wait because hedge funds, notably New York-based Tiger Global (which invests in start-ups from a separate venture capital fund), are no longer breathing down their necks. Hedge funds, until recently among the most aggressive dealmakers in India’s start-up market, are on a hiatus due to the recent turmoil in the public markets.

While venture capitalists have started to come to terms with the downturn, entrepreneurs are still holding out. This isn’t unusual. Historically, private valuations have always lagged the public markets by a few months. But, there’s no doubt that they will eventually correct. Entrepreneurs can take cues from the recent markdown of the value of Flipkart shares owned by mutual funds. The latest to do so is Morgan Stanley Institutional Fund Trust, which has written down the value of its minor stake to $58.9 million, as of 31 December, from $80.6 million in June.

The Morgan Stanley markdown brings Flipkart’s valuation down to about $11 billion from the $15.2 billion the company claimed when it raised its last round of funds. That’s a fairly big hit, assuming that the lofty valuations that Flipkart claims aren’t, as Gurley suggests, imaginary.

Flipkart is a bit of a lodestar for the country’s start-up ecosystem.

That makes the markdown the strongest manifestation yet of the correction that is currently underway in India’s start-up funding market.

Winter is here. Make no mistake. But, as anybody who’s lived through a couple of downturns would know, it’s also when the most interesting start-ups are born.

Snigdha Sengupta is the founder of StartupCentral, a digital news and analytics platform focused on venture capital. She also periodically contributes stories on venture capital and private equity to Mint.

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