**Investors Seek Better Terms in Pre-IPO Funding Amid Market Volatility**
As of May 2, 2025, several companies, including Pine Labs, Porter, Groww, Zepto, and Cred, are actively raising pre-IPO funds. However, the current turbulence in public markets has led investors to demand lower valuations, increased equity stakes, and enhanced exit rights in their term sheets, according to industry experts.
The instability in public markets has complicated fundraising efforts for unlisted companies, particularly in the realm of pre-IPO share sales. Wealthy individuals and institutions are typically drawn to these private deals, enticed by the potential for significant returns from future initial public offerings (IPOs). Yet, the recent volatility has caused many to approach pre-IPO investments with caution.
Bankers and legal professionals involved in pre-IPO transactions report that investors, who previously flocked to these funding rounds, are now seeking to safeguard their investments. “Investors are increasingly requesting adjusted and discounted valuations, greater controlling rights, and negotiating deal timelines to mitigate risks associated with the current market conditions,” stated a partner at Khaitan & Co., who is engaged in multiple pre-IPO deals.
The startup funding landscape has seen a slowdown in 2023, with total funding dropping to $7 billion from $25 billion the previous year, following a surge during the pandemic. As late-stage deals begin to reemerge, investor interest is shifting towards pre-IPO opportunities due to their perceived potential for quicker returns. However, ongoing market volatility and disappointing tech listings have dampened enthusiasm.
Recent IPO performances illustrate this trend. For instance, FirstCry shares debuted at a 40% premium, while Swiggy’s listing saw a modest 5% premium. Ola Electric’s shares initially listed flat but surged 20% on their debut day. Despite these initial successes, shares of these companies have experienced declines of 42-48% in 2025. In contrast, CarTrade Tech, which listed at a 1% discount, has seen a 14% increase year-to-date.
The Nifty 50 index has dropped 7% since its peak in September, and the India VIX, a measure of market volatility, has surged by 52%, indicating heightened investor anxiety. “We are observing a decline in both high-net-worth individual and retail subscriptions for recently listed IPOs,” noted an industry analyst.
In summary, as pre-IPO funding becomes increasingly competitive, investors are adapting their strategies to navigate the challenges posed by market fluctuations, seeking more favorable terms to protect their investments.
**FAQ**
**What are pre-IPO funds?**
Pre-IPO funds are investments made in companies before they go public, allowing investors to acquire shares at a potentially lower valuation before an initial public offering.
