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Investor caution and market corrections are bringing back a term startups had hoped to leave behind: down rounds. Currently, at least two new-age companies – Stanza Living and CityMall – are negotiating deals to raise fresh capital at lower valuations, sources in the know told Moneycontrol.

A down round is when a company, especially a startup, raises money at a lower valuation than in its previous funding round. This essentially means that the company is now worth less than it was perceived to be in the past, largely because of evolving market conditions which nudges investors to relook at multiples and reset expectations accordingly.

Down rounds are not new nor are they a bad sign. They only reflect the changing market conditions. Several startups, including large ones including Oyo, Meesho, Udaan and others, closed such rounds through 2023 and 2024 when investors had adopted a cautious approach.

Down round at Stanza Living

Stanza Living, a managed accommodation and student co-living startup, is in advanced stages to raise around $25-30 million (Rs 215-250 crore) from existing investors in an internal round which could potentially mark down the valuation of the company by over 50 percent.

Stanza Living was last valued at about $650 million in April 2021, as per Tracxn, a private markets data provider, but the current deal values the Gurugram-based firm at around $300 million, sources said.

“Accel will put in more money into Stanza Living as part of the internal round. It is also likely that other existing backers such as Peak XV Partners and Z47 (formerly known as Matrix Partners India) also participate to retain their stake in the company,” the source added.

Accel and Z47 did not reply to Moneycontrol’s queries. Peak XV Partners had no comments to offer.

While Anindya Dutta, managing director and co-founder of Stanza Living, confirmed initiating an internal fundraise a few weeks ago, he said the details are speculative.

“...conversations are extremely preliminary at this stage and the investor names and valuation figures being speculated, including any historic references to valuations, are grossly/factually inaccurate, and do not reflect the reality of ongoing early discussions,” Dutta said in response to Moneycontrol’s queries.

“Stanza Living has always and continues to attract strong interest from both existing and new investors. We will share formal updates once we have more clarity on the process and the fundraising plan is finalised,” he added.

Founded by Dutta and Sandeep Dalmia in 2017, Stanza Living reported revenues of Rs 458 crore in FY23, up 196 percent from FY22. However, at the same time, its losses widened 19 percent from Rs 418 crore in FY22 to Rs 495 crore in FY23, Tracxn data showed.

The firm is yet to file its FY24 results with the regulator.

Down round at CityMall

Accel is not only participating in Stanza Living’s ongoing round, it is also doubling down on CityMall, a bet it first made in March 2021, the sources cited above told Moneycontrol.

CityMall is an online platform for grocery, electronics and more.

“CityMall is raising around $20-25 million (Rs 170-215 crore) in an internal round from Accel. Other existing backers like Elevation Capital may also double down on the company in the ongoing round,” the source said.

The Gurugram-based company was last valued at $315 million in a March 2022 round but is now raising money at a slightly reduced valuation of $300 million, the source added.

ALSO READ: Citykart, a value retail chain company, discusses Rs 340-crore round with A91 partners, TPG NewQuest

CityMall and Elevation Capital did not reply to Moneycontrol’s queries. Founded by Angad Kikla and  Naisheel Verdhan in 2019, Citymall reported revenues of Rs 460 crore in FY24, up 22 percent from FY23. However, at the same time, its losses widened 10 percent from Rs 145 crore in FY23 to Rs 159 crore in FY24, Tracxn data showed.

To be sure, the talks at Stanza Living and CityMall are still underway so it is possible that the contours of the deal may change slightly over the coming weeks.

While Stanza Living and CityMall are the most recent down rounds in India’s startup ecosystem, there are others in the works, too. Even large startups like Cred are reportedly raising $100-200 million at a valuation of $4 billion, down sharply from $6.4 billion earlier.

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