Weekly Musings – Big start-up updates for the week to July 21, 2023

23 Jul 2023 , 06:55 PM

Funding stood at $111 million across 19 deals compared to $85.40 million of funding in the previous week across 17 deals. While the funding is higher week-on-week, it is still sharply lower than the average of the last 2 months and substantially lower than the numbers seen between second half of 2021 and end of 2022. Start-up funding has started off in a relatively tepid fashion in the September 2023 quarter and that appears to be a carry forward of the June quarter trend. Here is a quick rundown on the key start-up updates that defined the week to July 21, 2023.

Start-up funding improves to $111 million on low base

For the week ended July 21, 2023 the start-ups saw fund raising of $111 million across a total of 19 deals on the street. That represents a 30% increase from the week prior to that, which saw start-up funding of $85.40 million across 17 deals. In the current week, the number of deals were marginally higher, indicating that the proportion of big-ticket deals had improved compared to the prior week. Let us turn to the specific funding stories.

In one of the biggest funding deals of the week, RenewBuy has secured funding of $40 million (more than a third of the weekly start-up funding) from Dai-Ichi Life of Japan. RenewBuy was launched in the year 2015 and it offers agnostic comparisons across different insurance policies across over 40 insurance providers. RenewBuy will use these fresh funds to access growth opportunities in the Asian market. The last round of fund had been raised by RenewBuy in 2021. In another major funding deal, the robotics start up (Ati Motors) has bagged $10.5 million in funding from a consortium led by True Ventures. Athera, Blume and Exfinity were the other participants in this funding round. Ati Motors will use the funds to accelerate product development and also explore opportunities in sectors like chemicals, pharma, and injection molding. Ati Motors is an industrial robotics starts-up and counts TVS Motors, Ceat, Hyundai and Bosch among its premium customers.

In other significant fund raising activity, Bureau, the fraud detection start-up, has raised $4.5 million in Series-A funding. GMO Venture Partners led this round of funding into Bureau. Bureau has already verified more than 300 million (30 crore) digital identities in its platform in the last 2 years that it has been in business. In another key deal, PingSafe has bagged a $3.5 million funding round from Peak XV Ventures to scale up its enterprise cloud  security offerings. In addition to Peak XV, Tanglin Ventures also participated in the funding round. PingSafe offers a comprehensive cloud security platform that detects vulnerabilities automatically without requiring human intervention. In the last 12 months, the company claims to have grown its revenues 10-fold, albeit on a low base. In another relatively major deal, footwear start-up, Solethreads has bagged $3.7 million funding from DSG Consumer Partners and Saama Capital to enhance product design of its footwear offerings. The company was launched in the year 2020 and this is its third round of funding. Another major funding deal was done by Blitz, the superfast delivery start-up. Blitz bagged $3 million funding round from India Quotient, Better Capital, First Cheque and Titan Capital. The funds would be used by the company to improve its technology infrastructure and expand its network across its dark stores. Incidentally, Blitz enhances the speedy delivery experience for consumers. It enables same day delivery for sellers who place orders before 3PM in the day. Several leading consumer brands are already onboarded on the platform.

There were a number of smaller deals too in the start-up space. Energy drinks start-up, Jimmy Cocktails, has bagged funding of $1.3 million from Prath Ventures as well as individual investors like Vijay Sekhar Sharma of Paytm and Keki Mistry of HDFC Ltd. The funds will be utilized to expand its portfolio of energy drinks on offer in the B2C space. Also, hyperlocal services start-up, DusMinute, has raised Rs11.5 crore ($1.4 million) from Inflection Point Ventures. The funds will be used to drive the growth of the platform in Bengaluru city. It also plans to take its services to 7-8 large cities. The nature of funding from Inflection Point is in the form of strategic bridge financing. Finally, Tooljet Services, the open source low code platform has bagged an undisclosed sum from the Microsoft M12 Fund and GitHub Investors. It will use the funds to expand its workforce and also its artificial intelligence capabilities. Founded in 2021, Tooljet Services empowers clients to enhance their platform capabilities by integrating Java Script based plug-ins.

Big start-up strategies this week?

Here is a quick take on some of the key start-up strategies evidenced last week.

• Jio Financial, which was spun off from Reliance Industries last week, is already worth $20 billion in terms of market cap. It is likely to focus on consumer durables and merchant lending as well as BNPL (buy now pay later).

   

• Generative AI for content has caught up of late and now Swiggy will also leverage generative AI to pilot food recommendations tool from September onwards. It will tie up with a third party to develop and maintain a GPT-4 powered chatbot.

   

• Foxconn of Taiwan plans a manufacturing facility in Tamil Nadu next year to manufacture high-end electronic components. It has already met up with the Karnataka government on setting up a Rs8,800 crore plant for a different purpose.

   

• It looks like GIFT IFSC in Gandhinagar is emerging as an alternative to Singapore and Mauritius. It is a preferred platform for VCs/PE funds as they are automatically exempted from angel tax. Both Singapore and Mauritius have a liberal business climate.

   

• In order to boost revenues, Netflix has decided to end password sharing in India. In the past, only simultaneous use by two persons was barred. Now subscriptions would be limited to a single household as identified by the IP address of the accessing point.

   

• Decentro has acquired Neowise Technologies, a SAAS Fintech. This deal will allow Decentro to integrate payment and lending workflows and enter the debt collection space. Neowise will now operate as a subsidiary of Decentro.

   

• Prashant Pitti, founder of EaseMyTrip has forayed into MSME funding through a new start-up. It will be a co-lending platform to serve the underserved market. Most of the business loans will be targeted at rural India and will be given free of collaterals.

   

• OYO, which is planning an IPO in the near future, has strengthened its premium offerings with its new brand, Palette. Now, Palette will comprise of upscale resorts and leisure destinations across India. It has 10 Palette resorts and plans to expand it to 40 in the second quarter.

In a related development, PharmEasy is planning to raise up to Rs3,000 crore via rights issue to ease its debt problem. Clearly, the funding winter for digital companies has been going on for longer than expected.

 

Start-up story of the week – Temasek makes a big $10 billion bet on India

Temasek needs no introduction to global investors. Temasek has a global portfolio of $287 billion of which $17 billion, or 6%, is invested in India. Now Temasek plans to scale up its India equity investments by another $10 billion in the next 3 years and take the India share from 6% to 10%. In FY23 when global equity returns in the Temasek portfolio were in the negative, it was only India that had stood out in the positive. Temasek wants to up the ante when on its India strategy and is betting on a combination of stable government policy, attractive demographics, and high-quality entrepreneurs.

Here are some insights into how Temasek plans to invest in India.

• The first big paradigm for Temasek in India is the future of consumption. As purchasing power rises, consumption gets a boost. Temasek strategy is to follow that trend. This would include sectors like FMCG, retail, banking, consumer goods etc.

   

• The second paradigm that Temasek is betting on is digitisation. It will go beyond new age ideas like generative AI, machine learning and cloud. It will also look at ecommerce players, IT players and ITES players; that are adapting to the new digital order.

   

• The third trend is increasing lifespans. Temasek plans to invest in healthcare services, diagnostics, pharma, and biotech. Within healthcare, Temasek will focus on this singular trend of expanding lifespans, more than anything else. 

   

• Finally, Temasek is betting on sustainability. This includes sustainability enablers also. It has a plethora of investment opportunities like energy transition, green energy, decarbonization and many more. Clearly, Temasek has its job cut out for India and it wants to be on the cutting edge of digitization and sustainability.