Weekly Musings – Big start-up updates for the week to October 20, 2023

23 Oct 2023 , 01:25 PM

Compared to the previous week, the current week saw lower flows into start-ups, but that could be more due to the low-time holiday season. However, the start-up funding in the latest week was higher than the average of the previous 5 weeks, albeit marginally. Here is the story of start-up fund raising over the last 6 weeks in numbers.

Week ending September 15, 2023	$413 million
Week ending September 22, 2023	$91 million
Week ending September 29, 2023	$194 million
Week ending October 06, 2023	$119 million
Week ending October 13, 2023	$288 million
Average of previous 5 weeks	$221 million
Week ending October 20, 2023	$237 million

The start-up funding for the latest week ended October 20, 2023 is 7.24% higher than the average funding of the previous 5 weeks. However, a quick look at the start-up funding numbers would tell you that the numbers have been fairly volatile. Let us now move to the actually break-up of the start-up funding in the latest week.

Start-up funding surges to $237 million across 20 deals

For the week ended October 20, 2023 the start-ups saw fund raising of $237 million across a total of 20 deals, as compared to $288 million raised in the previous week across 24 deals. The total fund raising this week was 7.24% higher than the average of the previous 5 weeks, albeit lower than the previous week amidst holiday season. As a sector, it was Enterprise Tech plays that dominated with more than 54% of the fund raising in the week coming from Enterprise Tech plays. Zetwerk and Neo were among the major fund raising stories of the week, although there more. Neo is the wealth management business launched by Nitin Jain, former head of wealth management vertical at Edelweiss Financial. Zetwerk is the Enterprise Tech player, that has dominated the fund raising in the week Here is a quick rundown on the major deals in the start-up space during the week ended October 20, 2023.

1. In the biggest deal of the week, B2B unicorn involved in Enterprise Tech, Zetwerk, bagged $120 million funding from Avenir and Lightspeed. As recently as May 2023, Avenir had picked up a 2.96% stake in Zetwerk. It was entirely an equity funding round and came about 2 years after Zetwerk had raised $210 million from Greenoaks in late 2021. Zetwerk will be using the funds to expand its team, build up the tech stack and also to expand its footprint in a much bigger way.

    

2. Wealth management and asset management firm, Neo, bagged $35 million in funding from Peak XV (formerly Sequoia Partners). They will use the funds to expand the headcount from the current 350 to 500 and also to expand it existing offerings. The wealth manager services more than 1,000 HNI families, family offices and business units and is looking to expand its AUM. Neo was founded by former CEO of wealth management at Edelweiss Wealth Management, Nitin Jain. He had also roped in Varun Bajpai from Macquarie and Hemant Daga from Edelweiss. Neo currently has about $3 billion or over Rs25,000 crore as Assets under Advise.

    

3. SpaceTech start-up, Agnikul, has bagged funding of $26.7 million or Rs200 crore as part of the Series-B round from Celesta Capital, Rocketship and Artha Venture Fund. Agnikul is building India’s first private small satellite rocket capable of carrying up to 100 KG of payload to low earth orbits up to 700 KM range. It will use the fresh funds to accelerate the commercialization of its existing technology and invest in facilities.

    

4. Leucine has raised $7 million in funding from Ecoloab, Pravega Ventures, and Axilor Ventures to make pharmaceutical manufacturing safer with its latest AI tech stack. Today artificial intelligence is finding newer applications and remains a big opportunity area. The start-up will use the funds to refine its AI capabilities and also to expand its footprint to reach out to more customers. It helps pharma companies to digitize workflows to improve compliance procedures.

    

5. Freyr Energy has bagged $6.9 million or Rs58 crore in funding to offer solar panels to homes. The Series-B funding was led by EDFI ElectriFI with participation from Schneider Electric Asia Fund and Lotus Capital. Freyr Energy offers a range of smart solar rooftops for homes and businesses. It will use the fresh capital to cater to rising demand and to invest in growing its team size.

    

6. Showroom B2B, the unbranded garments start-up, has raised $6.5 million to build its Phygital presence. They will also use the funds to open additional experience stores in India. The Indian unbranded apparel market is expected surge by 60% to $80 billion in the next 5 years. The funding round was led by Jungle Ventures with participation from Accion Venture lab, Saison Capital and ICMG partners.

    

7. In the Agritech sector, BharatAgri has secured $4.3 million in funding from Arkam Ventures to strengthen last mile delivery and to scale up the ecommerce platform. Other participants in the venture included Capria Ventures, India Quotient and Omnivore. It will also look to expand its footprint to new geographies.

    

8. In another funding round, Mokobara, has raised $3.6 million from its existing investors; Saama Capital and Alteria Capital. The fund raising is through the issue of preference shares. This is part of their Series-B funding round. Mokobara is a D2C backpack start-up, and it is currently valued in the market at an enterprise valuation of $60 million.

    

9. Game Theory, the sportstech start-up, has raised $2 million from Nithin Kamath and Rohan Bopanna. The sportstech start-up will use the fresh funds to develop its tech stack and also to build skill-based match-making. It will also use the funds to develop coaching products and enjoyable gaming products. 

    

10. In one more funding round, Alwrite, the insuretech player has bagged funding of $1.3 million to digitize the back-office operations of insurance companies. The funding support came from the promoters of Pidilite Industries. Alwrite will deploy the funds to scale up product development and to expand its footprint across the country.

     

11. There were also several smaller deals in the week. Omnivio bagged $1.02 million in funding to help retail brands to build its omnichannel customer experiences from Caret Capital and Bloom Ventures. Cross border payment start-up, Hiwi, floated by former MCX honcho Dewang Neralla, bagged a modest Rs7.25 crore in funding from Unicorn India Ventures and Unmaj Family office group. Smarter Dharma also bagged $0.50 million to provide a sustainability platform for the real estate industry from Nithin Kamath’s Rainmatter. There were also deals by Niyo raising an undisclosed sum.

The latest week to October 20, 2023 has been fairly robust in terms of start-up funding with a number of medium and large funding being put through during the week.

Big start-up strategies in the week to October 20, 2023

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

• After a long break, a start-up IPO is likely to be back in the Indian markets. Honasa Consumer, the holding company of popular brands like Mamaearth, Derma and Bblunt, is likely to announce its IPO opening data as October 31, 2023. The indicative valuation of Mamaearth is likely to be around Rs10,500 crore to begin with. The total IPO size is likely to be Rs1700 crore and will have a fresh issue portion and an offer for sale (OFS) portion in the IPO. The fresh issue proceeds are likely to be used to bolster its market presence across India.

   

• Tata Neu may be in the back burner for some time, but the Tata group now plans another $1 billion of investment in Tata Neu. Incidentally, Tata Neu was conceived as the digital front for all Tata consumer products including consumer durables from Croma, cars from Tata Motors, FMCG products from Tata Consumer and airline tickets from Air India and Vistara. However, due to technical glitches, Tata Neu could not really take off. The fresh investment comes on top of $2 billion already sunk by the group into this Tata Neu venture.

   

• Tata Motors has confirmed that it will acquire a 26.79% stake in Freight Tiger. That gives the company a valuation of Rs560 crore. Freight Tiger is a logistics SAAS start-up and Tata Motors will invest another Rs100 crore in the venture. This will enable Tata Motors to create a total digital ecosystem for the entire logistics value chain. It is likely to eventually take a controlling stake in the company.

   

• Google has made the big announcement that it will now manufacture its Google Pixel phones in India. With Apple already showing its full faith in India, Google obviously cannot be too far behind. Google will start rolling out its Pixel 8 Smart phones from India by 2024. Google is looking to expand its India engagement in a big way. Recently, for the Indian audience, Googe added the AI (artificial intelligence) feature to its search engine.

   

• There is good news for mega start-up valuations as Invesco has now raised the valuation of Swiggy to $7.85 billion after two rounds of valuation cuts. However, this is still lower than the peak valuation of $10.5 billion assigned to Swiggy by Invesco as part of its January 2022 funding round. The latest action marks a 42% upgrade to the valuation of Swiggy, probably led by the massive rally in the stock of Zomato. 

One final word. There is still a lot of smart and patient capital in the sidelines and more funds are currently being raised in the market to fund start-ups. In the latest such deal, Singularity closed its Rs1,500 crore Growth Opportunities Fund II. The firm is targeting investments of Rs75 crore to Rs175 crore in around 14 to 16 start-ups. The moral of the story is that there is a big funnel of funds in the pipeline. The challenge is to find the right projects to fund.