Weekly Musings – Big start-up updates for the week ending June 9, 2023

12 Jun 2023 , 10:13 AM

The week to June 9, 2023 was a relatively subdued week for start-ups with funding lower to the tune of $132 million only. However, start-up funding had just touched $1 billion in the previous month, showing that momentum was clearly favourable. 

Start-up funding tapers to $132 million in the week

For the week ended June 9, 2023 the start-ups saw fund raising of $132 million across a total of 19 deals on the street. While funding was lower, the number of deals were higher showing a predominance of small ticket deals. HealthifyMe, the Bengaluru based start-up, secured $30 million in per-series-D funding with major investors being Leapfrog Investments and Khosla Ventures. Additionally, there were some other interesting deals too during the week.

In other start-up funding updates, the EV Financing startup, RevFin has bagged $5 million of debt fund from DFC. It will use these funds to diversify into two wheelers for last mile delivery and for ride share taxis. It will also expand its presence to a total of 25 states. Meanwhile ProKlean Bags, a cleantech start-up has also bagged $4 million funding to ramp up hiring, R&D and to expand into new markets. The funding came from the Raintree family office. Meanwhile, RevSure.AI has raised $10 million to help companies to build revenue funnels. It will deepen investments in product engineering and AI technologies. In another case, lending platform, Lentra has raised $27 million from an arm of MUFG Bank to strengthen its Global Pay business.

There has also been funding coming for the first healthcare venture studio by 2070 Health, which has bagged $30 million in funding. It will use the funds to built the platform and launch new start-ups in the healthtech space. The funding came from W-Health Ventures. Apart from the regular funding, there was more funding news in the week. Narayana Murthy’s Catamaran plans to participate in the $300 million funding round for Ola Electric. At the same time, Bhavish Agarwal of Ola is getting all set to woo global investors for his proposed $1 billion IPO, expected later this year or early next year. On the subject of EVs, 2-wheeler EV manufacturer, River Bags, also bagged $15 million funding from the Al Futtain group and other investors.

 

 

What were the big start-up strategies this week?

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

• VLCC, the grooming and styling group, will foray into the men’s grooming segment by acquiring Ustraa. It will be a combination of a secondary buyout and a share swap. Ustraa can now tap the vast network of VLCC to expand operations. The deal is pegged at around Rs61 crore in value.

   

• With AI picking up in a big way, the IT minister Rajeev Chandrasekhar has underlined that the government will regulate AI to keep citizens safe. That means; it would regulate Web3 and other AI related emerging technologies. Its stand on ChatGPT is not yet known. Even Sam Altman of OpenAI has called for regulating AI.

   

• Lenders to Byju’s have called its legal case in the US as lacking merit. Byju’s had repudiated interest payment on a foreign loan on the grounds that the loan had been sold to a distressed asset fund, Redwood Capital, which was against the covenants of the loan agreement. Byju’s had complained that the stressed assets fund was putting pressure on Byju’s for accelerated repayment of the loan.

   

• With the IPO called off, PharmEasy has appointed Avendus Capital for its next round of funding. Existing investors like Prosus and Temasek are looking to invest another Rs250 crore into PharmEasy. It is looking to raise up to $100 million in this round. It also needs to repay part of the loan extended to it by Goldman Sachs.

   

• Myntra has launched short videos platform, Myntra Minis. The idea is to improve the shopping experience of customers. Videos on Myntra Minis will highlight products across multiple categories including new launches and global trends. It has been rolled out for more than 70% of the existing users.

   

• Generative AI is the new buzzword. Now, after Blinkit, even Zomato wants to leverage on generative AI. This is a combination of machine learning and data science to build products based on generative AI. AI will be integrated into search engines and into notifications in this case.

Fintechs get a boost from Default Loss guarantee guidelines

This was part of the latest monetary policy announced by the RBI on Friday last week. This is of specific interest to digital lenders. In fact, the release of the guidelines by the RBI was long awaited and now gives a lot more clarity to the fintech players. In the past, lack of clarity had made banks and NBFCs slightly cautious about tying up with fintech players for lending products. Now that would be smoothened out. FLDG (first loss default guarantee) is a contractual agreement between regulated entities and lending service providers. Under this agreement, the latter will agree to compensate the regulated entities for any loss caused due to default, limited to a certain percentage of their loan portfolio only.

As per the RBI guidelines issued in the monetary policy, the central banks have capped the total amount of DLG cover on any outstanding portfolio at 5%. Such arrangements would be permitted subject to this cap of 5%. This is likely to be a boost to co-lending and to loan syndication arrangements between banks or NBFCs on one side and the fintech players on the other side. The 5% cap is a clear indicator that risk containment measures have to very strong in the first place.

Finally, in an otherwise tepid week for start-up funding, Indian start-ups like Paytm and Zomato scaled yearly highs. Of course, they are still far from their IPO prices, but the bounce is encouraging for sure.