Weekly Musings – Big start-up updates for the week to 19th May

22 May 2023 , 09:19 AM

India is fast emerging as one of the key countries with a robust start-up ecosystem. India had over 100 unicorns (start-ups valued at over $1 billion) about a few months back and that is unlikely to have changed much, despite recent valuation downgrades. For the week ended 19^th May 2023, there was a lot of interesting start-up action in India. Here we look at the key start-up updates for the week across different key segments of the start-up ecosystem in India.

Fund raising by start-ups in the week

The week just concluded saw start-up funding to the tune of $171 million across a total of 18 deals. Agilitas Sports, floated by ex-Puma executive, raised $52 million in its maiden funding round led by Convergent Finance. Among the other fund raises in the week, the data, and insights platform (PYOR) or power your own research; raised $4 million in seed funding led by Castle Island Ventures. PYOR helps companies to get insights into their digital insights through a user-friendly dashboard. 

In other funding updates for the week; Rooter, the game streaming start-up also managed to raise $16 million of funding from Lightbox Ventures in the week to expand its franchise in a substantive way. Among other start-ups that got the funding green signal in the week; Revenue Hero managed to bag $5.1 million in funding. Revenue Hero specializes in customized and off the shelf sales automation as well as in creating a funnel of leads and catalyse lead conversions. In another funding report, Agraga, the logistics start-up raised Rs70 crore or around $8.5 million to resolve the challenge of multiple intermediate deliveries. It covers logistics across road, rail, and sea.

Nurturing the start-up ecosystem

In what could be a statement on the growing popularity of the government sponsored UPI (unified payment interface) system, even Japan has agreed to sign on to the UPI network in India. That means, Indian citizens living in Japan can make payments using their existing UPI networks and UPI ids. This widens the scope for transaction between the two nations. Already, countries like Singapore and UAE with substantial Indian diaspora have signed up to the UPI network.

Even as the government has been aggressive about its agnostic ecommerce platform (ONDC), many of the existing start-ups are seeing it as a potential threat. The open network for digital commerce (ONDC) is a government owned ecosystem where vendors can sell their products online without having to depend on aggregators like Flipkart, Amazon, Swiggy or Zomato. Currently, ONDC offers lower costs compared to traditional aggregators. While this gap may not sustain in future, the low cost of ONDC is likely to make the aggregators more cautious about pricing. Meanwhile, the ONDC is most likely to hit the food aggregators like Zomato and Swiggy hard as most restaurants are paying 25% to 30% commissions to these food aggregators. ONDC can bring that down to the range of 10% to 15%.

Global tech companies in India

Meanwhile, Tesla has been hard pressed to explain that they were dead serious about investing in India. Tesla wants access to the Indian markets first but India will not accept cars made in China. Also, Tesla is seeking deep concessions on duties and GST, which India is unwilling to offer. However, Tesla has made statements in the week underlining that it was serious about setting up its production and innovation base in India. In the meantime, Tesla has also enlarged the scope of talks with the Indian government to include incentives for batteries too. The Indian stand is that import duty concessions are unlikely unless Tesla brings in genuine investments into India.

In other cases of global tech investing in India, Amazon Web Services (AWS) plans to invest $12.7 billion in cloud infrastructure in India.  Between 2016 and 2022, AWS invested $3.7 billion in the Indian cloud infrastructure and this new plan will take the total AWS investing in India to $16 billion in the next few years. Meanwhile, MOS, IT Ministry, Rajeev Chandrasekhar, has confirmed that both Apple and Samsung will boost their smart phone manufacturing industry in India. While Samsung has been around for some time, Apple has been a recent entrant after the US adopted a conscious China Plus One policy.

Start-up strategies at play

What were the big start-up strategies at plan this week? Zomato has the big challenge of making its acquisition, Blinkit, into a profitable proposition over time. However, as a quick commerce player, Blinkit will have limited room and competition is hotting up in this space from the likes of Zepto. Now, Zomato wants to position Blinkit more as a doorstep service provider on the lines of what Urban Company (formerly Urban Clap) does in the form of engaging and owning the customers through doorstep services.

Meanwhile, Domino’s Pizza is banking big on ONDC platform to boost its sales. Currently, even when Domino’s orders are placed on Swiggy or Zomato, it is Domino’s that handles the delivery logistics. Hence, ONDC would be more of a logical extension for Domino’s. Meanwhile, in other start-up updates, fashion brand Shein, which had made a previous bid to foray into India, is at it again. This time around, it plans to enter India in partnership with Reliance Retail. The retail arm of Reliance is, anyways, creating a huge retail ecosystem for fashion and lifestyle products. Delhivery will strengthen its D2C offering with a significant stake in Vinculum, which is a SAAS start-up for plug in solutions. Delhivery sees Direct to Consumer (DTC) as the road ahead.

How start-up regulation looked this week?

There were several key changes to the start-up regulation during the week. Here are a few key changes that are material.

• The angel tax has been one of the bones of contention between the start-ups and the CBDT. To assuage the concerns of the start-ups and to attract foreign start-up investments, the new angel tax rules make provisions for diverse valuation approaches, safe harbour provisions and widening the ambit of exemptions. 

   

• RBI will tighten rules for POS (point of sale) and for QR code payments. These tighter rules will pertain to capitalization norms and tighter KYC requirements. Those retailing these payment solutions will also come under the ambit.

   

• RuPay supporting Fintechs have protested to the finance minister about the removal of MDR charges on RuPay cards. Currently, Visa and MasterCard are allowed to charge MDR and this puts RuPay supporting Fintechs at a disadvantage. Government is keen to keep RuPay cards outside the ambit of MDR for now.

   

Top OTT players in India like Netflix, Amazon Prime and Disney Hotstar have been asked by the Parliamentary Standing Committee to be sensitive to cultural sensitivities of India. There is less regulation on suitability of content on OTT platforms and the government is starting to clamp down on that.