Weekly Musings – Big start-up updates for the week to August 04, 2023

8 Aug 2023 , 12:04 PM

This is progressively lower compared to the previous week at $42 million across 16 deals and $111 million of funding in across 19 deals in the week prior to that. In the last 2 weeks, the start-up funding is almost down to a tenth. While the funding is sharply lower on week-on-week basis, even the average deal sizes are sharply down in the current week, holding just above $1 million on an average. 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 August 04, 2023.

Start-up funding falls to $11 million on lower deal values

For the week ended August 04, 2023 the start-ups saw fund raising of $11 million across a total of 9 deals on the street. That is nearly a fourth of the previous week and a tenth of the collections by start-ups in the week prior to that. In the current week, the number of deals were fairly high indicating that the per capita deal financing amount was much lower, averaging just a little over $1 million. We now turn to some of the key funding deals of the week.

In one of the biggest funding deals of the week, Unstop raised $5 million from Japan based Mynavi, which will help students and freshers to easily seek and get jobs. Apart from Mynavi, the other participants in this round of funding were Coursera, Venture Catalysts, and 9 Unicorns. Unstop already has a talent pool of 6 million students from across more than 20,000 colleges and attracts close to 2 million active users each month. The Unstop platform also helps the companies to target the right candidates by testing them on real life skills uniquely needed for niche jobs.

In another key deal in the week, The Fuel Delivery has raised $2 million from Singapore based Drake Trade. The funding will be used to offer doorstep delivery of diesel. This is a pre-series A funding and had previously raised $1 million as angel funding. It will use the funding to explore the gas and EV space. In addition, Drake Trade will also provide additional working capital to The Fuel Delivery to support its expansion plans. It will also use the funds to upgrade to an IOT enabled platform. While it has started off with diesel, The Fuel Delivery also plans to foray into gas and EV fuel in a big way.

Finally, this is not a fund raising but a proposed fund raising of a fairly large scale. One of India’s leading digital logistics players, Xpressbees, is in talks to raise $100 million from the Ontario Teachers Pension Plan Board. The talks are in early stages but there is sufficient interest from both sides. Among other things, the funds would also be used by Xpressbees for inorganic expansion. The last time it raised funds in February 2022, Xpressbees had been valued at $1.1 billion, so it is likely to be meaningfully higher this time around. Just about 4 months back, Xpressbees had raised $40 million from the Malaysian Sovereign Wealth Fund, Khazanah Nasional BHD. 

Substantial action on creating funnel for funding

While there was not much of action on the start-up funding side this week, there is a lot of action in creating a funnel. Major PE Funds and VC funds have been aggressively raising funds to invest in the Indian start-up ecosystem. Here is a cross section of interesting deals in this space. 

1. SIDBI and CIIE.CO have collaborated to raise Rs40 crore deeptech accelerator fund. SIDBI partners with different incubators in India. SIDBI adopts this route to provide seed funding to start-ups and thus promote deeptech and science led innovation. 

    

2. PI Ventures has just closed Fund II with a corpus of Rs702 crore. The fund will invest in SpaceTech, AI and other deeptech sectors. The fund has the backing of British International Investments, Accel, Nippon Digital India Innovations Fund and Premji Finvest. The fund will invest in 20-25 start-ups over the next 2 to 3 years.

    

3. The former CBO of Bharat Pe has launched an early stage VC fund with a target to raise Rs50 crore. The focus will be on Fintech, SAAS and deeptech sectors. It plans to invest in a total of 12 to 15 start-ups. 

    

4. Finally, Elev8 Venture Partners have announced the close of their first fund (Fund I) with a corpus of $67 million. Elev8 Venture Partners will participate in Series B and Series C funding rounds in areas like consumer tech, SAAS, fintech and healthtech. Its average funding ticket sizes would be between $10 million and $15 million.

In 2023 alone, fund funnel of more than $3.6 billion have already been announced for India. The funding may have been tepid in recent times, but surely the momentum is picking up.

Big start-up strategies this week?

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

• Pricing is all about who has the bargaining power. Now, Zomato has also taken a leaf out of the Swiggy playbook and plans to start charging platform fee of Rs2 per order. It has not committed on scaling it. This is a flat fee irrespective of the value of the order. While Swiggy has already implemented, Zomato is yet to announce the formal launch.

   

• In a massive leap of faith, Amazon plans to digitize 10 million small businesses, creating nearly 2 million jobs in the process over the next 2 years. Amazon India already has annual exports of $7 billion. Amazon has committed to invest close to $15 billion into India including the AWS investments.

   

• Pristyn Care, the healthtech unicorn, has decided to look east by expanding its operations into Bangladesh. It has set aside Rs100 crore to build 5 patient care centres in Dhaka and Chattogram (formerly Chittagong). As part of its Bangladesh plans, Pristyn Care will also be hiring 200 persons in Bangladesh.

   

• Dunzo, backed by Reliance Retail Ventures, has decided to take the ONDC route. Its Dunzo For Business (D4B) vertical has already been integrated with ONDC, enabling over 1,500 merchants to joint the network in a week. Over the next 45 days, it plans to onboard 20,000 merchants. This move is likely to give Dunzo a revenue boost.

   

• MasterCard has launched a CVV-free payment feature for tokenized transactions. MasterCard holders can select their tokenized cards from the checkout page, input the one-time password (OTP) and complete the transaction without the CVV. Visa and RuPay have already introduced the CVV-free system for payments.

   

• Florintree has bought a stake in drone start-up, BotLab Dynamics. This is after they made a whopping 600% returns on their IdeaForge deal. It paid $2.4 million for a 15% stake in BotLab Dynamics. BotLab focuses on drones for light shows. BotLab is in a similar business as IdeaForge and Florintree sees big opportunity in the drone space.

   

• US based IBC will set up a Rs8,000 crore battery manufacturing plant in the state of Karnataka. This will be one of the few lithium-ion (LI-ON) battery manufacturing units in India. Production is expected to commence in the year 2025. This will be a boost to the LI-ON ecosystem as Foxconn is already infusing $1 billion into a battery venture.

   

• Finally, let us end with some celebrity participation news. Former Bollywood star, Suniel Shetty has partnered with the CEO of Veda to launch a mental health app. The app will be called “Lets Get Happi.” The app will address the pressing need for affordable, inclusive and stigma free focus on mental health. The CEO of Veda is expected to invest close to Rs55 crore in the venture. Currently, the app offers audio, video, and chat-based therapies, apart from psychological assessment and expert curated content.

To sum it up, the issue of accountability of start-ups has been a major debating point and the case of Byju’s has been a case study on the same. Now the Institute of Chartered Accountants of India (ICAI) has referred the case of Byju’s to a disciplinary committee over the delay in publishing financials. It may be recollected that the company recently saw the resignation of its auditor for the same reason. The ICAI review board has also flagged certain concerns over the balance sheet, P&L, and notes to accounts of Byju’s. However, the bigger concern is the persistent delay in filing annual accounts. How the ICAI deals with this case will be a benchmark for start-ups in future.