Weekly Musings – Big start-up updates for the week to August 11, 2023

16 Aug 2023 , 09:46 AM

Both the deal value and the number of deals is  higher over the previous week. In the previous week to August 04, 2023, start-ups managed to collect just about $11 million across 9 deals. The latest week collections of $95 million is higher than the previous two weeks, although still quite low in absolute terms. While the funding value is sharply higher on week-on-week basis, even the average deal sizes have gone up in the latest week from an average of just about $1 million in the previous week to about $5.5 million in the latest week. Start-up funding still remains fairly tepid 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 11, 2023.

Start-up funding bounces to $95 million on higher deal values

For the week ended August 11, 2023 the start-ups saw fund raising of $95 million across a total of 17 deals on the street. That is nearly nine times of the previous week and even the number of deals nearly doubled. In the current week, the number of deals were fairly high indicating that the per capita deal financing amount was much higher, averaging a little over $5.5 million per deal. In two of the major start-up deals for the week, fintech company Credgenics raised $50 million while Disprz raised $30 million. These were the two dominant deals for the week, with other deals being relatively much smaller. Let us now look at the key funding deals of the week.

In one of the biggest funding deals of the week, Credgenics raised $50 million in Series-B funding from Westbridge Capital, Accel, Tanglin Ventures, Beams Fintech Fund, and other strategic investors. Credgenics offers a SAAS based loan collection and debt resolution platform for banks, non-banking finance companies (NBFCs) and fintech start-ups. The company claims to have already hit revenues of Rs100 crore and also claims to have turned profitable. They will be using these funds to drive growth. In the second biggest deal of the week, the enterprise skilling platform Disprz got $30 million funding to enable expand its footprint in the generative AI space. Disprz will use this funding to for product development and for integration of generative AI across the learning and skilling cycle. Some funds are also being set aside by Disprz for inorganic growth.

Apart from Credgenics and Disprz, there were other important deals too in the week to August 11, 2023. Stable Money, the WealthTech start-up has got $5 million funding from Matrix Partners and Lightspeed Ventures. In addition, Titan Capital also participated in the funding round while Kunal Bahl, Rohit Bansal and Harsha Majety participated in their personal capacity. The funds will go into senior leadership hiring. Climate tech start-up, Chakr raised $2.2 million from the EXIM Bank under its Ubharte Sitare Program (USP). It will use these funds on new technologies to mitigate air pollution. In another key deal, Shaktimaan.ai bagged $2 million in seed funding from Y Combinator and Goodwater Capital. The funds will be used by Shaktimaan.ai to build an LLM trained for diverse use-cases to enhance the capability and adaptability of the platform. Shaktimaan.ai provides a discipline induced learning ecosystem with personalized learning and mentorship.

Finally, here is a look at three more such deals for the week. Bidso has raised $1.5 million in funding from Peer Capital to help manufacturers source products through an agnostic platform. This will be more of a B2B venture catering to the manufacturing companies in India. In another interesting deal, the ice cream brand, Go Zero, has also bagged funding of $1 million from DSG Consumer Partners and V3 Ventures. The pre-Series A funding was led by Saama Capital. They will be using the funds to penetrate brand into newer markets in India. In another deal, Expertrons also bagged an undisclosed funding amount from HT for product development and SEO initiatives. Expertrons is an enterprise upskilling venture and is looking to reach out to more professionals with its offerings. It uses video Bot technology to offer a platform that connects users with over 750 experts from across the digital spectrum. Apart from all these, the D2C wellness brand, What’s Up Wellness bagged Rs14.40 crore funding from Unilever Ventures to expand its team and to launch new products.

Action picks up on creating funnel for funding

While there was a lot of action on the start-up funding side this week, there was also 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. BGMI maker, Krafton, has decided to invest a substantial $150 million in Indian start-ups. Being a gaming giant, its primary interest would be in facilitating gaming start-ups to foster innovation. It has already invested in 11 Indian start-ups till date. It remains to be seen how the 28% GST on gaming will impact their plans. 

    

2. Meanwhile, Japan’s MIXI launches $50 million CVC fund for Indian digital entertainment start-ups. This CVC fund will invest in seed to pre-series B early stage entertainment and consumer service start-ups. It plans to invest in about 30 start-ups in the next three to four years with average ticket sizes of $0.50 million to $2 million.

    

3. Rainmatter, the fund belonging to Zerodha group, has allocated Rs1,000 crore of Patient Capital for Indian founders. Patient Capital has really no exit mandates and the projects can take much longer to fructify, which would suit high risk projects with a high degree of uncertainty. These investments will be willing to stick around for much longer.

One last word on what is driving so much of interest in Indian start-ups. One only needs to look at the notional profits made by the Softbank Vision Fund in the first quarter ended June 2023. The rally in listed digital stocks in India helped the Software Vision Fund to make $200 million on its investment in Paytm and $100 million each on its investments in Zomato and Delhivery. That just about sums up the India start-up story.

Big start-up strategies this week?

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

• Charging of convenience fees is the latest strategy among start-ups to partially defray the rising costs. After Zomato and Swiggy experimented with such convenience fees, Nykaa is next in the line. Nykaa is imposing convenience fee of between Rs20 and Rs99 on each transaction.

   

• Zerodha, India’s largest broker by volumes and number of active clients, has got SEBI approval to launch its own mutual fund. Zerodha plans to launch a family of passive funds with low costs to create an equity cult with minimal risk. Zerodha has roped Vishal Jain as CEO. Vishal was formerly the CIO of Benchmark AMC, the passive funds pioneer.

   

• Truecaller has launched an artificial intelligence (AI) based Truecaller Assistant in India for answering calls. To begin with, the AI based Truecaller service will only be available to Android users, but will later be extended to IOS users also. This app will also provide real time transcription of the caller conversation.

   

• Wal Mart, the world’s largest retailer and also the parent company of Flipkart, plans to reduce the share capital of Flipkart, as per application filed with NCLT. Wal Mart wants to write off the accumulated losses against the share premium received from existing shareholders under Section 66 and Section 52 of the Companies Act.

   

• As problems mount for Byju’s, even the founders of Aakash have decided to terminate their share swap agreement with Byju’s. The Chaudhry family will not swap their remaining 18% stake in Aaksh for equity in Byju’s due to sharp valuation downgrades. Byju’s has already sent legal notice to Aakash founders to honour their side of the deal.

   

• In one of the biggest deals in the microfinance space, Svatantara promoted by Ananya Birla, plans to acquire Chaitanya, promoted by Sachin Bansal for Rs1,429 crore. This will allow Svatantara to expand its lending portfolio to women entrepreneurs while Sachin Bansal will focus more on their digital first businesses. The deal will make Svatantara the second largest NBFC-MFI in India.

As we conclude the start-up news for the week, one thing that stands out is that digital companies continue to deepen their losses in the latest quarter. That is forcing them to impose other costs on the platform to make it more competitive and profit generating. However, the likes of Zomato, Delhivery and Paytm have shown better than expected numbers and that is rubbing off on their stock price performance. The coming days will surely separate the digital men from the digital boys.