Weekly Musings – Big start-up updates for the week to August 25, 2023

28 Aug 2023 , 01:17 PM

It may be recollected that the week to August 18, 2023 had been one of the most tepid weeks in recent memory with just about $4.4 million of start-up funding raised across a total of 7 deals. Fortunately, things have changed substantially in the current week. For the week to August 25, 2023 the start-ups in India saw fund raising to the tune of $231 million spread across a total of 16 deals. To be fair, out of the $231 million of start-up funds raised, Zepto alone accounted for $200 million with the remaining 15 deals jointly raising just about $31 million between them. The substantial increase can be largely attributed to the Zepto Funding this week, but even otherwise, the week was relatively robust compared to the previous week.

Start-up funding at $231 million across 16 deals in the week

For the week ended August 25, 2023 the start-ups saw fund raising of $231 million across 16 deals, with most deals, other than Zepto, being small to medium ticket deals. This is sharply higher than the $4.4 million raised in the previous week across 7 deals. Not only has the number of deals more than doubled in this week, but the fund raising is exponentially higher in the current week. Here is a quick summary of the fund raising deals during the week ended August 25, 2023.

The week was clearly dominated by the Zepto fund raising, which accounted for $200 million out of the $231 million of funds raised in the week. In short, the week was all about the quick commerce (Q-Commerce) start-up, Zepto which raised $200 million at an enterprise valuation of $1.4 billion. This makes Zepto the first start-up to enter the Unicorn club in the year 2023. The latest funding round of $200 million saw participation from Stepstone Group, Goodwater Capital and other existing investors like Nexus Partners and Glade Brook Capital. Zepto is a quick commerce company that competes with the likes of Dunzo, Blinkit and Instamart. Quick Commerce is about ensuring deliveries of groceries and other home essentials across a city in less than 15 minutes. This is done through a network of dark stores or cloud outlets as they are called. Including the latest round of funding, Zepto has now raised $560 million till date. Quick Commerce is a capital guzzling business where returns tend to be back ended. Hence, most of the funds raised would be deployed in expanding their outreach to customers and to sharpen their technology and logistic skills. 

In other key funding deals in the week, edtech startup GradRight, secured Rs50 crore in funding to finance high potential students. GradRight brings together universities, students, and lenders under one common agnostic platform. It has processed loan requests worth $1.4 billion for 55,000 students till date. The entire funding was raised from Ivy Capital, which will nominate managing partners, Tej Kapoor, to the board of GradRight. These funds will be used by GradRight to expand its funding book to deserving students. In another key deal, Brand SuperBottoms; the baby and mother care D2C brand, has raised $5 million in funding. Participation came from Lok Capital, Sharrp Ventures, as well as existing investors like DSG Consumer Partners and Saama Capital. In another significant deal Portkey got $3 million in seed funding from multiple angel investors including AWS, OpenAI, Cloudflare and Postman. Portkey will use these funds to help businesses ride the generative AI wave. It will use the funds for R&D and for building a language model operations stack.

In other deals, Yummy Plate raised $2 million from K12 Techno Services to provide meals to school students. They will use the funds to expand their services to Mumbai, Pune, Hyderabad, Chennai, and Delhi. It offers a subscription based meal service for schools. It will be using the funds for expansion of its presence. In another round, Box Bags got funding of $1.6 million from Peak XV. It will use the funds to offer design procurement solutions to architects. The funding was raised from Titan Capital, and from a group of individuals. 

There are other interesting plans also afoot on the fund raising front. PharmEasy, which had put off plans for its IPO due to unfavourable market conditions, has outlined plans to raise Rs3,500 crore via rights issue. Temasek, CDPQ and ADQ will infuse Rs2,000 crore into the company. In another such proposed fund raising, Mamaearth will raise $150 million in pre-IPO round. Mamaearth is in talks with Softbank, GIC, Qatar Investment Authority and Fidelity Investments for this round. Mamaearth has already got final approval for its IPO from SEBI. The enterprise valuation of Mamaearth in this funding round is expected to be in the vicinity of $1.5 billion. In another key deal, Zaggle has raised Rs98 crore in pre-IPO deal from a clutch of Indian investors including Vikasa India ETF and Acintya Investment Fund.

Big start-up strategies this week?

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

• MobiKwik is jumping onto the merchant lending bandwagon to enhance its revenues. This would position along with Phone Pe and Paytm in that exclusive space. MobiKwik will foray into business to business (B2B) lending. It will offer mid-ticket and mid-sized loans to its existing merchants to expand the revenue base. 

   

• The Madras High Court has barred Google India from delisting apps of Indian start-ups. This judgement will be valid for start-ups that pay 4% of the gross revenues from downloads from the Google Play Store to Google. If this condition is met, then Google cannot technically delist apps from its play store. Meanwhile, Paytm is foraying into the small credit space, where it is not too entrenched as of now.

   

• Westbridge Capital has picked up a majority stake in the agnostic mutual fund marketing platform, FundsIndia.com. Westbridge will also bring its expertise and its networks into play. FundsIndia has over 25 lakh customers active on its platform and over Rs10,000 crore in assets under management (AUM).

   

• Dunzo, the quick commerce player, will resume its dark store operations in Bengaluru. It had temporarily shut them down but started it again in 7 of its dark stores. Dunzo had been in financial troubles of late and needs fund infusion quickly. There were reports of payouts being held up, which resulted in partners refusing to work with them.

   

• Reliance Retail has got a $1 billion boost for its retail and digital commerce business. Qatar Investment Authority (QIA) will infuse $1 billion for a 0.99% stake in Reliance Retail Ventures, valuing the retail unit of RIL at over $100 billion. RRVL operates an integrated omnichannel network of over 18,500 stores across India.

   

• Adani Total Energies has partnered with EV cab aggregator, Evera, to set up battery charging infrastructure. The super hub will be in New Delhi, which will integrate 200 charging points. The two companies plan to jointly bridge the existing gaps in EV infrastructure, which is holding up the rapid growth of green transport.

   

• Droneacharya has marked its SpaceTech foray by testing reusable rocket launch vehicles. It had launched the reusable rocket for an altitude of 3 KM. The next step is to increase the height testing to 10 KM and the payload to 3X to be able to collect valuable atmospheric and meteorological data. The testing was done at a foreign location.

   

• In another EV partnership, Tata Power has partnered with Zoomcar to boost India’s EV ecosystem. The idea is to encourage more people to list their EVs on the Zoomcar platform. Tata Power EV charging infrastructure includes over 50,000 home chargers, 4,370 public charging points, and 250 bus charging points.

   

• After tasting success in its platform fee experiment, Zomato has decided to go aggressive and expand the platform fee to more users. It has already hiked the fee to Rs3 in many cities. It is charging a platform of Rs2 in metros and Rs3 per order in smaller towns. Swiggy had started this move, but Zomato also eventually followed suit.

   

• Nykaa, the beauty and wellness start-up, plans to set up its first store in Dubai. This will fructify in FY24 and is part of their global foray. It has partnered with the UAE based Apparel group and will enter UAE, Qatar, Saudi Arabia, Oman, Kuwait, and Bahrain. The company already has a strong foothold in India and would experimenting with countries that have a substantial expatriate Indian population.

   

• Swiggy is now targeting an IPO and listing in 2024 and preparations are again back in right earnest. It has invited investment bankers including Morgan Stanley, JP Morgan,  and Bank of America to present their pitch. It had targeted its IPO last year, but put off due to adverse market conditions. With all the back and forth on valuations, it would be interesting to see at what value, Swiggy targets its IPO.

   

• In order to boost its offline presence, PhysicsWallah and announced 26 new PW Vidyapeeth centres. PW Vidyapeeth already operates 67 centres in India across 38 cities with a student base of over 1.50 lakhs. It also plans to give out scholarships worth Rs200 crore under this scheme.

It may not have been a busy week for fund raising, but it has been surely a good time for some strategic thinking among start-ups.

Touche – Chandrayaan III launch, enthuses start-up ecosystem in India

The week saw Chandrayaan III safely landing on the moon. It marked a first in that India was the first to land on the South Pole of the moon. However, behind the phenomenal success of the Chandrayaan III mission is a lot more than the unflinching efforts and the global capabilities of Indian scientists. It has also been an opportunity for the Indian corporate sector to showcase its defence and SpaceTech manufacturing skills. India is now only the fourth country in the world after the US, Russia, and China to land on the moon.

A host of companies ranging from L&T to MTAR Technologies to Bharat Forge have been involved in various aspects of the Chandrayaan III mission. More importantly, the opportunity in SpaceTech is expected to tough a level of $45 billion over the next few years and that is going to be the real big takeaway from the Chandrayaan III mission as far as the Indian defence industry is concerned. It has arrived on the global platform.