Weekly Musings – Big start-up updates for the week to July 14, 2023

18 Jul 2023 , 09:39 AM

Start-up funding has been relatively tepid in the June quarter and that appears to have carried forward into July also. Here is a quick rundown on the key start-up updates that defined the week to July 14, 2023.

Start-up funding nearly halves week-on-week to $85.4 million

For the week ended July 14, 2023 the start-ups saw fund raising of $85.4 million across a total of 17 deals on the street. That represents a 45% drop from the week prior to that, which saw start-up funding of $155 million across 15 deals. In the current week, the number of deals were higher despite the fund raising halving, indicating that the tickets sizes were smaller in comparison.

In one of the biggest funding deals of the week, trucking aggregator, LetsTransport, bagged funding of $25 million to offer intra-state logistics solutions. This takes their total funding till date to $50 million. The funding round was led by Bertelsmann, which put in 80% of the money. LetsTransport will use the fund infusion to expand its market presence and expand its logistics suite. The company basically operates as a last-mile logistics service provider. In another major funding round, SAAS management start-up, Zluri, raised $20 million from Lightspeed Ventures and other existing investors like Mass Mutual and Kalaari Capital. Zluri will use the fresh funds to expand its generative AI capabilities in enterprise SAAS operations. Zluri is a specialized SAAS management platform.

Meanwhile, in another major fund raising venture, SmartDukaan raised $10 million to help strengthen smartphone retailers to strengthen their digital play. The funding was led by Findoc Finvest. SmartDukaan will use the fresh funds to expand its product portfolio and also to expand its franchise network on a pan-India basis. SmartDukaan specializes in digitization of the end to end operations of retail players. In another key funding round this week, healthtech start-up, Fold Health, bagged $6 million in funding in a round led by Iron Pillar. Fold Health is a healthtech start-up that allows medical workers to integrate electronic health records and use digital tools to automate tasks. Fold Health will use the fund infusion to for scaling up its business and also for hiring fresh talent. The company operates out of Pune and the US and with its latest fund raising round, it has already raised up to $12 million from investors. The company largely caters to disrupting the US healthcare market with a neat automated digital solution.

There were a number of smaller deals too in the start-up space. In a relatively smaller deal, Neuron Energy has got funding of Rs20 crore to manufacture lithium-ion batteries. Neuron Energy currently offers lead acid and lithium-ion technology smart batteries. The fresh funds will be used to get the ICAT certifications as well as to strengthen the work bench. The company is targeting Rs100 crore of sales in this year. Also, Shardeum, floated by Nischal Shetty, has raised $5.4 million and will use the funds to support the growth of the mainnet ecosystem. Its mainnet already has over 820,000 accounts and has seen more than 7.4 million transactions till date. In a much smaller round of funding, SupplyNote bagged funding of $2.5 million to offer supply chain solutions to restaurants. The funding was raised from Venture Catalysts and Artesian. It will use the fund funds to expand in the MENA region. Finally, OneStack has raised an undisclosed sum of money from growX to digitize cooperative banks in India. It provides core banking services to the cooperative banking sector in India and the target is to become the vendor of choice.

As important is the start-up funding is the funnel of funds supply and that has seen a lot of action in the week. CapFort Ventures has just launched a Rs200 crore tech fund to invest in up to 40 start-ups in India. The fund will basically to pre-series funding in deeptech, cleantech, logistics and B2B tech. The investments will be in start-ups with valuation of Rs100 crore or more. The average ticket size per start-up will be around Rs3 crore to Rs3.50 crore. The first close of the fund is expected later this year. Meanwhile, Vertex Ventures (the VC arm of Temasek) has closed its first master fund at $900 million. The target corpus was $1 billion. It is already an active investor in India in start-ups like Licious, First Cry, XpressBees, Kissht etc. Also, the founders of 100X Entrepreneur Founders have launched a $25 million fund exclusively for B2B SAAS start-ups. The fund will enable such start-ups to scale up revenues to $10 million in five years. 

Big start-up strategies this week?

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

• In the digital world, you cannot lag competition. After Zomato took the initiative, even Swiggy has decided to offer data analytics and insights to restaurants at no cost. This dashboard based platform will offer insights with actionable suggestions.

   

• Fashion start-up, Styched, acquires Flatheads to mark its foray into the footwear segment. Flatheads became famous as a participant in the Shark Tank contest. Flatheads makes all-day casual sneakers. Styched will leverage Flatheads technical expertise.

   

• Reliance will acquire Alia Bhatt’s Ed-a Mamma for up to Rs350 crore. Ed-a-mamma manufactures and sells children wear and teen wear. Reliance has been quite aggressive on the online lifestyle and fashion front and it is going largely by the inorganic route.

   

• China’s BYD may invest up to $1 billion in India to build electric cars and batteries. This will be done in collaboration with Megha Engineering. BYD plans to produce up to 1 lakh EVs in India but will start by importing CKD kits and assembling in India.

   

• Tesla plans to bring its auto parts and electronics supply chain to India. Tesla will start by selling cars assembled elsewhere but will eventually start manufacturing in India. This comes in the aftermath of Musk meeting Mr Modi during his US visit.

   

• Digital travel platform, Ixigo, has taken the Generative AI route with GPT powered travel chatbot. It is built on OpenAI’s ChatGPT and offers personalized recommendations and travel itineraries. It will be the first travel company in India to deploy Generative AI.

   

• Disney Hotstar parent may be looking to selling its India business. Last year, Disney Hotstar had lost the IPL digital streaming rights to Viacom 18 which had badly dented its subscriber base. Disney is yet to firm up on its India strategy.

   

• In a significant shift in export strategy, the Tatas will take over the Wistron assembly plant in Karnataka and will become the first Indian manufacturer of iPhones. Apple had suspended all contracts with Wistron after the violence had broken out in its factory.

   

Start-up story of the week – Is the 28% GST on gaming sites justifiable

The GST Council in its last meeting took a decision to tax online gaming sites at par with gambling at the peak rate of 28% GST. This has led to industry bodies and the gaming companies protesting that the tax would kill the nascent industry. One of the reasons offered by the gaming industry was that imposing a GST of 28% on the chip buying value or on the value of the bet was too steep and would only push such betting activities into the informal market, resulting in loss of revenues for the government. While the gaming industry is open to the 28% tax idea, they do not want it imposed on the full value.

However, from the government side, there appears to be no intent to relent. Rajeev Chandrasekhar, the Minister for IT, has clearly said that the high GST was needed to prevent any scope for money laundering using the online gaming route. However, the challenge is that the government has imposed the 28% GST on all gaming sites, irrespective of whether it is a game of chance or a game of skill. The gaming industry wants the games of skill to be treated differently and taxed at a concessional rate. However, the government may have a point. Even sports events like IPL are levied 28% GST and products like cement, white goods and aerated drinks also attract 28% GST rate. In such a situation, there may be little justification for the government to give any special treatment for gaming.