Weekly Musings – Big start-up updates for the week to June 2, 2023

5 Jun 2023 , 08:41 AM

For now, there are an elaborate set of exemptions, so most start-ups are confident that they should be able to skirt the angel tax issue, but we have to wait and see. The week to 02^nd June 2023, was an active week for start-up strategy and start-up funding. As much as big money poured into the start-ups, several unicorns also saw their valuations being slashed rather mercilessly.

Start-up funding above $200 million in the week

For the week ended 02^nd June, the start-ups saw fund raising of $209 million across a total of 13 deals on the street. This is sharply lower than the $476 million raised in the previous week to 26^th May 2023. However, the good news is that for the month of May 2023 overall, the start-up funding crossed the $1 billion mark, something that had been elusive for some time. Among the major deals in the week, consumer appliances brand (Atomberg) got $86 million Series-C round funding, making it the top deal of the week. In another deal, Aurum PropTech has approved the acquisition of NestAway for $10.93 million.

But there were several other interesting deals too during the week. Among other major deals, Pixxel, the start-up focused on space technologies, has bagged funding to the tune of $36 million in a round led by Google. The funds would be used by Pixxel for building high resolution hyper-spectral satellite constellation and for developing its AI platform. In another deal, Karma Life has managed to raise Rs44 crore to offer early wage access to blue-collar and gig workers. Essentially, it allows employees to borrow against their monthly salary in advance. Capillary Bags, another start-up that just shelved its IPO plans, has also raised $45 million from Avataar Ventures. Capillary Bags is a SAAS start-up and the funds will be used to expand its global presence and also for inorganic growth. 

In two more interesting rounds of funding, Newtrace, a cleantech start-up raised $5.65 million from Sequoia India and Aavishkar Capital to accelerate the global transition to hydrogen. In another deal, Transak managed a $20 million funding round from CE Innovation Capital for scaling up its Web-3 payments. It is an agnostic fiat-to-crypto payment gateway. However, not all start-up news was good news with several old time unicorns seeing valuation cuts. Henderson cut the valuations of PharmEasy to as low as $2.7 billion while NestAway, backed by Tiger Global, saw its valuation plummet from $220 million to just $11 million. To add to the challenges for start-ups, the lenders have called off the $1.2 billion loan restructuring of Byju’s. It looks like Edtech has a new set of challenges.

Start-up regulation gets more focused 

With Tesla opening discussion lines with the Indian government, the Indian side has sought firm commitments and timelines for Tesla to set up a manufacturing plant in India. Manufacturing in China and selling in India has been already ruled out. Meanwhile, ONDC has decided to turn rational and limit discounts. After all, digital platforms are not about cash burn alone. On the subject of regulation of lending apps, Google has come up with its own set of rules. The move is not only aimed at reducing the flak that Google Play has been receiving, but also to encourage responsible borrowing by the customers.

Controversies surrounding Ashneer Grover refuse to go away easily. In its latest salvo, the Delhi High Court has refused to stay the probe against Ashneer Grover and his wife. This probe was launched by Bharat Pe which has accused Ashneer Grover and his wife Madhuri Grover of defrauding the company to the tune of Rs81 crore. Meanwhile, the Parliament Panel has quizzed Razorpay, Phone Pe and Cred over rising cyber incidents of late. One of the big issues has been the implementation of fool proof cybersecurity measures. 

They have also been quizzed about providing a platform for illegal lending apps charging usurious rates of interest being allowed to operate on platforms without adequate KYC being completed. Meanwhile, on a lighter vein, Netflix, Hotstar and other OTT players do not believe cigarette smoking is injurious to health. They are debating a legal challenge to the new requirement to show anti-tobacco warnings and the start and middle of each web show. This is likely to be an interesting area to keep a watch on.

What were the big start-up strategies this week?

In start-up strategies this week, Chinese phone maker Xiaomi has decided to jump on the make in India bandwagon and plans to manufacture wireless products in India. This will be done through its partnership with Optiemus. With Apple and Samsung aggressive in putting together the India strategy, the largest seller of phones by volumes (Xiaomi) does not want to be left behind. The recently concluded IPO season saw the fructification of the Jio media strategy. It set a new record with 32 million concurrent viewers tuning into the IPL final last week. Jio also clocked more than 15 billion video views in the first 7 weeks of the IPL.

Talking about global giants expanding their India hard ware bets, Foxconn will start making iPhones at its Karnataka facility from next year. It has invested Rs13,000 crore in this facility and is likely to create upwards of 50,000 jobs. Foxconn has been a key partner of Apple in this China plus one strategy. Meanwhile, Apple is also tapping the India market aggressively. It plans to expand its store presence aggressively in coming months across India. Even the domestically owned and run Ola Electric is now betting big on electric vehicles and plans to multiply its total experience centres to 600 in the next eight months.

Edtech stories may be facing a lot of trouble, but that is hardly stopping new ideas. For instance, Edtech start-up (Avidii) has entered India to offer instant and on-demand learning solutions to students. It is targeting up to 1 million downloads in India by the end of the year. It offers customized courses and operates on a B2B as well as on a B2C model for delivering learning solutions. Continuing on Edtech strategy, Scaler will acquire Delhi based edtech start-up, Pepcoding. Scaler is developing a 4-year undergraduate program in technology and Pepcoding will provide the content support.

How do we sum up the India start-up story in the latest week?

A week may be too short a time to take a view on the tech ecosystem but it is always useful to look at incremental progress on this front. Here are some key data points.

• The latest week may have seen tepid start-up funding compared to the week before that. However, the good news is that the total fund raising in May 2023 has crossed $1 billion and that is great news for the start-up ecosystem. In fact, May 2023 saw a 15% spike in start-up funding compared to April .

   

• The week also happened to be a positive week for start-up performance in the stock markets. Several listed new age stocks like Nykaa, Zomato and Delhivery did well on the bourses in the previous week. Even others like CarTrade, PB Fintech, Paytm and EaseMyTrip put up a strong rally during the week.

   

• Amidst its enthusiasm to encourage start-ups, the government has also put its foot down on several issues. For instance, it has refused to accept any promises from Tesla without firm commitments on manufacturing time lines. Also, on the incentives for EVs under FAME-2, government has refused any leeway on the India component.

Start-up funding in the week to 02nds June may be relatively lower than the previous week, but the good news is the start-up funding flow of over $1 billion in May. After an 18-month winter, the start-up scene appears to be looking up once again.