Weekly Musings – Big start-up updates for the week to October 27, 2023

30 Oct 2023 , 09:12 AM

Compared to the previous week, the current week saw flows into start-ups nearly double, although the funding surge was largely led by just one company Ola Electric. For the week to October 27, 2023, the start-up funding was 96.6% higher than the previous week at $466 million. In fact, when compared to the average of the last 5 weeks, the start-up funding in the latest week was up 150.53%. Here is the story of start-up fund raising over the last 6 weeks in numbers.

Funding Week	Start-up funding raised
Week ending September 22, 2023	$91 million
Week ending September 29, 2023	$194 million
Week ending October 06, 2023	$119 million
Week ending October 13, 2023	$288 million
Week ending October 20, 2023	$237 million
Average of previous 5 weeks	$186 million
Week ending October 27, 2023	$466 million

The start-up funding for the latest week ended October 27, 2023 was sharply higher led by the big funding round by Ola Electric. However, a quick look at the start-up funding numbers would tell you that the numbers have been fairly volatile. Let us now move to the actually break-up of the start-up funding in the latest week.

Ola Electric – The funding deal that defined the week

Ola Electric, part of Bhavish Aggarwal’s Ola group, raised a whopping $384 million funding during the week or approximately Rs3,200 crore. It is already well known that Ola Electric is planning a $1 billion IPO in the Indian market sometime next year and this funding round comes ahead of the actual IPO. The funding round by Ola Electric was a mix of debt and equity. The combination of debt and equity in total amounted to $384 million and accounted for 82.4% of the entire start-up funding during the week. While the equity funding round was led by Temasek of Singapore, the debt funding round was led by State Bank of India. Ola Electric is one of the leading electric 2-wheeler makers in India.

Ola Electric will use the funds for expansion of its EV business and also to establish India’s first lithium-ion (LI-ON) manufacturing facility at Krishnagiri in Tamil Nadu. Lithium Ion batteries are considered the most efficient batteries for running EVs and control over the supply chain is critical to success in the EV business. Out of the total fund raising of $384 million, $140 million in equity funding came from Temasek while debt funding of $244 million came from State Bank of India. Ola Electric has already roped in Kotak Mahindra Capital and Goldman Sachs as Book Running Lead Managers (BRLMs) for its forthcoming IOP in the first half of 2024. Ola Electric has a current manufacturing capacity of 1 million EVs, which will be scaled up to 2 million EVs in six months, by the time of the IPO. The eventual target is to take the manufacturing capacity to 10 million EVs.

Where the other funding deals came from during the week

For the week ended October 27, 2023 the start-ups saw fund raising of $466 million across a total of 13 deals, as compared to $233 million raised in the previous week across 17 deals in the previous week. Out of the $466 million of funding raised by start-ups, Ola Electric alone accounted for $384 million or 82.2% of the total start-up funding in the week as explained in the previous para. However, there 12 other deals which raised $82 million between them. Here is a quick rundown on the other major deals in the start-up space during the week ended October 27, 2023.

1. The biggest deal of the week (other than Ola Electric) was the $30 million fund raising  by PMI Electro Mobility. PMI is an EBUS manufacturer and it bagged the $30 million funding from Piramal Alternatives. PMI Electro Mobility will use the funds raised to develop more innovative solutions and bring about technological advancements to its production capabilities. It is also looking to scale up its operations. The company already plies nearly 1,200 of its buses across 10 states. In exchange for the funding PMI Electro Mobility has issued convertible securities to Performance Credit Fund, a sector agnostic fund which is part of Piramal Alternatives.

    

2. In another big deal this week, Footwear brand Inc.5 Shoes has bagged $10 million in Series A Funding from Carpe Diem Capital, Param Capital and P3 Ventures. Inc.5 is an D2C omnichannel brand that caters to footwear buyers in the age group of 16 to 35. Inc.5 already has 70 offline stores and about 200 shop-in-shops. It will use the funds to triple its presence and consolidate its presence in urban areas but will mostly targe Tier-2 and Tier-3 cities. The footwear brand has been around for 25 years since 1998.

    

3. One of India’s leading reverse supply chain platform, BluBirch, has raised $6.4 million to bolster its reverse supply chain platform. It current leverages artificial intelligence and offers a SAAS based platform to clients. This Series A funding round of $6.4 million was led by Cornerstone Ventures and Capital2B. The fresh funds will be used by BluBirch to deepen its presence across markets and to accelerate growth. The reverse supply chain is a process that is almost opposite of a traditional supply chain, meaning the product moves from a customer back to a vendor/supplier/retailer. Reverse supply chain management includes pickups, disposing or cleaning, sorting, repackaging, restoring, and finally reshipping

    

4. Escrowpay has bagged $6 million in Series-A funding to offer digital escrow services. Out of this $6 million, Escrowpay has raised $4 million by way of issue of warrants. This is part of the overall Series funding round of $15 million. Escrowpay is a fintech that offers digital escrow services and is the first company to receive the digital escrow fintech authorization from the IFSCA.

    

5. Giga ML has raised $3.6 million in funding to help enterprises trail and deploy on-premise LLMs or large language models. The funding came from Nexus Venture Partners, Y Combinator, Liquid 2 Venture and others. This seed funding round will help companies to secure on-premise deployment of such large language models. Giga ML has created the base model, which companies can take and customize for their training purposes. The company is just about 3 months old.

    

6. Manastu, the SpaceTech start-up has bagged $3 million funding. Manastu was founded in the year 2017 to offer propulsion systems for micro satellites. Manastu will use the funds to develop its cutting edge space technology and to also scale up its business. It will be a green propulsion system and the company will also validate its technology in the live environment in the next one year. The funding round has basically come from members of the IANS network. 

    

7. Homegrown beer maker, Proost, has raised Rs25 crore or $3 million to foray into new markets. The funding round is a mix of equity and debt with funding support from the Chimes group as well as India Accelerator. Proost Beer already has presence in Delhi, Punjab, Uttar Pradesh, and Kerala and it will use the funds to boost its production capacity as well as to venture into new markets. With its wide range of beers, it plans to capture 5% of the Indian beer market by 2030.

    

8. Finally, Garuda Aerospace has also raised a sum of Rs25 crore or $3 million from Venture Catalysts and WeFoudnerCircle. It is a bridge funding round. Garuda Aerospace has the backing of MS Dhoni and is essentially a drone start-up with a wide variety of applications. Earlier this year, it had raised $17 million as part of the Series-A funding round. The fresh funds will be used for working capital requirements and for fulfilling drone orders.

The latest week to October 27, 2023 has been fairly robust in terms of start-up funding with a number of medium and large funding being put through during the week. Of course, the week was largely dominated by the Ola Electric story.

Big start-up strategies in the week to October 27, 2023

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

• Tata group has bought out the Wistron iPhone manufacturing unit in India for $125 million. Wistron is a Taiwanese manufacturing group and is one of the key suppliers of iPhones in India. As part of the deal, Tatas will take over the Karnataka plant of Wistron along with its 10,000 employees. This will make the Tata group the first home grown company to manufacture iPhones on behalf of Apple.

   

• Rapido, the bike and taxi start-up, is now planning a big foray into cab services to take on Ola and Uber on their own turf. It will start cab services on a pilot basis in Hyderabad and then look to extent to other parts of India. It is looking at cabs as a way to boost its top lien and eventually its bottom line too.

   

• Reliance Jio launched the first satellite based giga fibre services in India. This will enable the company to offer nationwide access at low affordable rates. This will enable the company to expand its digital footprint to beyond the current 450 million. Jio Space Fibre will be India’s first giga fibre services. It is intended to provide fast and reliable internet connectivity to remote and hard to reach regions.

   

• Ontario Teachers Fund of Canada has got the CCI nod to acquire a minority stake in XpressBees. It will acquire a stake in the parent company, BusyBees Logistics. The deal is expected to happen at a valuation of $1.4 billion. The approval has been given through the much faster green channel route.

   

• Ahead of its high profile Rs1,701 crore IPO, Honasa Consumer Products (owner of Mamaearth and BBLUNT brands) has decided to get rid of Momspresso, which is the loss making vertical of the group. It was one of the most expensive acquisitions made by Mamaearth. The website of Momspresso has been down for the last two days.

   

• The Aditya Birla venture, TMRW, will invest Rs155 crore in the D2C brand, The Indian Garage Company. TIGC has a leadership position in the middle range casual wear apparel market. Some of its popular brands include Bewakoof, Berrylush, Juneberry, Urbano etc.

   

• In a deal that could change the contours of media industry in India, Reliance has agreed to acquire the India business of Walt Disney in a cash and stock deal. Disney will sell controlling stake of its India franchise including its sporting telecast rights as well as the OTT brand, Disney Hotstar. The valuation of the India business of Disney is estimated in the region of $8 billion to $10 billion and the deal is expected to be announced next month. This will allow Reliance to acquire a big chunk of the OTT market in India. 

Amidst the volatility in funding, a slew of funds has reported solid fund raising for investment in start-ups. It is estimated that around $50 to $60 billion is in the sidelines and waiting for the right opportunity to enter. That is the good news.