Weekly Musings – Big start-up updates for the week to September 01, 2023

4 Sep 2023 , 06:34 AM

It may be recollected that the week to August 25, 2023 had been one of the most exciting weeks in recent memory with $231 million of start-up funding raised across a total of 16 deals. This was largely led by the quick commerce company Zepto, which accounted for $200 million out of the $231 million raised last week. It also marked the emergence of Zepto as a true blue unicorn, the first of the current year. However, with no Zepto deal to boast about, the latest week to September 02, 2023 was relatively subdued. The week saw a total of $52 million being raised across 12 deals in the week with MediBuddy leading the way. The latest week may not have been as impressive as the previous week, but was surely a lot better than the week before that when just $4.4 million of start-up financing was raised. Here is quick rundown of the fund raising story for the week to September 01, 2023.

Start-up funding at $52 million across 12 deals in the week

For the week ended September 01, 2023 the start-ups saw fund raising of $52 million across 12 deals, with MediBuddy leading the way, accounting for half the funds raised in the week. This is sharply lower than the $231 million raised in the previous week across 16 deals. Not only has the number of deals fallen in this week, but the fund raising is just about one-fourth of the previous week. However, as we said earlier, this dichotomy was largely due to the $200 million mega fund raising by Zepto in the previous week and the tickets being much smaller this time around. Overall, the month of August ended with start-up funding of just about $341 million, one of the very tepid months in terms of start-up funding enthusiasm. This was also largely influenced by the Zepto deal. Here is a quick summary of the fund raising deals during the week ended September 01, 2023.

In one of the biggest start-up funding deals of the week, MediBuddy raised $18 million from a slew of investors including Quadria, Lightrock and TeamFund. MediBuddy will use these funds mainly for acquisitions and for revving up its inorganic growth. MediBuddy is a healthtech start-up that offers video consultations with doctors, surgical consultations and also allows the customers to book lab tests online as well as order medicines online. A little over a year back, MediBuddy had raised $150 million through Series-C round of funding. The healthtech space is growing rapidly and MediBuddy sees the need to catch up through the inorganic route. The company has grown at 95% CAGR over the last 3 years and for that pace of growth, perennial flow of funds is essential.

The other big funding deal in the week was SatSure, the SpaceTech start-up, raising $15 million. The funding round was a mix of equity and debt and was led by Baring Private Equity Partners and Promus Ventures. SatSure is a Bengaluru based SpaceTech start-up that leverages satellite data to offer decision making intelligence across verticals like BFSI, agriculture and infrastructure. SatSure will use these funds for its global expansion plans across the Americas and in the Asia Pacific region. Part of the fresh funds will also be used to accelerate product innovation. Apart from Barings and Promus, the round of funding also saw participation from Omidyar Networks. SpaceTech is the big emerging segment in the start-up scenario and a lot of funding is current gravitating towards that space.

The third major deal during the week was the $9.7 million funding secured by CreditRight. Now, CreditRight is a Hyderabad based Fintech start-up that bridges the credit gaps for MSMEs (medium, small, and micro enterprises) located in Tier-III and Tier-IV towns. These places, normally, do not have easy access to formal lines of credit. The fund raising was a mix of equity and debt. The equity portion was provided by the Michael and Susan Dell Foundation while the debt component was provided by Blacksoil, Caspian Debt, RevX Capital and Western Capital. CreditRight will use these funds to expand its MSME funding to smaller towns and new locations as well as for building up its technology stack further.

There were two more significant start-ups that got funded during the week to September 01, 2023. Facets.Cloud raised $4 million from 100X Entrepreneurs and a slew of angel investors including Abhinav Asthana, Pallav Nadhani, Aneesh Reddy, Krishna Mehra and Sridhar Pedinneni. Facets.Cloud was just founded in 2021 and it helps start-ups to improve their developer productivity. Facets.Cloud will use the funds raised to expand its US presence and also to enhance and enrich its product offerings. Its platform is already being used by reputed names like Treebo, MPL, Capillary Technologies and Purplle. Finally, the week also saw Varthana bag a $2.5 million debt funding from Symbiotics Investments to provide loans to rural schools. These funds were raised through the issue of education focused social bonds. Varthana will use the funds to make private schools in rural areas affordable by financing equipment purchases and refurbishment of facilities. Varthana is an NBFC which focuses on such small ticket education loans. In addition, Varthana will also provide small ticket loans to students for vocational training. 

Big start-up strategies in the week to September 01, 2023

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

• With over 50,000 restaurants onboarded onto ONDC, would it impact the fortunes of food delivery apps like Swiggy and Zomato? The numbers have shot up from 500 to 50,000 in just 6 months. However, for ONDC to really make a mark, it will have to control the entire logistics chain from end to end, the way Swiggy and Zomato do. 

   

• Amidst the financial crunch, PharmEasy plans to restructure its $300 million debt from Goldman Sachs. They are currently in talks to negotiate a lower rate and also, possibly, convert part of the debt into equity. It is doing a rights issue of Rs3,500 crore at a valuation of $600 million, nearly a one-tenth of its peak valuation in 2021.

   

• The start-up competition is hotting up on the stock broking space. Phone Pe plans to take on Zerodha and Groww by launching its stock broking platform. The Phone Pe offering will include intraday equities, delivery trades, mutual funds, ETFs, and wealth baskets. It will start stockbroking under the banner of Share.Market.

   

• Big investors are now taking a virtually mixed view on start-up valuations. After Barons upgraded other start-ups except Byju’s, Fidelity has marked up a slew of start-ups but kept Gupshup out. Fidelity upped valuations of Meesho and Pine Labs. Earlier, even Baron Labs had upgraded Pine Labs. 

   

• It is now clear that Google is bringing its generative AI (artificial intelligence) to its search engine in India. Indian users will be able to toggle between English and Hindi languages. The feedback has been generally good about its AI integrated search engine. Its response to ChatGPT, the AI Chatbot Bard, is already launched on experimental basis.

   

• Razorpay, the Fintech Unicorn, has introduced one-tap checkout without the need to authenticate the transaction using OTP (one-time password). Customer details will get auto-filled in a single tap through Truecaller. Razorpay has over 200 million customers and this will enable them to get smooth and seamless checkout experience.

   

• Wal-Mart appears to be betting big on Flipkart. This year, Wal-Mart has already sunk in $3.5 billion to increase its stake in Flipkart. It recent acquired the non-controlling stake from Accel and Tiger Global. Earlier this year, Wal-Mart also bought out the residual stake of Binni Bansal, one of the original founders of Flipkart.

   

• Country Delight, the app based milk and groceries supplier, has been in the news recently for its widening losses. However, the management has confirmed that Country Delight would now be profitable over the next 10-12 months. Currently, Country Delight makes over 10 million monthly deliveries to more than 5 lakh subscribers across 15 major cities in India. Its revenue growth has continued to remain robust.

   

• Good to Go has acquired TenderCuts in a distress sale. Incidentally, TenderCuts is backed by Paragon. Recently, TenderCuts had laid off more than 60% of its staff and also wound up operations in Bengaluru and Hyderabad. While Good to Go is an Omnichannel meat brand, TenderCuts is a Chennai based meat delivery start-up.

It may have been a relatively subdued week for fund raising, but it has been surely a good time for some strategic thinking among start-ups. That is something expressly visible during the week.

Touche – Need for cohesive online and offline strategy

Wakefit cofounder, Ramalinga Gowda, has underlined the need for brands to align their offline and online marketing strategies. Today, the need for alignment works both ways. There are the legacy brands with a strong offline presence. These brands are looking to scale up quickly by expanding their online franchise. However, that is an entirely different mindset. At the same time, India has more than 50,000 digital-first brands that have been launched as online channel products. However, now they see the natural advantages of having a supportive offline presence. 

The big challenge is the sales and distribution costs, which can add up to a substantial amount. However, the tougher challenge is to allocate these costs between offline and online, which is essential to evaluate the viability of either channel. With online and offline now getting merged into, what is called, an overall omnichannel experience; this alignment will be the next big challenge that marketers of brands will face.