This month on Startup Street, India minted its hundredth unicorn in what continues to be a lean funding period amid global volatility.
Sequoia, one of the world's largest venture capital funds, described its “crucible moment“. Edtech startups resorted to layoffs amid a “tough environment”, while Droom Founder Sandeep Aggarwal outlined the company's altered listing plans.
Here's what went on in May...
100 Not Out!
Five-year-old neobanking startup Open raised fresh funds at a billion-dollar valuation, giving India its 100th unicorn.
The fresh investment round was led by IIFL. Existing backers, including Tiger Global, Temasek and 3one4 Capital, also participated. The company, however, did not disclose the amount raised in the latest round.
🦄 The Indian startup ecosystem just hit a century today!
We are super excited to become the 💯th Unicorn from India. 🥳
But before that here's the #Unicorn🧵summarizing our journey so far👇 pic.twitter.com/FsfSOpK5BpPrime Minister Narendra Modi acknowledged the landmark in his Mann Ki Baat speech. He also highlighted the accelerating pace of creating unicorns in the country, corroborating Iron Pillar's forecast.
“The good thing is that our unicorns are diversifying. They are operating in many fields like e-commerce, fintech, edtech, biotech, etc.,” Modi said.
The frenzy around the latest milestone, however, fails to mask the muted sentiment at present. For instance, Open was the only unicorn in May and the 16th so far in the year. In April, there were no new unicorns minted.
Compare that with the bumper 2021, which saw 44 such startups reach a valuation of $1 billion or more.
Sequoia's ‘Crucible Moment'
In an internally-circulated presentation, Sequoia addressed its founders, labelling the current situation as a “crucible moment”.
“We do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery like we saw at the outset of the pandemic,” the 50-year-old venture capital firm said in the presentation titled ‘Adapting to Endure'—reviewed by BQ Prime. “We expect the market downturn to impact consumer behaviour, labour markets, supply chains and more. It will be a longer recovery and while we can't predict how long, we can advise you on ways to prepare and get through to the other side.”
A snapshot from the Sequoia presentation. (Source: BQ Prime)
“We foresaw some of this when we first published our Black Swan memo at the start of Covid-19 in early 2020. What we got wrong then was monetary and fiscal policy response that followed and the distortion field that created,” it said. “This time, many of those tools have been exhausted. And sustained inflation, and geopolitical conflicts further limit the ability for a quick-fix policy solution.”
Sequoia said its intention is not to “be a beacon of gloom”.
“Winning in the years ahead is going to depend on making hard, decisive choices—confronting uncomfortable challenges that may have been masked during the exuberance and distortions of free capital over the past two years.”
The grim outlook was evident as edtech startup Vedantu laid off 400 staffers, taking its annual total to at least 624. In a blog post, Vedantu CEO Vamsi Krishna said the current external environment is “tough”. “War in Europe, impending recession fears, and Fed rate interest hikes have led to inflationary pressures with massive correction in stocks globally and in India as well. Given this environment, capital will be scarce for upcoming quarters.”
Other edtech firms Unacademy and FrontRow, and startups such as Trell, Cars24 and Lido Learning, too, laid off employees this year.
Droom In The Waiting Lane
Sandeep Aggarwal has been waiting for the markets to “stabilise” to list his marketplace for buying and selling new and used automobiles, Droom.
If it wasn't for the Omicron wave, Aggarwal said, Droom would have debuted on the bourses already. The startup had filed its draft red herring prospectus with the market regulator in November last year for a Rs 3,000-crore initial public offering.
Droom was expecting to ride on the momentum as some of India's biggest startups went public, but couldn't.
Sandeep Aggarwal, founder and CEO, Droom. (Source: Company)
Aggarwal, who also founded online retailer ShopClues, said the plans for the IPO haven't changed in size, but where the company will list. “For me, it is all or none. Whenever we list, it will be to raise Rs 3,000 crore,” he told BQ Prime.
Last year, Droom had said it was eyeing listing on the U.S. stock exchange, Nasdaq. But in November, the company filed its DRHP in India.
“Until August last year, we had no plans of listing in India,” Aggarwal said. The reasons for the change in his decision, however, were threefold.
With Zomato, Paytm and Nykaa listing, there were “comparable” new-age companies for Droom. Besides, the notion that loss-making firms will not be accepted by the markets was also widely being shed. “A listing abroad is also more time-consuming, painful and expensive,” he said.
But the doors for secondary listing in markets such as Singapore, Hong Kong, Europe or the U.S. remain open, since Droom operates in India through a subsidiary, Aggarwal said. The parent is registered in Singapore.
According to him, the recent plunge in shares of new-age companies was “largely due to market forces”.
Despite being a loss-making firm, Aggarwal said there are no layoffs being considered, bucking the sector-wide trend.
“We're very asset-light. Our employees are probably one-tenth the size of the next player who is half our size,” he said. “We will exercise conservatism wherever necessary, maybe on discretionary spends, but we don't anticipate any layoffs.”
Major Deals And Developments
Dental aligner brand Toothsi raised $40 million (Rs 305 crore) from Eight Roads, others.
Interview platform Barraiser raised $4.2-million (Rs 32.5 crore) seed funding.
InfoEdge to invest in three new schemes in partnership with Temasek.
Zepto raised $200 million (Rs 1,550 crore) in Series D funding, valuing the company at around $900 million (Rs 6,978 crore).
Plug-and-play product-led growth platform Toplyne raised $15 million (Rs 116 crore) in Series A co-led by Tiger Global and Sequoia Capital.
Evenflow raised $5 million (Rs 39 crore) from Village Glocal, Shiprocket and others.
B2B digitisation platform Bizzo garnered $2 million (Rs 15.5 crore) from ICICI Bank-led group of investors.
Skillmatics raised $16 million (Rs 124 crore) from Sofina, Sequoia India, others.
CoinDCX to invest Rs 100 crore in Web3.0 firms over 12 months.
Home construction app Kolo raises $4 million (Rs 31 crore)
Byju's said to be in talks for $1-billion (Rs 7,500 crore) funding. Its unit Great Learning has acquired Singapore-based Northwest Executive Education, a global provider of executive education programmes.
HOP Electric Mobility raises $2.6 million (Rs 20.15 crore).
Vivriti Capital raised $30 million (Rs 232 crore) from TVS Shriram Growth Fund 3.
BharatX raised $4.5 million (Rs 34.8 crore) from Y-Combinator and others in seed round.
IIFL Group's early-stage investing vehicle IIFL Fintech Fund invested $2 million in EasyRewardz Software Services, a company that offers services related to loyalty-based rewards as a part of its Series B funding.
Kotak Securities announced its investment in fintech startup Multiple.
Swiggy entered definitive agreements with Times Internet to acquire Dineout, which will continue to operate as an independent app after the acquisition.
Ather Energy raised a Series E round of $128 million (Rs 992.4 crore), led by National Investment and Infrastructure Fund Ltd.'s Strategic Opportunities Fund and Hero MotoCorp Ltd.
IPO-bound Navi expanded its board to 4 independent directors
HDFC and HDFC Life made strategic investment in Xanadu Realty
Walmart's PhonePe acquired two wealth management firms—WealthDesk for about $50 million (Rs 388 crore) and OpenQ for nearly $25 million (Rs 194 crore), Bloomberg reported.
GuardianLink.io established India's first Web3 accelerator in IIT Madras' Research Park.
Hyperlocal shopping startup 1k kirana raised $25 million (Rs 193.8 crore).
Former Twitter India head Manish Maheshwari quit his metaverse education platform Invact Metaversity.
Zoho Corp. invested in Genrobotics, a deep-tech startup using robotics to end manual scavenging.
(Source: Official media statements)
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