This month on Startup Street, the word was dichotomy.
While the startup ecosystem churned out three new unicorns, firms across sectors resorted to layoffs to tide over a funding slowdown and uncertainties prevailing in the market. But a fintech platform might have a solution.
Besides, Hurun Future Unicorn Index lists some of the most promising startups to emerge in the next four years.
Here's what went on in June...
Unicorns Vs Layoffs
At the start of the month, a tweet by Rishad Premji, chairman of Wipro Ltd., pretty much summed up the duality of the startup ecosystem in India.
Are we focusing too much on the Unicorn status of startups as opposed to focusing more on their ability to be strong and sustainable businesses?
In June, three startups—PhysicsWallah, Purplle and LeadSquared—turned unicorn with a valuation greater than $1 billion (Rs 7,800 crore).
Edtech startup PhysicsWallah raised $100 million (Rs 780 crore) in its first funding round, while LeadSquared raised over $150 million (Rs 1,208 crore). Purplle, a Mumbai-based beauty products e-tailer, raised $33 million (Rs 260 crore).
That too when uncertainties prevailing in the market prompted a few Indian startups to cut workforce.
Meesho, Trell, Rupeek, Blinkit, Cars24 and Mobile Premier League have fired employees in June to lower costs. Crypto platform Coinbase cut about 8% of its Indian staff.
Byju's group firms—Toppr and WhiteHat Jr—together laid off as many as 500 staffers. Udaan, looking to go public sometime next year, is estimated to have cut at least 180 jobs.
In Funding Winter, Raise Money Without Paring Equity
As tech valuations take a hit and layoffs rise amid liquidity tightening, a fintech platform may have a solution for raising funds.
Recur Club, born in the throes of the Covid-19 pandemic in 2021, with its proprietary trading platform helps startups raise money without diluting equity. Instead, it allows companies to trade their future customer revenue at a small discount to get capital within 48 hours.
At a time when startups are preserving capital, this platform has seen an uptick in companies signing up and trading through them.
“Over the last three months, the number of new companies trading on our platform has gone up from 10-12 to 30 per month. The total number of companies registering has gone up from 400 to over 750,” Eklavya Gupta, founder and co-chief executive officer, told BQ Prime.
The IIM-Calcutta graduate started the company with another batchmate Abhinav Sherwal, after being a private equity investor with Nomura, Kotak and CDPQ.
Eklavya Gupta and Abhinav Sherwal. (Photo: Recur Club)
“There are predictable recurring revenue businesses such as SaaS, tech services, some B2B tech platforms, edtech, proptech. A lot of D2C businesses are also recurring—gyms, OTTs, etc. But the problem with the model is that they end up spending for their customer acquisition cost, hiring, software implementation upfront, which leads to a cash flow mismatch,” Gupta said.
This gap, he said, is being financed by equity dilution or deep discounting their own clients effectively, which aren't “ideal” ways of funding. “Hence, we created a new mechanism where we transformed the recurring revenue streams that these companies are supposed to generate over the next 12 months or so, and get that upfront. They can use their customers' recurring revenue to fund their predictable growth expenditure.”
The model worked not only for companies, but also for investors. “For institutional investors, this gives them a new asset class altogether that gives good returns.”
Recur Club charges both the investee and investor a small percentage of the amount that is being funded. That's their main revenue stream.
The Singapore-based startup itself has raised about $30 million (Rs 237 crore) through equity and debt allocation.
About why he chose to dilute equity, Gupta said pre-revenue companies should do it since there are no revenue streams to finance anything. “For anything that has a higher payback period or is an uncertain activity, equity should be used.”
The funding round was led by InfoEdge Ventures, backers of Zomato and PolicyBazaar; Titan Capital, that backed Ola; and Village Global, a Silicon Valley fund backed by Jeff Bezos, Bill Gates and Mark Zuckerberg.
On the financing side, the company has partnered Aditya Birla Finance Ltd., U GRO Capital, and Incred Financial Services, among others.
Hurun Unicorn Outlook
The ASK Private Wealth Hurun India Future Unicorn Index 2022 listed some of the most promising startups to emerge in the next four years.
“While compiling, we discovered that the country's startup ecosystem is expanding at an unprecedented rate. In just one year, the number of unicorns has increased by 65%, the number of ‘gazelles' has increased by 59% to 51, and the number of ‘cheetahs' has increased by 31% to 71,” Anas Rahman Junaid, managing director and chief researcher, Hurun India, said.
Junaid acknowledged the latest slowdown in the system, too. “There are some global economic concerns that could affect the valuations and capital-raising abilities of Indian startups.”
“Additionally, some Indian startups are implementing layoffs and cost-cutting measures, fuelling speculation of an ecosystem downturn. There could be a short-term blip in the growth story, but the Indian startup ecosystem's long-term potential remains excellent and resilient,” he said. “The pressure felt during the valuation process and the increased inspection of deliverables could help broaden the system's foundation.”
Rajesh Saluja, chief executive officer and managing director, ASK Wealth Advisors, said, “The current scrutiny of valuations in this ecosystem will help build more sustainable business models in the long term.”
Major Deals And Developments
Pristyn Care acquires Ratan Tata and Tiger Global backed health-tech platform Lybrate.
Rupeek fired 180 employees.
Mobikwik seeks to raise $100 million (Rs 790 crore) after deferring planned IPO.
Lending fintech Kissht gets $80 million (Rs 630 crore) from Temasek's Vertex, Brunei.
Pepper Content raised $14.3 million (Rs 112 crore) in Series A funding round led by Bessemer Venture Partners, with participation from Lightspeed Venture Partners, Titan Capital, and Tanglin Venture Partners.
Fintech unicorn Cred raised $80 million (Rs 630 crore) of fresh capital as part of its Series F funding round from new and existing investors. Valuation jumps by 60% to $6.5 billion (Rs 51,000 crore).
Office space occupied by unicorns to more than double by 2024 to 1.4 crore sq ft.
Sequoia raises $2.85 billion (Rs 22,500 crore) for India, Southeast Asia funds.
Ronnie Screwvala-founded UpGrad has raised $225 million (Rs 1,778 crore) in a funding round led by James Murdoch's Lupa Systems, at a valuation of $2.25 billion (Rs 17,780 crore).
Shiprocket to acquire majority stake in Pickrr for $200 million (Rs 1,580 crore).
Groyyo raises $40 million (Rs 316 crore) in funding led by Tiger Global.
India Accelerator announces international expansion with launch of Lanka Accelerator.
G.O.A.T Brand Labs raises $50 million (Rs 395 crore).
Savings and investment app Gullak raises Rs 10 crores from Better Capital & Stellaris Venture Partners.
Esports startup Fanclash raises $40 million (Rs 316 crore) from Sequoia, others.
Credit data platform Finbox raises $15 million (Rs 118.5 crore) led by A91 Partners
Kotak Investment Advisors announces $590 million (Rs 4,660 crore) platform with ADIA.
Transport marketplace Vahak raises $14 million (Rs 111 crore) in series A funding.
Biotech startup Immuneel Therapeutics announced India's first Phase II patient trials for CAR-T cancer therapies alongside a $15 million (Rs 118.5 crore) Series A financing.
Ex-bankers' study-abroad startup nears $1 billion (Rs 7,800 crore) unicorn status.
Silver jewellery startup GIVA raises funds from Aditya Birla Ventures, others.
Neuron7 gets $10 million (Rs 79 crore) from Battery Ventures, Nexus.
WeRize raises funding of Rs 120 crores ($15.5 million) from British International Investment, Sony Innovation Fund and existing investors.
Re-commerce marketplace Cashify raises $90 million (Rs 710 crore) in Series E round led by NewQuest Capital and Prosus.
Pine labs acquires API infrastructure start-up Setu.
Chaayos raises $53 million for business expansion led by Alpha Wave Ventures.
EV startup Battery Smart secures $25 million (Rs 197 crore) Series A funding led by Tiger Global
Small Business Marketplace Solv raises $40 million (Rs 316 crore) Japan's SBI Holdings, others.
Proptech startup PropShare raised $47 million (Rs 371 crore).
Bertelsmann raises $500 million (Rs 3,950 crore) fund to deploy in Indian startups.
Byju's names Vedati head of global growth, strategic initiatives.
Google invests in Progcap as part of $40 million round (Rs 316 crore), startup now valued at $600 million (Rs 4,740 crore).
HDFC Bank-backed Lentra acquires AI startup TheDataTeam.
Razorpay's co-founder and CTO Shashank Kumar appointed as Managing Director, ex-AWS executive Murali B named new CTO.
Arzooo raises $70 million (Rs 552 crore) in Series B at over $300 million (Rs 2,370 crore) valuation.
Fintech Cheq digital raises $10 million (Rs 79 crore) in seed funding round.
Zetwerk acquires three firms to boost industrial business for Rs 100 crore.
Garuda Aerospace signs MS Dhoni as brand ambassador and shareholder.
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