Paramita ChatterjeeThe startup space has been bustling with activity with Indian entrepreneurs churning out winning ideas and attracting millions of dollars in funding. In fact, there is growing chatter across the risk capital industry that the venture market is the place to watch out for! “What is exciting today is that this kind of a venture ecosystem did not exist five years ago,” said Mohit Bhatnagar, MD, Sequoia Capital on the sidelines of the Young Entrepreneur Conference & Event (YECE) organised by Businessworld on July 23. “If we as investors can handhold a few promoters and scale them to the next level, the contour of entrepreneurship will change in the years to come. There are great ideas floating in the market now,” he added. Investors who attended the Young Entrepreneur conference evinced interest in a slew of sectors including consumer, biotech, healthcare and software, apart from online and ecommerce within technology that are currently doing the rounds. “A good business can be described as one that can be scaled up rapidly and has robust unit economics in place that can help the company achieve profitability,” said Karan Mohla, executive director, IDG Ventures. In the first half of the current calendar year, the number of private equity and venture capital deals in the country increased to 462 from 285 in the corresponding period in 2014, as pet advisory firm Grant Thornton. In terms of value too, investors pumped in 38 per cent more at $7.1 billon in the January-June period this year. “We are always scouting for exciting business opportunities and are looking to fund in the range of $2-100 million,” said Sanjeev Aggarwal, co-founder and senior MD at Helion Venture Partners. Entrepreneurship in India can be classified into various categories of which these three are most common. One, businesses that ride on content. Here, promoters do not need too much of experience to begin with and therefore, the new breed of India's entrepreneurs who are typically very young and are fresh out of college are foraying in this space. Two, businesses that combine the online and offline models where experience is welcome but people can also start from the scratch. The third category is the outsourcing business where one typically would require prior experience to make a mark. “Our agenda is to explore investment opportunities and build relationships,” said Dev Khare, MD, Lightspeed Ventures India. “There are several India-specific businesses to watch out for and going forward, they are expected to gain traction as they exist nowhere else in the world,” he said. All in all, both private equity and venture capital investments in the country are here to stay. However, there is one factor that fund managers seemed wary about - high valuations riding across sectors. “The valuation game is really tricky. While certain companies are quoting high numbers, there are some who are finding it tough to even startup ,” said Sequoia’s Bhatnagar.
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Startups betting on the dometic forex market worth $18 billion to scale up business, writes Vishal Krishna With Makemytrip, the travel ticketing portal, acquiring a 28 per cent stake in Bangalore-based holiday planning company, HolidayIQ for Rs 93 crore, the travel portal industry is fast heading towards raising large funds. The market size for the travel booking industry is $120 billion in India and the organised players have only 2 per cent market share. According to the Indian Brand Equity Foundation, the forex earned from the domestic travel industry can be as high as $18 billion. This opportunity had already started a customer acquisition war like the one that we are witnessing in the etail business and all the money raised will be spent on hiring large sales teams. They will build market share in acquiring properties to be listed on their portals and create a bidding war of consumers. Surely television channels, Google and Facebook will benefit from all this. But what about the business itself? The funding will create many startups, to set shop, and ultimately drive them towards consolidation or make them shut down. For now the system is all geared up for a massive launch. With rumours floating around that Oyo Rooms is raising Rs 630 crore from Softbank, the industry could trickle down more money. The deal would make startups like iTraveller, Stayzilla, TripHobo, Tripoto, Travel Triangle and ZipRooms to raise more money with existing investors or look for funding. Today a startup, which has raised Rs 10 crore or more, spends Rs 1 lakh per day on Facebook and Google advertising. This would mean that Rs 3.6 crore is spent per year by a small startup to increase customer traction. “We look at bettering customer experience and manage customer repeats that book on the site when they are traveling to smaller towns,” says Yogendra Vasupal, founder of Chennai-based Stayzilla. He adds that increasing traffic volumes on to the site and app is not the end game. Stayzilla raised $20 million from Nexus Ventures and Matrix Partners recently. By not focusing on customer service, the travel industry can distance consumers. Today, like every etail business, there have been customer complaints about the less than average experience after booking from several travel sites. No doubt the money will make them improve processes. But this industry too will become a victim to heavy discounting to increase consumer traffic. In the off season too prices may drop to a point where the consumer benefits with a holiday package. iTraveller’s founder Shiju Radhakrishnan says that there is a need to organise the travel industry and that the discounting model is not the right way to go about it. “You need good data about regions and the properties. So you need to organise the suppliers who provide you this data in India,” says Shiju Radhakrishnan, founder of iTraveller. He adds that India will primarily remain a customer acquisition market, through heavy rotation of television ads, because of the nascent nature of the startup industry. “Consolidation is on the cards. But the opportunity to be independent, as a startup, is large because technology is going to disrupt the travel industry by getting rid of middlemen,” says Radhakrishnan. iTraveller recently closed a round of $1 million from LetsVenture. Ticketing is dominated by Goibibo and Makemytrip and these large portals do not have holiday planning tools that are customised for individuals. These new startups provide discovery, booking, planning and experience tools that become obvious acquisition targets. Let us hope that at least this industry is deep rooted in common sense and that it does not get lost in the story of valuations and wealth creation only for fund houses.
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Sanjay Swamy is a start-up veteran. His friends say that his out-of-box thinking has led him to scale up operations of several businesses. In 2006, when he was the CEO of mCheck, Swamy worked with telecom and banking regulators to help build regulations for mobile commerce. Perhaps, he was perhaps the first to scale up this industry. In 2015, Twitter acquired Bengaluru-based mobile marketing and analytics company ZipDial. And the deal enabled Swamy to entirely focus on start-ups. His investment arm called Angel Prime is a $10 million fund which incubates technology companies and youngsters with ideas that can benefit the mobile Indian. They have invested in 8 companies so far. Speaking to BW | Businessworld's Vishal Krishna, Swamy says the company will close at least six deals per year. Excerpts from the interview:Finally, Sebi has come out with listing norms. At least, it would be easier for entrepreneurs to list in their own country?It is a welcome move. Having a friendly vehicle is very important for investors. There are solid start-ups in India and now with the norms being put out, it's only going to increase investment in India. The numbers are here to stay, just take a look at the smartphone penetration and the number of opportunities that it has presented to build technology that can change lives. China was like this in 2007 and they have seen a massive ramp up of start-ups since. But it is still early days because we need to look at the nuts and bolts of the listing norms. What interests you in ideas today?Today people learn from the past mistakes. There are young entrepreneurs who are willing to fail and are ready to work with new ideas. It is interesting to note that Indian companies are now started by boys and girls who are between 21 and 29 years of age. There are older people who are also becoming start-up founders. The last five years has seen Indian entrepreneurs become bolder because of the penetration of smart phones and the sheer population size presents several business opportunities. I have noticed older people join start-ups because they want to back the idea and cash in on the growth upon an ideas success. Where do we come in? We come in at a very early stage as a fund and provide value whenever needed. What we will not do is to make decisions on behalf of entrepreneurs. But one must remember that we spend months evaluating ideas and we are not a fund that invests in a company because we want to be everywhere. We are focused on technology. By that I mean financial technology, payments, security, education technology and internet of things. The ideas we back we hand hold them.How do you evaluate an entrepreneur?First he should know why he wants money. Then he should know who he is taking money from. We are disappointed at times because we close only 1 in 10 engagements that we make. Some deals do not close because the founders have not evaluated the market that they want to serve. It is sometimes compelling to back the opportunity alone. Before raising a fund an entrepreneur should also validate the idea. The idea should have gone through certain iterations. This makes it easier for a fund to invest in. We have a lot of success with start-ups serving business to business companies. Is there a particular reason for the same?Yes the consumer game requires velocity which is why we notice that companies that succeed have such high valuations. In the B2B industry we have seen successful start-ups because there are clients adopting a technology. It may also be because this business does not require scale. It needs paying customers. But the BBC business requires a large understanding of the customers and consumption behaviour. A start-up in either case must understand their target market.We want to back ideas that will not be copied easily. Today capital is no longer a differentiator. Four or five years ago you could raise money and people would talk about you. Today all funds are looking at fundamentals and unit economics is the key. Also in a start-up more things go wrong than good. The competition today is in acquiring teams that can ramp up an idea. I would say that there are challenges to find a company that can disrupt the market with the least capital. That said I get 1000s of ideas in my mail box. It would be interesting to see what business models will succeed. But we are looking at technology and how it can be scaled for enterprises to win more consumers to clients.
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Mumbai-based crowdfunding platform for social, personal and creative projects, Ketto has raised $700,000 in funding led by Pradyumna Dalmia, deal champion of Calcutta Angels and Sudhir Rao, deal champion of The Chennai Angels & co-founder of IndusAge Partners.The other investors in the round includes - Singapore angel network, Anupam Mittal, Indian Internet Fund, Letsventure, Chennai Angels, Calcutta Angels, Intellecap Impact Investment Network (I3N), Ah Ventures, & Project Guerrilla. With the infused funds, the startup plans to double its technology and business development team with an aim to reach $100m in volumes via crowdfunding. Ketto also plans to expand operations in Singapore, Indonesia, Malaysia, and other South-East Asian countries.Varun Sheth, Co-founder & CEO, Ketto said, “The fresh round of funds will be used to build a world class platform which will facilitate users to raise funds across multiple categories for any project of their choice.”With global crowdfunding market estimated to reach $96 billion by 2025 and Asia being the key growth driver, Ketto is uniquely positioned to amass maximum support for any projects – be it disaster, social, technology, creative or personal.Sudhir Rao, the Chennai Angels and co-founder of IndusAge Partners said, “It is creating a platform where everyone has an equal chance to raise funds for any project: be it social or commercial.”Founded in October, 2012 by Varun Sheth, Bollywood actor Kunal Kapoor and Zaheer Adenwala, Ketto is Asia’s largest crowdfunding platform for social, personal and creative projects in Asia according to crowdsurfer.com. The company has witnessed a growth of 3000% year-on-year basis in terms of volumes, and in the past few months, has been crowdfunding close to a crore monthlyIn the last 12 months, multiple celebrities & corporates have backed various projects by raising funds on Ketto, The list includes names like - Hritik Roshan, Amitabh Bachchan, Anuskha Sharma, Myntra, StarSports, among others. Recently, Ketto has created first-of-its-kind partnership with Lakme Fashion Week - to provide a platform to the seven Gen Next designers to garner funds to launch their label at the upcoming showcase in August, 2015 in Mumbai.(BW Online Bureau)
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Funding to be deployed for multi-city expansion and brand management activitiesBoxMySpace, a Mumbai-based unique storage solution provider which uses technology to enable clutter free homes and office spaces, has raised Rs 1.92 crore from a consortium of investors led by Farooq Oomerbhoy, who was one of the co-founders of the early stage fund Orios Venture Partners. Ritesh Veera and Singapore Angel Networks also participated in the funding round.The funding will be deployed for expanding operations in metros including Pune, Bangalore and Delhi and undertaking key marketing efforts. BoxMySpace also plans to launch other innovative storage solutions in the future and partner with online retailers and SMEs to streamline their need for an efficient storage solution for their goods.Established in January 2015 by Pratyush Jalan, BoxMySpace was formed with an aim to bring the same convenience of cloud storage to the physical goods of a consumer’s home. The consumer can effortlessly avail on-demand storage service for their household goods at their doorstep either through the web or mobile application across Android and iOS platforms for monthly fee starting at Rs 99. BoxMySpace delivers high quality storage boxes to customer’s homes/offices wherein they can pack their belongings in the boxes, thereafter BoxMySpace collects it and stores it safely for them! It also provides spaces for larger storage items through it’s 4x4 and 6x6 packages. BoxMySpace leverages the unused spaces in large warehouses and plugs the gap to provide a technology backed solution to retail customers. It also provides the consumer with their storage dashboard to create a visual catalog of all their stored items and a unique code to each item/box to enable recall within 12 to 24 hours.Commenting on the investment, Farooq A Oomerbhoy, said “We are delighted to partner with BoxMySpace which is poised to lead the innovation forray within the storage industry in India. Shrinking living spaces, dynamic work patterns have resulted in people adopting a transient way of life, necessitating the need for storage solutions. Certain problems which plague consumers but do not consciously warrant attention unless a solution is bought forward for them, (for eg Ola/Uber) and BmS is one of them. Once consumers realise storage is no longer a hassle and expensive, BmS will become their preferred choice. We are working closely with BmS to introduce this solution to not only Indian consumer, but given the scalable nature of the business will be looking to expand in other part of Asia very soon. ”
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The flavour seems to have returned to lending capital to small and medium businesses. Ten years ago private banks like ICICI and HDFC Bank increased their retail lending. In less than two years the global crisis, along with increased defaults in the Indian small business industry, compelled the banks to rein in their lending to the small businesses. Most of the loans, in the early 2009, ended up recovering only 75 per cent of the the total loan value.
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This is the third round of funding for Grofers which has already raised over $45 million, writes Paramita ChatterjeeA clutch of early-stage investment firms -- Sequoia Capital, Tiger Global and Apoletto Asia -- have infused $36 million dollar in Grofers, an online grocery delivery service, founded by Saurabh Kumar and Albinder Dhindsa in Delhi NCR in late 2013.Today, in less than two years, Grofers is present in over 10 cities including Ahmedabad, Hyderabad, Jaipur and Pune apart from the metros.While an email sent to a Grofers executive did not elicit any response, a person familiar with the transaction said the funds raised will help facilitate the Gurgaon-based start-up’s expansion plans. “Going forward, Grofers plans to expand its operations in other geographies and penetrate deeper in groceries and add new consumables categories,” the person added. Daily grocery, bakery items, flowers, fruits & vegetables, meats and baby care products, are among the products that are currently available on Grofers. It is understood that corporate law firm Shardul Amarchand Mangaldas & Co. acted for Grofers.So far, Grofers has partnered with over 400 vendors in Bangalore, Delhi NCR and Mumbaie. This is the third round of funding for the company. The company has already raised over $45 million in two earlier rounds. However, the quantum of stake that the investors picked up could not be ascertained.The funding in Grofers highlights how investors are increasingly betting big on Indian entrepreneurs and their winning ideas. Earlier this year, Gurgaon-based ShopClues raised $100 million from Tiger Global, Helion Venture Partners and Nexus Venture Partners, while Rocket Internet AG along with other investors infused $110 million in global food delivery marketplace Foodpanda.While start-ups in themselves seem to be the current hot favourites of private equity and venture capital investors, it is the online shopping market space that they are betting big on. "Today, the contours of PE/VC investments in the country have changed in India, with investors eyeing a lot more new age, consumer oriented companies for investments,” said Avnish Bajaj, co-founder and managing director of Matrix India, which recently infused less than $7 million in two starts ups, Treebo Hotels - a new age, tech-enabled chain of hotels -and Bangalore based recruitment startup Belong.
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Indian designed chipsets power satellites and future of mobility; now over $100 million private equity money will find these startups to build connected civilizations, says Vishal KrishnaIndians have moved on from making potato chips to building chip sets for connected vehicles and smart cities. Analysts estimate that startups that have a combination of software, hardware and embedded systems experience can raise money. This industry has already raised close to $60 million now. Saankhya Labs, Ineda Systems and Si2 Microsystems are all betting big on the global industry. With words such as internet-of-things and smart cities floating around, these companies are out there to prove to the world that their technology is more than just a Make in India campaign.Tucked away in a corner of Whitefield, a sprawling industrial complex, in Bangalore, is a small chip manufacturer called Si2 Microsystems. Upon entering its futuristic lab one can see machines building chips on substrate. These robots use golden thread to make integrated circuits with such precisionbecause the operating chipset ultimately lands in to defence satellites.Si2M specialises in manufacturing System-in-Package (SIP) modules that give birth to the connected machines that we see in daily life. From a mobile phone to the car and later ending with the connected lights, at home, everything carries a SIP module. To illustrate this further, a SIP is nothing but a combination of the central processing unit and its allied systems, which have different applications, packaged or stacked into a unit. The popular architecture is System-On-Chip (SOC) where functionalities are in independent chips. The engineers would know this better than the lay reader. The lay reader has to think of all functionalities in a box (SIP) versus individual chips (SOC) having their own boxes.For this Rs 50-crore company, the year 2015 has become a turning point. After five years of hard work and becoming the preferred vendor for the Indian Space Research Organisation (ISRO) and work with several automobile OEMs, when founders, brothers Dinanath and Sanjay Soni invested $2 million on this lab, there were naysayers who said that they could never compete with the Chinese companies. “We have to spend a lot more on marketing,” says Sanjay Soni, Director and co-founder of Si2M, chuffed about the kind of research that has gone in to building chipsets. The company hopes to raise the bar and increase their investment by $200,000 (Rs 1.3 crore) to spend on marketing activity. They are a manufacturing company and need not spend, on marketing, like a startup focused on consumers and, therefore, spending millions of dollars becomes necessary from imperative investors.“These are ideas that can generate jobs in research,” says Sanchit Vir Gogia, CEO of Greyhound Research. It also adds up to the whole make in India campaign, which even Chinese electronics companies, like Xiaomi, are waking up to.“Chinese companies have realised the potential of Indian software engineering and they are already setting up shop here to aid their growth in chip manufacturing,” says DinanathSoni. The brothers add that the buzz around IoT and growing defence spends has made many small and medium enterprises, globally, buy their SIP modules because they offer high value in performance. “We are a premium company. Our research allows a soldier to carry the least amount of payload because the hardware is miniaturised,” says Dinanath Soni.Why are they important? Rs 48,000 crore has been allocated to the building of smart cities, cars are going to have more electronics in them - 30 per cent of the cost of manufacturing is going to be on software- and there is this whole campaign around the Internet of Things and Everything (IOT&E). The number of wearables in the world that connect to larger smarter systems is also going to go up. IDC, the research firm, predicts that the worldwide wearables market will reach a total of 45.7 million units in 2015. From there, the market will reach a total of 126.1 million units in 2019, resulting in a five-year CAGR of 45.1 per cent. No wonder automobile software centres like Robert Bosch Engineering India (RBEI), Mercedes Benz Research and Development India along with chipset manufacturers like Freescale and Texas Instruments are playing a major role in investing in Indian R&D. Robert Bosch filed 179 patents in 2013 and 80 in 2014.“The use of deep research on chips for the global automotive industry for safety and semi-autonomous driving is happening out of India,” says Manoj Koul, Director-Product Development, Texas Instruments. Another startup that has taken this deep dive in to making a standard chip for the wearable industry is called Ineda Systems. This Hyderbad-based company has raised a total of $43.3 million and has been backed by the likes of Cisco Systems. “There will be several billion wearables in the market and the industry is in need of low cost and low power consuming processors,” says Balaji Kanigicherla, CTO and co-founder of Ineda Systems. The company’s first big launch with a smart phone chip manufacturer is to happen in another six months. Ineda’s processor is an SOC, unlike a SIP of Si2M. Saankya Labs is building a solution that brings different standards of digital and analog TV on to a single chip. The have raised $5 million from Intel Capital.These chip manufacturers have taken a giant leap of faith and their products will be defined in the era of the smart city or the smart car. It is also a time of make or break for these companies. However, it looks like the world wants to make these Indian companies leaders in building cost effective and powerful chips with quality software applications. No wonder the likes of Intel and Qualcomm are betting big on Indian talent. Perhaps there will be many more companies like these chip makers.
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