Looking back at May

June 1

Hey you all, we were on a brief hiatus because of the devastating second wave that is still ongoing in India. With daily reports of increasing cases, deaths and lack of healthcare facilities we didn't feel like writing about startups was going to be super helpful. It does seem like the worst of the wave is over and some cities and states are finally recovering. We hope you and your loved ones are keeping safe. The country seemed to be on a standstill for a couple of weeks, but it sounds like things are getting better and the humdrum of startup funding news seems to be coming back. Since we've been away for the last month, today's newsletter will be a sort of recap of May. Though there's a bunch that has happened in just the last two weeks, so we'll be catching you all up on the news over the next couple of weeks as well as part of our regular schedule.

BONUS: We also now have an archive for every single past daily newsletter. Searching and a better design are coming soon ✨


Unicorns and Exits

April was a very harrowing month for India as the number of Covid cases surged. In tandem, it was also a super buzzy month in terms of funding with several companies (including the likes of CRED, Groww and ShareChat) being valued over $1B. The trend seems to have continued in May as Urban Company (technically the end of April), Moglix and Zeta raised rounds and became the newest entrants to India's unicorn club. There are now over 50 Indian startups that are valued over $1B and roughly half of them have attained the status in the last year and a half. This is due to the increasing amount of capital in the ecosystem (we touched on this with Tiger last month) and we will touch on it a bit more later in the newsletter.

Urban Company is fairly popular in the ecosystem but Moglix and Zeta aren't talked about as much. Moglix is a B2B marketplace for industrial goods. The marketplaces serves over 500,000 SMBs with a supply chain network of 16,000 suppliers, over 35 warehouses along with logistics infrastructure. The round was led by Falcon Edge Capital and Harvard Management Company, and existing investors Tiger Global, Sequoia Capital India also participated in the round. Several Indian B2B marketplaces have been scaling up in the recent years so it isn't a huge surprise that the company raised capital. Zeta too finally closed and announced its monstrous $250M Series C, which was scooped by TechCrunch and covered by us in April.

The other big trend of news in May was on exits. Tata's acquisition of BigBasket was finally officially announced, and Zomato filed to go public (in the last week of April). The Tata acquisition of BigBasket is huge as it has provided exits to some of the company's earlier backers like the Alibaba Group and Actis LLP. Tata is infusing $200M of capital into the entity as well. The Tata group now owns 64% of the company and BigBasket's management will continue to run the company. Tata now owns or controls BigBasket, the online pharmacy company 1mg and is also looking to acquire a majority stake in the fitness startup Cure.fit as it plans to build a super app. It also looks like Zomato will be the first marquee Indian startup to list on the Indian Stock Exchanges NSE and BSE when it filed its DRHP in the end of April. This will set the tone for future IPOs in the country, which for venture-backed startups in the country haven't been super easy to come by. How the Zomato IPO does will be watched closely by everyone in the ecosystem. Zomato, which leads in its segment, will look to increase its gross order value, along with its improving unit economics. The company does have a history of net losses and that won't change in the immediate future but has been spending fewer amounts of money (as a percent of its total income) on advertising and sales promotion which is a good sign. Zomato's largest investor, InfoEdge (which owns 18.55%) plans to sell a stake worth $100M. The company's other large investors include Alibaba (~16%), Uber (9.13%) and Sequoia Capital India (~7%). The company was last valued at $5.4B and plans to raise about $1B from the IPO.

An update on the market

Since the last post on Tiger, the firm has confirmed a couple of their India investments (Plum, Kutumb, CoinSwitch Kuber), made several new investments (Urban Company, Moglix, Koo) and been rumored to be investing in even more companies. While India has been on lockdown and the economy has been ground to a standstill, the venture market in the country has been as hot as ever and companies are closing out rounds or have already done so. Many have, however, chosen not to announce them yet so I suspect a bunch of more formal announcements will follow in the upcoming weeks. I was also chatting recently with a good friend of mine, Sudhee, about Tiger's history of being hot and cold in India over the years and he pointed me to this video of Douglas Leone's chat with Sequoia India's Managing Partner Mohit Bhatnagar from last August. (21:11 - 23:00)

Through India's multiple bull and bear cycles in the venture ecosystem, we've seen waves of Tourist Capitalists come and leave the ecosystem countless times and Tiger, too, has been either very aggressive or dormant when it comes to its investments in India. Doug talks about how he feels great times are the best time to exit, and dark times are the best times to enter the market; which is quite unlike most of the Tourist Capitalists who enter India only during the great times and leave as soon as it gets hard. India certainly seems to be in the great times currently, or the startup world at least. I personally am cautiously optimistic about Indian companies going public this year, be it Zomato, Paytm or even a listing / SPAC in the US; though am somewhat concerned about the effects of the deathly and horrific Covid waves on the country's economy. A recent study by by the Centre for Sustainable Employment at Azim Premji University showed that 230M Indians had fallen below the national minimum wage poverty line, and that India is likely facing its “longest economic slowdown since 1991”. Nearly half of India's formal salaried workers moved into informal work during the pandemic with 9.8% moving into daily wage/casual work. 35% became self-employed and 8.5% became temporarily salaried. This report doesn't even include the after effects of the second wave, which the country is still recovering from but it does not look good for a large population of the country. Huge rounds and pre-emptions also means that Indian startups are under pressure to grow faster but if consumers and businesses can no longer afford them or go under, who do they sell to?

Other Interesting things in May

The KiranaTech / DukaanTech space seems to be heating up again. Tiger is reportedly in talks with Dukaan to invest $35-$40M, which would value the company at $300M. Khatabook also is in talks to raise $100M from new and existing investors, and the YC standout from the Summer 2020 batch Bikayi is in talks to raise $10M from Sequoia Capital India. Last year, Khatabook's early investors Sequoia was in talks to lead Dukaan's seed round (which ultimately did not end up happening). And now Sequoia has invested or is in talks to invest in 3 mostly different but somewhat overlapping companies in the space with Khatabook, Pagarbook and Bikayi. Sequoia, and other Indian firms, often back companies that compete indirectly so this is nothing new, but it will be interesting to see if these rounds do end up happening and if OkCredit also goes out to raise again.

There's been countless EdTech acquisitions as the space heads towards consolidation, but an acquisition in the fitness space caught my eye. Cult.Fit has acquired Tread for $32M in a cash and stock deal. Cult itself is in talks with Tata for a potential acquisition, but this acquisition fascinated me for a couple different reasons. But to give some context on Tread first, it is building an at-home fitness experience starting with a spin bike along with live and on-demand classes. The company certainly seems to be inspired by Peloton as the bikes look very similar. Tread was only started in 2020 and raised a $1.1M seed round in October from a handful of angels including Kunal Shah, Gaurav Munjal, Amrish Rau and others, and let customers pre-book their spin cycle from January. From the founder's twitter, it sounds like the company has already generated over 1 Cr in bookings (though I am unsure if this means the entire value of the bike or just the pre-booking amount which is much lesser). Tread is selling it's spin cycle for ₹59,900 which also includes 1 year of its content membership and users only have to pay ₹9,900 to pre-book a bike. The company is only starting to deliver bikes from July onwards (which is understandable given the pandemic and second wave in the country), but if the company is really doing so well why did they agree to the acquisition? It isn't a terrible result for their investors who will make double their money back in less than a year but certainly didn't result in Tread becoming the fitness behemoth that Peloton has turned into. Cult itself has been making a bunch of acquisitions in the space but is often criticized for trying to do too many things instead of focussing on one. Only the future will tell if at-home fitness becomes a distraction for Cult or a sizable part of their business in the future.

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