Tag: News

Are we going ‘soft’ on Hardware?

October 30, 2022

In the startup space, for reasons of scalability, discussions about ‘tech’ revolve around software. But software or AI algorithms run on a device made up of hardware components, most critical of them being the processing unit, commonly referred to as the chipset.

Beyond the tech world, chips or semiconductors (building material of chipset) have become a discussion point in the geopolitics arena, as nation states strategize to secure the supply-lines of rare-earth elements, and develop design & manufacturing competence in them.

Simplistically, the AI hardware can be classified in two ways, based on type of AI activity – training or inference.

Training refers to the AI component where an algorithm mines through a massive amount of data for long durations in order to ‘learn’ what it is set to learn. Thus, high memory, high computation, longer cycle life would be the required hardware characteristics. Often there is a disconnect between the training device and the eventual deployment device.

Inference refers to the real-time data crunching component of the AI algorithm to generate output. Hardware for this type of activity would demand speed & efficiency over capacity. Inference or output is required at every end deployment device which necessitates the hardware to be of low power consumption.

Hardware can also be classified based on the end application specificity. Industry jargons are – FPGA, GPU, ASIC.

Field programmable gate array (FPGA) can be simply understood as those chips which are flexible, configurable, power efficient, required to perform parallel tasks. Think of chips in our smartphones or laptops. Graphic processing unit (GPU) refers to the chips initially designed for graphics but are now also used for computationally heavy tasks such as video processing, image analysis etc. Application specific integrated circuit (ASIC) refers to a custom designed chip optimized for end application which cannot be used elsewhere.

Another industry jargon worth mentioning is the ‘leading’ edge / ‘trailing’ edge semiconductor manufacturing nodes. In simple terms, a chip is a circuit made up of micro transistors. Over generations, transistors have become smaller and more efficient. Leading edge denotes the smallest manufacturing possible(10-12nm), thus packing more transistors in a unit space for more computing power. But not all chips are meant for advanced computations or the latest laptops. There are less sophisticated devices and applications which rely on ‘trailing’ edge nodes. (older set of chips)

Given that the applications of AI are unfolding and expanding their reach in every sector, there exists a latent opportunity of hardware led innovation. By 2025, AI-related semiconductors could account for almost 20 percent of all demand, translating into about $67 billion in revenue. The Traditional Non AI semiconductor market is estimated to be ~$300 billion.

GPU market (NVIDIA, AMD) and FPGA market (Intel) are dominated by US firms. The US also controls the majority of semiconductor fabrication units (known as fabs) worldwide. China is catching up with the US in manufacturing of the ‘trailing edge’ chips.

India has certain strengths in the form of large human capital which can dominate design capabilities and recent policy initiatives are a step to harness them. The weaknesses of India are the lack of supply-side manufacturing infrastructure, and linkages with larger fab units.

Large-scale low-cost trailing edge chip design & production, geared towards AI hardware might be an interesting space to look out for in the Indian context, provided the market is shifting from general-purpose to application-specific chipsets.

We at Ecosystem Ventures aim to be at the ‘leading’ edge of upcoming startup ‘nodes’. Your insights and valuable comments are no less than the ‘training’ hardware for our ‘inferences’. Please feel free to share your thoughts.

Startup Funding Summary

Udaan, Bangalore-based e-commerce platform, has raised $120 Mn in convertible notes and debt from Existing Investors – Read More

boAt, Delhi-based consumer electronics company, has raised $60 Mn in a funding from an affiliate of Warburg Pincus and Malabar Investment – Read More

Kinara Capital, Bangalore-based fintech platform, has raised $25 Mn in funding from British International Investment, Nuveen and ASN Microkredietfonds – Read More

Devtron, Gurugram-based open-source DevOps platform, has raised $12 Mn in funding from Insight Partners, Leo Capital and Angel Investors  – Read More

EMotorad, Pune-based EV brand, has raised $3 Mn in Pre-Series A funding from Green Frontier Capital, LetsVenture and Ivy Growth Associates  – Read More

M&A Snippets

Ghaziabad-based FMCG company Dabur will acquire Mumbai-based foodtech company Badshah Masala for $73 Mn  – Read More

Why are board games sacred?

October 23, 2022

Why are board games sacred?

As you might have guessed by the wordplay in the title on the popular Netflix series ‘Sacred Games’, in this edition we would be discussing the fascinating world of board games.

One might be tempted to think that with ubiquity of smartphones, table-top board games have become a relic of the past as all the famous board games have multiple digital versions of them available either free or paid on the internet.

Board games are a segment of the larger games & toys market. The Indian toys industry is estimated to be $1.5 Bn making .5% of the global market share. There is a significant opportunity as domestic demand is forecasted to grow at 10-15% against the global average of 5%.

The board games can further be segmented into mainstream and hobby games. Mainstream would include our all time favorites such as scrabble and monopoly. The high-ticket hobby games segment has a dedicated customer base of its own. In advanced economies such as the US, board game enthusiasts on average may spend over $500 and purchase around 10 hobby games in a year. The most popular hobby games include – Settlers of Catan, Warhammer, and Dungeons & Dragons.

It is important to realize that board games are an integral part of the larger Content-Intellectual property ecosystem. The well crafted board game can have multiple spin-offs, merchandise, movies, TV shows and media opportunities. Further, the board games have a natural extension, to bring their imagined world to a close real life experience, through AR-VR technologies.

The board games sit at a unique cross section of creative-storytelling and entertainment. In my view a successful board game would be such which understands and caters to human behavioral psychology. We all have competitiveness inherent in us. Secondly, we as humans seek rewards or gratification in the real world. These rewards are a product of our intellect and sustained efforts to achieve them. Moreover they are dependent on the role of chance or luck in our lives.

A successful board game would balance ‘personal effort’ and ‘randomness’ in a compelling story-based narrative. At Ecosystem Ventures, we are working closely with one such company which has an eclectic mix of content IP, impressive game design skills, and integrated media capabilities.

Please feel free to message me if you are tempted to roll the dice on reading about board games.

Startup Funding Summary

Byju’s, a Bangalore-based edtech firm, has raised $250 Mn in a funding from QIA and Existing Investors – Read More

Ather Energy, a Bangalore-based EV startup, has raised $50 Mn in a funding from Caladium Investment and Herald Square Ventures – Read More

Snapmint, a Mumbai-based fintech startup, has raised $21 Mn in a funding from Prashasta Seth, Kae Capital, 9 Unicorns, Anicut Capital and Negen Capital – Read More

GlobalFair, a Gurugram-based cross border trading platform, has raised $20 Mn in Series A funding from Lightspeed Venture Partners, Saama Capital, India Quotient, AUM Ventures and Stride Ventures  – Read More

Drivetrain AI, a Bangalore-based financial planning and monitoring platform, has raised $15 Mn in Series A funding from Elevation Capital, Jungle Ventures, Venture Highway, Akshay Kothari, Amit Singhal, Khadim Batti, Amit Sharma, Krish Subramanian, Karthik Srinivasan and Kushal Nahata  – Read More

M&A Snippets

Gurugram-based retail platform V-mart has acquired Gurugram-based fashion brand LimeRoad for an undisclosed amount  – Read More

 

Can Intelligence be Artificial?

October 16, 2022

Can Intelligence be Artificial?

Humans as a species possess a monopoly on Intelligence. This ‘natural’ intelligence is a consequence of billions of years of evolution, where single celled organisms evolved into complex beings like you and me.

Due to our human-centric world, we often tend to attribute ‘end goal’ to the natural process of evolution of life on earth. There is none. Evolution didn’t happen because it was destined to produce an intelligent species such as homo sapiens.

Evolution has remarkably enabled humans to perceive, comprehend, interpret the ‘nature’ around them. Humans then collate, structure and classify what they have perceived. This is the cumulative corpus of ‘knowledge’ humans have created. We further have a unique ability to make inter-linkages between different knowledge blocks, either in an imaginatively creative way or in a logically deductive way. This way knowledge gets transformed into actionable intelligence.

The word ‘artificial’ is an antonym of natural, something which doesn’t exist on its own. Artificial Intelligence (AI) refers to the ability of a non-human entity to mimic human-like intelligent thinking. Since AI is not natural, it can have an ‘end-goal’ or objective.

Would AI be able to break or supersede the human monopoly on intelligence?

This question fascinates a lot of people. Techno-futurists certainly believe so. In order to attempt an answer we should classify AI’s caliber, as this prescient article from 2015 does, into three kinds – ANI, AGI and ASI.

ANI refers to Artificial Narrow Intelligence or Weak AI. Cars, ticket-booking, personalized recommendations on apps, email spam filters, translation engines, chess programs are common examples of ANI. As you would have noticed, the results of ANI engines have been refined over a decade. Recall the clunky computer generated translations or the speech-to-text programs. Basically, the AI has enhanced its ‘predictive power’ after multiple iterations of algorithms running endlessly over massive amounts of data.

AGI refers to the Artificial General Intelligence or strong AI. In simple terms it is the ability of an algorithm to understand and create abstract linkages between knowledge blocks, an innate characteristic of ‘natural intelligence’ as discussed above. Machines can easily beat a human on brute computation power and repetitive tasks. Hece making a chess program is an easy task. But machines have a hard time figuring out ‘abstractions’ or ‘meaning’ out of the words, images, and speech generated by humans.

A step in the direction of AGI can be this latest version of DALL.E. This AI tool is capable of interpreting descriptions in natural language and creating realistic images out of it.

The third stage of AI is ASI or Artificial super intelligence. Super intelligence not only in terms of speed but also quality. This is the realm of the ‘unknown unknowns’. Futurists debate over the timelines when this could become an eventuality. The argument made is – as humans we are limited by our natural brain, which had the ability to create a self-learning algorithm and it did, but it lacks the ability to imagine how AI would exponentially enhance itself in times to come. Simply put, ASI would be synonymous with God.

“Hey Google, next Sunday, compose and send the partners’ message wishing everyone on account of Diwali, with a creative message which denotes prosperity and happiness, based on my aesthetic preferences.”

Pondering when the commands like above may become a reality, I take your leave.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that Mr. Abhijeet Bhandari (Partner, Ecosystem Ventures) has been invited as a jury at the Bharat Pitchathon event, #HSX2022, an Entrepreneurship Conclave 2022 presented by Headstart, held in Bangalore.

 

 

Startup Funding Summary

Adda247, a Gurgaon-based edtech startup, has raised $35 Mn in funding from WestBridge Capital, Google, Info Edge (India) and Asha Impact – Read More

Isthara CoLiving, a Hyderabad-based premium co-living brand, has raised $10 Mn in funding from Eagle Investments – Read More

Good Health Company, a Hyderabad-based healthtech startup, has raised $10 Mn in Series A funding from Left Lane Capital, Khosla Ventures, Quiet Capital and Weekend Fund – Read More

Flickstree, a Mumbai-based content and marketing technology startup, has raised $5 Mn in Pre-Series B funding from Venture Catalysts Group  – Read More

Explorex, a Bangalore-based foodtech startup, has raised $5 Mn in Pre-Seed funding from Taher Savliwala, Kevin Lin, James Park, Harpreet Rai and Liron Shapira  – Read More

M&A Snippets

Bangalore-based edtech platform Vedantu has acquired Bangalore-based test prep platform Deeksha for $40 Mn  – Read More

Delhi-based e-commerce company Moglix has acquired Chandigarh-based security system supplier ADI for an undisclosed amount  – Read More

Delhi-based edtech startup Physics Wallah has acquired Delhi-based edtech platform PrepOnline.in for an undisclosed amount  – Read More

Mumbai-based real estate broking platform Homesfy Realty has acquired Mumbai-based property brokers EQServ for an undisclosed amount  – Read More

Is Ramayana a Metaverse?

October 9, 2022

I hope you had a joyous celebration on the occasion of Dussehra or Vijayadashmi.

Ramayana, for centuries, has defined the contours of cultural conscience as a victory of good over evil, dharma over adharma. One is expected to self-introspect and overcome his lesser traits to evolve into a better individual. But is an ‘individual’ separate from the ‘unified reality’ of the universe we inhabit?

‘Our universe’ was created through a Big-Bang explosion and has been expanding ever since. There may be multiple universes, we have no means to prove or disprove them. But what we cannot prove does not mean we cannot imagine. Imagination is the definitive human trait. Imagination makes us futuristic, linking the past, such as Ramayana, with the likely future – Metaverse.

The Greek word ‘meta’ means beyond or after. Thus, what is beyond the knowledge of physical science becomes metaphysical. Meta also denotes self referential identity or category.

Being added to the lexicon is Metaverse. Meta + Universe. Simplistically, a universe ‘beyond’ or ‘after’ our physical universe. A shared three dimensional space which ‘transcends’ our reality. How do we create that?

Well, poets and writers for centuries have ‘transcended’ reality through their words. Can we not create a bridge from Jambudweep to Lanka? Can a vanar sena not cross it? Have we not flown in a Pushpak viman? Through Metaverse one may look, feel, sense to a greater degree than just imagining these stories. Metaverse would enable real-life visualization of our thoughts.

Starting with Virtual reality (VR) and augmented reality (AR) technology, the metaverse aims to create a three-dimensional (3D) digital environment which we all can cohabit, think, and transact in.

This is enabled either through personal wearable devices such as the VR headsets or goggles and creation of dedicated spaces to take us into a simulated world. A tremendous scope of possibilities open up as we move beyond the traditional two-dimensional screen-spaces of our mobiles and laptops. Brands can leverage user experience (UX) to mimic the real world. Team collaboration may become realistic as individual ‘avatars’ would interact with each other just like a meeting room. Education & knowledge creation becomes far more interactive in 3D space.

It has applications in the manufacturing sector to increase productivity and occupational safety, reduce travel and training costs. Similarly, it has streamlined workflows in construction by reducing infrastructure inspection time and in complex engineering design by reducing the iteration time. In healthcare, doctors can go beyond 2D X-Ray or scans and remotely operate an arm in through a 3D space.

Metaverse is still in the conceptual stage though big tech companies have been working on it for quite some time. A new set of startups have come up which aim to capitalize on early mover advantage in this nascent space whose contours are yet to be defined and agreed on.

It would be interesting to observe the practical implementation or uses of Metaverse in times to come.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that Mr. Vinay Bhandari (Partner, Ecosystem Ventures) has been invited as a jury along with Vinay Bansal, Inflection Point Ventures and Susmit Patodia, Antler at ISB PGPMax CATAPULT, a Leadership Summit 2022 organized by the Indian School of Business, Hyderabad.

Startup Funding Summary

Euler Motors, a Delhi-based EV startup, has raised $60 Mn in Series C funding from GIC Singapore, Blume Ventures, Athera Venture Partners, QRG Holdings, ADB Ventures and Moglix – Read More

Vance, a Bangalore-based global neo-banking platform, has raised $6 Mn in Seed funding from Hummingbird Ventures, Global Founders Capital, YCombinator, Soma Capital, Alan Rutledge and Gokul Rajaram – Read More

Mufin Finance, a Delhi-based NBFC, has raised $5 Mn in Series A funding from Incofin India Progress Fund – Read More.

HROne, a Noida-based HR tech startup, has raised $4 Mn in Series A funding from Insitor Partners and Prudent Investment Managers – Read More

FALCA, a Bangalore-based agritech startup, has raised $3 Mn in Pre-Series A funding from Inflection Point Ventures, LetsVenture, Mumbai Angels and other HNIs – Read More

M&A Snippets

Noida-based premier online classifieds company Info Edge has acquired Delhi-based edtech platform Coding Ninjas for $17 Mn  – Read More

Mumbai-based children-focused robotics startup Miko has acquired California-based AI-enabled gaming startup Square Off for an undisclosed amount – Read More

Delhi-based IT services and consulting company RattanIndia Enterprises has acquired Haryana-based EV manufacturer startup Revolt Motors for an undisclosed amount – Read More

Where lies ESV’s Ecological Niche?

October 2, 2022

I hope you are enjoying a prosperous Navratri celebration this year. After being subdued for two years due to the pandemic, it appears the festivities have returned to their former glory.

The startup ecosystem appears to await its celebratory times, given the total reported funding for the week stood at ~$140 Mn, a decline of $48 Mn from last week.The funding stood at $245 Mn in the previous week.

Coming back to the question posed in the title. Ecological niche is defined as ‘the functional role and position (micro-habitat) of species in its ecosystem’. In this edition, I would like to talk about two of our company’s strengths , our ‘functional role’ or ‘micro-habitat’ within the broader Startup ecosystem.

Couple of days back, in one of his insightful posts, well regarded Linkedin columnist Rajan Singh, founder of Habitstrong, shared his insights for young professionals, on the pros and cons of joining the best-known management consulting firms, such as Mckinsey.

To summarize his argument, management consulting firms quickly develop you to be a structured thinker. Clear thinking is inseparable from clear communication, which when coupled with managing client’s team dynamics, results in a final client presentation, which is hard to disagree with.Majority of the consulting mandates end at this juncture of final presentation.

Here lies our first strength. I am pleased to share that this is the point where the challenging work at ESV begins. Our short term strategic consulting assignments or even fund raise mandates evolve into long term implementation support mandates to the founder/startup.

Needless to say, it is a difficult task and often an invisible one. What may be a bullet point on the final strategy-deck requires a whole arsenal of weapons, in the form of skills or being resourceful, to bear fruition. The problem is compounded given that startups are cash starved and do not have a war-chest like big corporations.

One may wonder how a seemingly simple task of structuring organization-wide Google drive folders, results in substantial productivity gains? Similarly, streamlining internal communication of a geographically-dispersed team with ad hoc & irregular communication channels is a huge task in itself. Next you may be optimizing the product development plan with the tech team while making digital marketing strategy more outcome driven. In short, one has to adorn all functional hats as per the exigencies, which happen daily in startup operations.

Mr Rajan in his post further commented that if you wish to become an entrepreneur or an investor (witness innovation or learn investing), you are better off doing it yourself, rather than joining a consulting firm.

Therein lies the second strength of our company. Ecosystem Ventures brings the best of both worlds. Consulting on one hand and entrepreneurship & investment banking on the other.

ESV continues to nurture innovative product ideas which are scalable. Also brings on board the nuances of investing with our funding arm.

Let me end by requesting you to share this newsletter with ambitious and intellectually curious professionals in your network who may be looking to find their ‘career niche’ – whether consulting, investing or entrepreneurship.

Startup Funding Summary

Molbio Diagnostics, a Goa-based healthtech startup, has raised $85 Mn in a funding from Temasek and Motilal Oswal Alternates – Read More

Signzy, a Bangalore-based fintech startup, has raised $26 Mn in a funding from Gaja Capital, Vertex Ventures and Arkam Ventures – Read More

Indel Money, a Kerala-based NBFC, has raised $6 Mn in a funding from Market-Linked debentures – Read More

Saveo, a Bangalore-based B2B marketplace for pharmacies, has raised $5 Mn in a funding from Matrix Partners, Gunosy Capital, 4point0 Health Ventures, LC Nueva AIF, Jetty Ventures, Ocgrow Ventures and RTP Global – Read More

Preimage, a Bangalore-based 3D reconstruction platform, has raised $2 Mn in Seed funding from pi Ventures, Better Capital, Java Capital and HNIs – Read More

M&A Snippets

Ahmedabad-based pharmaceutical company Torrent Pharmaceuticals has acquired Chennai-based skincare products manufacturer Curatio Healthcare for $245 Mn – Read More

Ahmedabad-based IT startup Aarav Solutions has acquired Pune-based AI-powered startup Froot Research for $4 Mn – Read More

Bangalore-based healthtech and insurtech company Medi Assist will acquire Mumbai-based insurtech company Medvantage Insurance TPA for an undisclosed amount – Read More

Bangalore-based fintech company Razorpay has acquired Bangalore-based fintech startup PoshVine for an undisclosed amount – Read More

Noida-based IT giant, HCL Group has acquired Chennai-based edtech platform GUVI for an undisclosed amount – Read More

What is the Ethereum blockchain trying to ‘merge’?

September 25, 2022

One of the major news before last week was the expected completion of a major software upgrade of the Ethereum blockchain called “The Merge” by Sep 15.

In this newsletter we would be discussing cryptocurrency and blockchain in simple terms for someone completely new to this world. Given the multiple jargon and complexity associated with them, there is no easy way around it, but let us give it a shot.

Visualize a ₹ 2000 currency note from your wallet. It has an alpha-numeric code – OBQ545781 as the serial number. You are giving me this currency note with a defined serial number as a paid annual subscription to this newsletter. Similarly, there are five hundred other subscribers to this newsletter who would hand me the same INR 2000 denomination notes. Each with their respective serial numbers.

In the world we operate, the responsibility of not having a fake note rests with the RBI. In other words, the repository of valid codes or serial numbers, on the currency notes in circulation, rests with the central bank of the issuing country. In our case, the Reserve Bank of India.

But now think of a different world.

Imagine the crisp currency note OBQ545781 in your wallet to be fragmented into 500 pieces of a jigsaw puzzle and each of the 500 subscribers has one. You have one piece too. Similarly, there would be 499 pieces or jigsaw puzzles of other subscribers’ currency notes in your wallet, assuming each one has ₹2000 in their account.

Visualize further, you wish to take an annual subscription of this newsletter and have to pay me. To do so, 500 jigsaw puzzle fragments magically come out of the 500 subscriber wallets and instantly reassemble to form a Rs 2000 note with OBQ545781 serial number, ready to be posted to me. In this way, the collective network of this newsletter’s subscribers have authorized a transaction between you and me.

In other words, the repository of valid serial numbers on the currency notes in circulation is decentralized. You don’t own it. I don’t own it. No one person holds it. No one bank holds it. No central bank holds it.

This is what blockchain is. The underlying database (repository of information) which is stored across all the nodes of the network. For our example, each of the 500 subscribers is a node in this imaginary ‘Venture pulse newsletter network’, where ‘blocks’ (jigsaw puzzle pieces of your 2000 note) are added and updated to authorize a transaction, resulting in a chain of blocks. Hence, the name blockchain.

A currency like ₹ or $ serves as a medium of exchange. Bitcoin is the oldest currency based on the blockchain technology. Just like a regular currency note has a host of security/authentication marks embedded in it, the digital currency has security/authentication codes (read algorithmic problems) embedded, which are encrypted. At the time of a transaction (such as you paying for this newsletter) these codes would be decrypted, updated and encrypted again, to reflect the latest transaction exchange, across the whole network. Hence, it is called crypto-currency. But Bitcoin, rather than becoming a widely accepted transactional currency, evolved into a speculative commodity. Maybe we would delve into reasons for it in another issue of this newsletter.

Like Bitcoin, Ether is a crypto currency on the Ethereum blockchain. Ethereum blockchain went a step further than Bitcoin and created a platform.

Recall the fragmented 500 jigsaw pieces of the ₹2000 currency note in your wallet. Can we replace the currency note with land records, insurance policy, health card, degree certificates? Obviously, we can. In other words, the application of blockchain can go beyond recording currency transactions. That’s what Ethereum enables users to do in the web3 space.

Seems surreal? It surely is! But as you might have guessed, there are quite a few challenges with blockchain and crypto applications built over it.

One of the challenges, ethereum seems to have solved with what it calls “the merge”. Hence, it was in the news. Let us look at their solution.

Recalling our thought experiment – the magical reassembly of a ₹ 2000 note to authorize and process the transaction between you & me. This is known as ‘validating a transaction on blockchain’. Some or the other computing machine actually has to do this task in the background. In crypto parlance it is known as ‘mining’ or ‘proof of work’. In ethereum lingo it is called ‘gas fees’. The term is inspired from gas, American for fuel, which is required for a car to run. Similarly, ethereum requires fuel to run i.e. to make transactions.

Simplistically, till now, this task can be understood to be performed by someone on the blockchain network who volunteers for it. E.g. You are paying me for the subscription, this is validated by another Mr ABC on the venture pulse subscriber network, who opts to do so, and earns INR 50 for it. This process is time consuming and has become computationally expensive. Rs 50 as ‘gas fees’, at times could become Rs 500 or more which was unsustainable and the reason for less adoption of the Ethereum platform.

Ethereum has switched the validation process on their platform from ‘proof of work’ to ‘proof of stake’ model.

Ethereum argues this is cost effective as it is not dependent on existing computing infrastructure or ‘miners’. Instead, the transactions would be validated by people who stake their existing ether coins, and get rewarded with more coins.

Continuing with our example, It is like saying, HDFC Bank is one of our newsletter subscribers and it assures us that let them handle the subscription transactions for all of us in crypto since that’s what they efficiently do in other currencies. They are pledging an initial sum of 10 lacs and would bring down the transaction cost (gas fees) from Rs 50 to Rs 15 or even lower.

Decentralized blockchain makes way for decentralized finance. This move would help existing ethereum owners to use their coins and earn returns on it. Second, it would allow finance professionals to compare crypto assets with traditional assets.

In a way it should be viewed as Ethereum trying to create a link between the old established financial world and the new one which is yet to shape up. Hence the name of the software upgrade – ‘the merge’.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that Mr. Shailesh Jain (Vice President) and Mr. Kinjalk Pancholi (Associate) have represented Ecosystem Ventures being a part of the judging panel at AvantGarde business plan competition organized by IPM students, held at IIM Indore.

 

Startup Funding Summary

Zopper, a Noida-based insuretech startup, has raised $75 Mn in Series C funding from Creaegis, ICICI Venture, Blume Ventures, Tiger Global and Bessemer Venture Partners – Read More

Light Microfinance, a Ahmedabad-based microfinance company, has raised $26 Mn in Series B funding from British International Investment, Nordic Microfinance Initiative, Triple Jump BV and Incofin IM – Read More

Join Ventures, a Mumbai-based house of D2C brands, has raised $24 Mn in Series B funding from MO Alternate Investment Advisors, Convivialité Ventures, DSG Consumer Partners, Venture Catalysts, ZNL Growth and other HNIs – Read More

KukuFM, a Mumbai-based Audio platform, has raised $22 Mn in funding from The Fundamentum Partnership Paramark, KRAFTON Inc, 3one4 Capital, Vertex, Verlinvest and FounderBank Capital – Read More

Bhanzu, a Hyderabad-based math learning platform, has raised $15 Mn in Series A funding from Eight Roads Ventures and B Capital – Read More

M&A Snippets

Mumbai-based green energy business Reliance Industries will acquire minority stake in US-based research and development firm Caelux Corporation for $12 Mn – Read More

Mumbai-based ecommerce furniture company Pepperfry has aqui-hired Mumbai-based architecture and planning firm Brandmakerr for an undisclosed amount – Read More

Is Byju’s revenue overstated?

September 18, 2022

The biggest newsmaker of the week has been the world’s most-valued Indian Ed-tech unicorn – Byjus. In this week’s newsletter we would analyze the reasons behind it. For brevity & readability, rather than quoting actual financial figures or terse accounting jargons, let us look at the underlying argument.

Byjus, started in 2011 as a CAT focused coaching institute which evolved into a full stack K12 education app, last raised ~$2.8 Bn at a valuation of ~$22 Bn. Byjus has made a series of acquisitions, the most notable of them being a billion dollar buy-out of physical JEE & NEET coaching brand Aakash Institute. This was on expected lines of other pure-play online players expanding their offline presence, after the pandemic induced enthusiasm and necessity for online learning had tapered off. Other big-ticket acquisitions in the past three years include Epic, Great learning, Toppr, GradeUp, Osmo, TutorVista, Whitehat Jr, LabinApp, Scholr, Tynker and GeoGebra.

From an investor standpoint, the growth story of Byjus or any other startup drills down to one single metric – IRR – Internal rate of return on the capital invested. IRR is dependent on the valuation jump the startup makes through successive fund raise rounds. In simple terms, investing 1 Cr at 10 Cr valuation brings me 10% stake in a business. In the next fundraise if the valuation jumps to 50 Cr, then simplistically, after dilution with let us say 8% stake, my 1 Cr becomes 4 Cr. The sooner it becomes, the merrier it is, as higher would be the IRR.

Valuation is the holy grail of the VC world as it is both an art and a science. Often, it is benchmarked as a multiple of the current revenue of the startup. SaaS platforms tend to command higher multiples as compared to operationally heavy service businesses. Thus, a software company with an ARR of ₹1 Cr, may command a valuation of ₹10 Cr (10x multiple) but a physical service business, such as a coaching institute, with an ARR of ₹1 Cr would not be valued the same.

Secondly, with a focus on hyper growth and scale, to command a dominant market position in the shortest possible time, profitability (unit economics) is given a miss. The focus on profitability is postponed to the future by founders & VCs alike, for short-term gains.

In the case of Byjus, both its revenue and costs (revenue drivers) for past financial years (FY 20 & 21) have been revised on the insistence of its auditor Deloitte. The old revenue figure for FY20 was reported to be ₹2800 Cr. The figures for FY21, due since Apr 21, also led to revision of FY20 figures, were released last Wednesday, hence the chatter in startup WhatsApp groups. The revised FY20 revenue is ₹2512 Cr and for FY21 is ₹2428 Cr. The total expenditure has increased from ₹2873 Cr in FY20 to ₹7028 Cr in FY21.

The expected reasons for the delay have been in the news since June as this report from The Ken argues.

At the heart of the matter is the accounting principle of revenue recognition. Should the revenue be booked completely as soon as sales happen or should it be spread over the delivery period of the services? E.g. If this newsletter was a paid subscription and I had taken an amount of ₹9000 from you for the next three years. As per the conventional accounting, INR 3k would be put as the revenue in the current financial year, as I have to write and ensure it reaches your mailbox every Sunday for the next two years. This entails a cost in terms of time & effort which goes beyond the current year.

On the other hand, if I was a tech startup, and had sold you a personalized AI newsletter bot for ₹90k for the next three years, which would have automatically sent a randomly generated newsletter to your contacts on your behalf, I would make an argument to book the whole or substantial part of the 90k amount in current financial year. I would argue the software is completely developed and works on an autopilot mode. Hence, there are no future efforts (costs) required to cater the offered service to the customer.

Byju, like other tech companies, made and persisted with a similar argument on revenue recognition. Specifically, for revenue classified as ‘education streaming services’. You can read Raveendran’s (Byjus’ founder) latest interview here. But Byjus’ argument becomes a bit unconvincing as ‘streaming services’ entails conducting live classes or sessions by teachers across grades. An operationally heavy service component.

Secondly, a major portion of Byjus’ subscriptions are financed through lending partners who transfer the complete subscription amount to Byjus after the down-payment made by parents. Byjus pays interest to the financiers on behalf of the parents and books the whole subscription amount as revenue whereas the interest paid is accounted as a finance cost. This has also been revised and now the interest component would be subtracted from the revenue figures itself.

Revenue recognition and its classification across various streams is of utmost importance. At ESV, as part of our startup scouting, investment due diligence, and long-term consulting engagements, we emphasize on segmenting revenue across identifiable streams and match direct costs attributable to each revenue stream. This makes the derived valuation multiple realistic. If one of the startup’s revenue streams is a low-margin business with significant direct cost, it should not be grouped together with a stream which isn’t.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that we were a part of the Central India Startup Summit, an event conducted by Headstart, a volunteer-driven organization supporting entrepreneurship and startups in India. Mr. Abhishek Sanghvi (Partner, Ecosystem Ventures) represented the jury and was also a speaker at the event, held in Indore (M.P.).

The major topics for discussion were how capital as a commodity is reachable in tier 2 cities and how experience is one of the major factors when a startup looks for funding.

Startup Funding Summary

Yulu, a Bangalore-based shared mobility startup, has raised $82 Mn in Series B funding from Magna International – Read More

DotPe, a Gurgaon-based fintech platform, has raised $55 Mn in a funding from Temasek, PayU Fintech Investment, Info Edge Ventures, MUFG Bank Ltd and Naya Global Investments – Read More

EPACK, a Noida-based outsourced design manufacturer, has raised $40 Mn in a funding from Affirma Capital – Read More

Nobel Hygiene, a Mumbai-based hygiene products manufacturer, has raised $17 Mn in a funding from Sixth Sense Ventures – Read More

Rephrase.ai, a Bangalore-based AI startup, has raised $11 Mn in Series A funding from Red Ventures, Silver Lake, 8VC and other HNIs – Read More

M&A Snippets

Mumbai-based beauty e-commerce platform Nykaa has acquired Delhi-based digital content platform Iluminar Media (LLB) for an undisclosed amount – Read More

Bangalore-based thrasio style startup Mensa Brands has acquired Silvassa-based peanut butter brand MyFitness for an undisclosed amount – Read More

Mumbai-based edtech startup upGrad has acquired Delhi-based corporate training platform Centum Learning for an undisclosed amount – Read More

Ecosystem Weekly | 11th Sep’22

September 11, 2022

The total reported funding this week stood at ~$132 Mn across 39 deals, a decline of around 33.6% from $199 Mn in the previous week. The highlights were Tata 1mg (ePharmacy platform) becoming a unicorn by raising $40 Mn at $1.25 Bn valuation, Akshaykalpa Organics (Organic dairy) raising $15Mn, GroMo (tier 2 / 3 towns focused fintech) raising $11 Mn in Series A round.

If you notice, all three of them are in different categories of ecommerce – pharmacy, groceries and financial products. In this newsletter let us understand the buzzword ‘ONDC’ which is supposed to transform ecommerce as we know it today.

Branded as ‘UPI for ecommerce’, ONDC stands for Open Network for Digital Commerce. ONDC is an open network and not a centralized platform. Amazon & Flipkart, the current e-commerce giants are centralized platforms, which means the seller and the buyer both have to be on Amazon app/platform to do a transaction, the rules for which are dictated by the platform.

On the other hand, ONDC aims to make ecommerce platform agnostic through a network of interconnected buyer-side apps and seller-side apps. E.g. Tata 1mg, Akshayakalpa Organics and GroMo may be onboarded as seller apps on ONDC network. Similarly, there is PayTM which has already been onboarded as a buyer-side app on the network. So, you and I, as PayTM app users, would be able to buy medicines from Tata 1 mg, dairy products from Akshayakalpa, and register for a GroMo loan, within the PayTM app itself.

Similarly, there can be multiple user-entry points (buyer side apps), like PayTM to the ONDC network. Nine banks have already bought stakes in ONDC, incorporated as a Not for profit company, to integrate their customers. Google and Payment aggregators can be another customer entry point to the network.

On the other hand, seller apps on the network would keep on adding new products and categories. This would be supplemented and catered through onboarding of logistic delivery partners on the network. More transactions lead to more deliveries leading to more business for them.

It appears it’s a win-win situation for everyone and the duopoly of existing giants Amazon and flipkart is bound to be broken in near future! Maybe, it’s not that simple.

Two strategic challenges arise. Is it so seamless to bring users from one app and sell them products on another? Second, what if Amazon & Flipkart themselves are on the network, as this news suggests? Would their dominance not translate on the new ONDC network as well?

In order to think about the first question, let me draw a physical world analogy, to emphasize on the sticking power of closed integrations.

Most likely, while shopping in a big city mall, you would have been approached by a young sales executive, selling great credit card offers, and on all occasions you would have excused yourself. Because you were in the mall to entertain yourself with a movie and a treat and not buy a financial product.

Somewhat similar consumer behavior is likely to play out in ‘digital malls’ of the future (interconnected buyer seller apps on ONDC). In my opinion, It is less likely for a person buying medicines on his preferred e-pharmacy app to explore and buy an insurance policy or shoes in the same session.

Closed integration – right from customer acquisition funnel, in-app buying experience, seamless payment integration, fast delivery, refunds and robust customer-care processes – has a lot of moving pieces, all of them have to be conquered.

ONDC is likely to open up new opportunities for all stakeholders. How they would evolve would be interesting to watch.

Startup Funding Summary

Tata 1mg, a Gurgaon-based e-pharmacy platform, has raised $40 Mn in a funding from Tata Digital, MPOF Mauritius Ltd, HBM Healthcare and KWE Beteiligung – Read More

iBus Group, a Bangalore-based telecom infrastructure and technology company, has raised $16 Mn in a funding from Nomura and global financial services group – Read More

Akshayakalpa Organic, a Bangalore-based dairy enterprise, has raised $15 Mn in Series B funding from British International Investment, Rainmatter Foundation and Venture Dairy – Read More

GroMo, a Gurgaon-based fintech startup, has raised $11 Mn in Series A funding from SIG Venture Capital, Y-Combinator, Das Capital, Goodwater Capital, Beyond Next Ventures, Soma Capital, Ace & Company, Hauz Khas Ventures, Kunal Shah, Niraj Singh, Ramakant Sharma, Alok Mittal, Utsav Somani, Ashish Sharma, Abhishek Goyal and Nitin Gupta – Read More

ZippMat, a Bangalore-based SCaaS platform, has raised $10 Mn in a funding from Matrix Partners India, Zephyr Peacock, HDFC bank and TradeCred – Read More

M&A Snippets

Navi Mumbai-based conglomerate company Reliance Industries has acquired US-based solar software startup SenseHawk for $32 Mn – Read More

Mumbai-based building materials supplier Aris Infra has acquired Bangalore-based real estate solution provider Unitern Advisors for an undisclosed amount – Read More

Chennai-based payment gateway firm IppoPay has acquired Chennai-based risk management startup Tutelar for an undisclosed amount – Read More

Ecosystem Weekly | 04th Sep’22

September 4, 2022

I hope you have had a joyous Ganesh Chaturthi celebration. May the lord be kind and shower you and your team with prosperity in times to come.

This week, it appears, Ganesh ji has been a bit reticent to facilitate the flow of funds in the overall startup ecosystem. Total funding reported has been ~$ 199 Mn, a decline of around 23 % from the previous week inflow of ~$260 Mn.

The biggest newsmakers have been Early Salary (an instant cash loans fintech) and Skyroot Aerospace (a small-satellite launch services startup). Early Salary has raised $110 Mn in Series D round at a valuation of $300 Mn whereas Skyroot Aerospace has raised $51 Mn in Series B round. Regular readers of our newsletter would recall, we had shared a brief note on challenges & opportunities for Fintechs and we made a comment on the immense possibilities of the Aerospace sector.

There’s never a dull moment in the startup ecosystem. Let us look forward to next week, as to what it has in store for us?

Startup Funding Summary

EarlySalary, a Pune-based fintech startup, has raised $110 Mn in Series D funding from TPG’s The Rise Fund, Norwest Venture Partners, Piramal Capital and Housing Finance Limited – Read More

Skyroot Aerospace, a Hyderabad-based spacetech startup, has raised $51 Mn in Series B funding from GIC, Mukesh Bansal, Anil Chalamalasetty, Mahesh Kolli, Sherpalo Ventures, Neeraj Arora, Solar Industries, Wami Capital and other HNIs – Read More

Bike Bazaar, a Pune-based two-wheeler services provider, has raised $21 Mn in Series D funding from Women’s World Banking Asset Management, Elevar Equity and Faering Capital – Read More

4B Networks, a Mumbai-based broker network platform, has raised $11 Mn in a funding from Info Edge – Read More

Metalbook, a Delhi-based digital supply chain platform, has raised $5 Mn in a funding from Axilor Ventures, Foundamental, RTP Global, Stride Ventures and other HNIs – Read More

M&A Snippets

US-based talent solutions platform Hudson Global has acquired Chennai-based HR services company Hunt & Badge Consulting for an undisclosed amount – Read More

Mumbai-based packaging and containers manufacturer Ansapack has acquired Kolkata-based packaging and Containers manufacturer Teximco Group for an undisclosed amount – Read More

Ecosystem Weekly | 28th Aug’22

August 28, 2022

It has been an eventful week in the startup ecosystem. The total funding reported is of $260 Mn across 24 deals, around an increase of ~192% from $135 Mn in the previous week. The uptick is attributed to the fact there were three deals of over $50 Mn.

The biggest deal of the week, $65 Mn in an ongoing Series D round, has been of Servify, which brands itself as the World’s smartest device ownership and service management platform. As per the news reports, the investing firm, Singularity pegs the addressable market of after sales device protection to be over $ 100 Bn. The company is poised to be profitable and is at an ARR of $130 Mn, as per the quoted statement of Servify’s founder.

Those numbers, if true, are impressive which would most likely make Servify a unicorn in near future. A report here estimates the company’s valuation to be over $800 Mn and is suggestive of an IPO in the next 18-25 months. But beyond numbers why would Servify claim to be the world’s smartest device ownership & service management platform?

Over 75 OEMs, nearly all of the top mobile phone brands, have partnered with Servify. The key differentiator has to be the automated decision making tool which the company has developed. The automated claim agent instantaneously approves or denies a consumer claim based on ‘sentiment & system + fault AI’ derived from device intelligence. This also leads to targeting and acquiring right customers and rewarding honest consumers. Thereby, the company claims to significantly drive down the operational costs for OEMs.

Whether Servify is the smartest platform is a redundant question. I would rather pick another phrase from their website which sounds more apt and the regular readers of our newsletter would find convincing – ‘Redefining service experience at scale.’

Startup Funding Summary

Servify, a Mumbai-based product lifecycle management startup, has raised $65 Mn in Series D funding from Singularity Growth Opportunity Fund, AmTrust, Pidilite, Iron Pillar, BEENEXT, Blume Ventures and DMI Sparkle Fund – Read More

Hector Beverages, a Bengaluru-based food & beverages company, has raised $50 Mn in a funding from GIC Special Investments – Read More

Mojocare, a Bengaluru -based health and wellness startup, has raised $20 Mn in Series A funding from B Capital, Chiratae Ventures, Sequoia India’s Surge, Better Capital, Vineet Jain, Kunal Shah, Ankit Nagori, Adrian Auon, Sajid Rahman, Ravi Bhushan and Vivekananda HR – Read More

Awign, a Bengaluru-based HR tech startup, has raised $15 Mn in Series B funding from Bertelsmann India, Amicus Capital Partners, Mynavi Corporation, Michael & Susan Dell Foundation, Client Associates and Unitus Ventures – Read More

XYXX, a Surat-based apparel brand, has raised $11 Mn in Series B funding from Singularity Growth Opportunities Fund, Trifecta Capital, DSG Consumer Partners and Sauce Venture – Read More

M&A Snippets

Mumbai-based furniture marketplace Pepperfry has acquired Mumbai-based interior solutions company Brandmakerr for an undisclosed amount – Read More

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