Tag: Newsletter

Can you afford to ignore your finances?

July 30, 2023

What might be the most overlooked function in an early-stage startup?

It can’t be product or tech as it shapes the core story of what the startup intends to solve. It can’t be sales as revenue is needed to sustain the operations. It can’t be marketing as consumer facing apps can’t do without it.

Finance is often the most critical-yet-ignored function in early stage startups. While founders are busy in product, sales, team-building and ops, finance is commonly relegated to accountants. Accountants generally are good with the accounting software, most likely Tally in India, but view the finance operations from a traditional business lens rather than the metrics required for a growth oriented startup.

Second, in the early stage of the startup, financial compliance does not receive the attention it deserves. As the famous quip goes – “If you think that compliance is expensive, try non-compliance!” – inefficiently managed books of accounts, compliance related documentation, has the potential of wreaking a hard-won fund-raise deal in future, when large VC funds and seasoned investors start probing deep on financial due diligence.

Third, without the CFO or a financial controller, which is often the case in early stage startups, the founders lack a critical layer of strategic financial planning over and above the accounting team which is primarily manned by junior accountants. This often leads to inadequate cash flow management overlooking unforeseen situations, incomplete debtor & creditor management, unavailability of readily reportable financial data, lack of governance of commercial contracts leading to financial risks.

Ultimately, all this leads to sucking up precious founders’ bandwidth in tactical firefighting tasks, which could otherwise be better utilized in strategic tasks of building the core business.

At ESV, we have found a solution for these entrenched yet easily avoidable startup inefficiencies, which we call FinStack.

FinStack is a full service financial services for business ventures. As investors, entrepreneurs and finance experts, we understand how to truly unlock the power of strategic financial planning, analysis and oversight –in order to help scale the business exponentially.
Our full-stack of capabilities are designed to work as partners, not service providers, in the journey of scalability & profitability. Through FinStack, the founders would not have to worry about the common pain points such as – how to plan for and control money, how to ensure 100% compliance with all regulations, how to balance between growth & profitability, How to optimize financial decisions (e.g.risk-reward, debt-equity, buy-vs-make), and finally how to tie all decisions to financial implications based on the overall business strategy.
To know more about our FinStack proposition, its engagement models, and the stellar team behind it, I invite you to have a look at our FinStack overview deck.

I would be pleased to answer your comments and questions.

Startup Funding Summary

GreenCell Mobility, Mumbai-based EV startup, has raised $41 Mn in a funding from REC Limited – Read More

Wiom, Delhi-based telecom startup, has raised $17 Mn in Series A funding from RTP Global, YourNest, Omidyar Network India, Global Brain, Blume Founders Fund, Alteria Capital, Stride Ventures, Stride One and 9 Unicorns – Read More

Ethereal Machines, Bengaluru-based CNC machines manufacturer, has raised $7 Mn in Pre-Series A funding from Peak XV’s Surge, Blume Ventures, Ganapathy Subramaniam, Mathew Cyriac, Lip-Bu Tan, Finvolve, 9Unicorns, Venture Catalysts and T2D3 Capital – Read More

Kapture CX, Bengaluru-based customer support automation platform, has raised $4 Mn in Series A funding from Cactus Venture Partners – Read More

Varashakti Housing Finance, Chennai-based fintech startup, has raised $4 Mn in Series A funding from Incofin India Progress Fund – Read More

M&A Snippets

Mumbai-based financial services provider Pantomath Financial Services Group has acquired Mumbai-based fintech platform Fundgini for an undisclosed amount – Read More

UK-based SaaS platform InVentry has acquired Krishnapura-based workplace management solutions provider Hipla Technologies for an undisclosed amount – Read More

 

What happens in a founder’s office?

July 23, 2023

What would be the most precious commodity for a growth oriented startup. Is it funds in the banks, dedicated team, access to the best tech, or an inspiring office space?

I would argue that the most precious thing would be – Founder’s time.

How and where the founder(s) allocate their time, based on the size and funding-stage of the venture, differentiates outperforming startups from the lesser successful ones. This becomes even more profound in the case of single founder startups.

Recently, there has been a significant amount of discussion and interest on how to unlock founders’ bandwidth from low priority low-impact tasks to high-priority high-impact ones. This has resulted in creation of a new set of roles, which we commonly referred to as – ‘Founders’ office’ or ‘Strategic Planning and Coordination’.

There can be more than one job description for a founders’ office role, due to the ambiguity and dynamism inherent in the working of any startup. This inevitable ambiguity, conflicting priorites, and everyday fire-fighting is led by the founders themselves. It sounds convincing if there is someone to whom the founder can offload these unavoidable tasks to. Hence, the role of the founders’ office is gaining traction.

There can be three major tasks attributable to the founders’ office role. One of them would be to become the champion of the Eisenhower Matrix (fig below) or to put it in simple words – enabling super-priortization of the founder’s time.

This involves optimizing the calendar for the founder and aligning leadership teams’ bandwidth around it. Clearly, this goes beyond scheduling and coordinating meetings, as decisions would have to be made on prioritization and relevance of calls.

In our informal discussions with founders, we overwhelmingly come across founders claiming to spend around two-thirds of their time on tasks, such as tracking updates, and doing follow ups,  ideally which could have been delegated. Nothing better than an email update over an avoidable meeting, it saves everyone’s time. Moreover, shifting non-planned adhoc activities to planned ones lead to greater productivity.

Second would the cross functional project management role for strategic initiatives. This would require cultivation of excellent working relationships with the functional heads in the startup team. The role again goes beyond taking updates and nudging others as one would have to contribute intellectually in problem solving and get the work done.

Third important function would be to establish and own a proper MIS process and reporting cadence for the startup. Reporting and data gathering is often adhoc, unstructured and incomplete. This is often the case in accounts and financial reporting, which gets overlooked when the scale of operations and revenue is low. But it creates bottlenecks during later fundraise or compliance related issues.

Beyond these definable roles, the founders’ office evolves to become the sounding board for the founders and contribute to shaping the strategy with the leadership team.

The value of a founders’ office increases furthermore if the individual(s) manning it can view the startup from an investor standpoint. He/she can then establish workflows and best practices, keeping in mind all of the key-metrics, which are bound to be asked by the VCs and strategic investors in a large round.

At ecosystem ventures, we prioritize safeguarding investor interests as ultimately it leads to value creation for everyone in the ecosystem. This requires working closely with the founders, like the founder’s office, and ensuring the success of each investment.

Ecosystem Ventures This Week

We are happy to share that Mr. Abhijeet Bhandari (Partner, Ecosystem Ventures) was invited as a speaker in Nath Valley School, Aurangabad. He underscored the significance in the session for students, aiming to assist them in thinking methodically about commencing a new business.

Startup Funding Summary

RenewBuy, Gurugram-based digital insurance aggregator, has raised $40 Mn in Series D funding from Dai-ichi Life Holdings Inc. – Read More

LetsTransport, Bengaluru-based commercial EV aggregator, has raised $25 Mn in a funding from Bertelsmann and other HNIs – Read More

Ati Motors, Bengaluru-based industrial robotics startup, has raised $11 Mn in Series A funding from True Ventures, Athera Ventures Partners, Blume Ventures, Exfinity Ventures and MFV Partners – Read More

Solethreads, Gurugram-based casual footwear startup, has raised $4 Mn in Series A funding from Fireside Ventures – Read More

Jimmy’s Cocktails, Gurugram-based F & B startup, has raised $3 Mn in Pre-Series A funding from Prath Ventures and other HNIs – Read More

M&A Snippets

Bikaner-based F & B company Bikaji Foods International Ltd has acquired 49% stake in Bikaner-based F & B company Bhujialalji Pvt. Ltd for $621K – Read More

Bengaluru-based retail apparel & fashion brand Styched has acquired Bengaluru-based footwear brand Flatheads for an undisclosed amount – Read More

Bengaluru-based fintech API Firm Decentro has acquired Mumbai-based debt collection SaaS platform Neowise Technologies for an undisclosed amount – Read More

India’s Digital Transformation Fuels Hyper Growth

July 16, 2023

India is experiencing a momentous phase of hypergrowth driven by its ongoing digital transformation. The convergence of several favorable factors, including financial inclusion initiatives, a mobile revolution, digital payments, robust infrastructure, a thriving startup ecosystem, and transformative policy reforms, has positioned India as a ripe ground for exponential expansion. As the nation embraces the digital age, it is poised to unlock its true potential and emerge as a global powerhouse.

India’s commitment to financial inclusion, exemplified by the Jan Dhan program, has empowered millions of previously unbanked individuals. Simultaneously, the mobile revolution, facilitated by affordable data plans and smartphone adoption, has connected the masses, opening doors to digital services, information, and opportunities. Mobile connections increased from 302.33 million in 2015 to 851 million in 2023. This combination of financial inclusion and mobile connectivity lays a strong foundation for India’s hyper-growth.

India’s digital payments landscape has been revolutionized by the Unified Payments Interface (UPI), the world’s most extensive digital payment system. UPI’s user-friendly interface, affordability, and compatibility with various applications have made it an integral part of everyday life for Indians. UPI transactions increased from 127 crore in 2013-14 to 12,735 crore in 2022-23. This widespread adoption of digital payments has accelerated economic transactions, driving productivity and efficiency and setting the stage for rapid expansion.

India’s robust digital infrastructure catalyzes hyper-growth, facilitating innovation and connectivity across the country. Digital public goods, such as Aadhaar, Fastag, and DigiLocker, provide a seamless framework for integration and interoperability. This interconnected ecosystem fosters combinatorial innovation, offering entrepreneurs fertile ground to develop new services and solutions. The transition from a cash-driven to a digital-first economy has unlocked immense opportunities, promoting transparency, efficiency, and inclusivity.

India’s startup ecosystem has experienced a remarkable surge, attracting global attention and investment. The convergence of digital technology, supportive policies, and access to venture capital funding have nurtured a thriving innovation ecosystem. Startups are disrupting traditional industries, introducing novel solutions, and driving employment growth. The entrepreneurial spirit and India’s market potential and digital transformation create a breeding ground for hyper-growth in the startup sector.

India’s proactive government has implemented transformative policy reforms to foster hypergrowth. Initiatives, like Make in India, Digital India, and Startup India, have created an enabling environment for businesses, attracting investments and promoting innovation. Streamlined tax systems, such as the Goods and Services Tax (GST), have simplified compliance, enhancing efficiency and ease of doing business. The Atmanirbhar Bharat (Self-reliant India) initiative aims to boost domestic manufacturing and reduce import dependence. These policy reforms demonstrate India’s commitment to unleashing its full potential and accelerating hypergrowth.

In the backdrop of India’s remarkable digital transformation, Ecosystem ventures has emerged as catalysts for nurturing and supporting transformative startups. With their expertise, resources, and network, these ventures empower the next generation of innovators and entrepreneurs, fueling India’s growth. By fostering an enabling environment and providing the necessary infrastructure, Ecosystem ventures is playing a pivotal role in driving India’s growth story and propelling the nation towards a future of unprecedented opportunities and prosperity.

Startup Funding Summary

SmartDukaan, Delhi-based retail tech startup, has raised $10 Mn in Pre-Series A funding from Findoc Finvest – Read More

Clensta, Delhi-based personal care startup, has raised $10 Mn in Pre-Series B funding from TradeCred – Read More

Adcount Technologies, Noida-based supply chain management startup, has raised $2 Mn in Series A funding from Venture Catalysts and Artesian – Read More

Hectar Global, Chennai-based agri commodity procurement platform, has raised $2 Mn in Seed funding from Powerhouse Ventures – Read More

OneStack, Gurugram-based fintech startup, has raised $2 Mn in Pre-Series A funding from GrowX, Stride Ventures, 9Unicorns and Venture Catalyst – Read More

M&A Snippets

Gurugram-based F&B company DSM Fresh Foods has acquired Bengaluru-based retail startup Dr. Meat for an undisclosed amount – Read More

Regulating Online Gaming

July 9, 2023

Humans by nature are competitive beings. But they also tend to be greedy, often giving in to the lure of making a quick buck without any mental or physical efforts.

Since ancient times, the culture of gaming has evolved, channelizing the above two human traits. A lot of games are played across the globe. These different games can be classified into two categories – games of skill or games of chance.

A game of skill is one where success primarily relies on the player’s expertise, knowledge, and strategic decisions. Our popular physical sports such as cricket, volleyball and mental sports such as chess would be good examples of games of skill. One can argue these games provide Intellectual stimulation, challenge, and opportunity for self-improvement.

A game of chance, on the other hand, relies on luck and randomness to determine the outcome. Popular examples include roulette, slot machines, lottery, and bingo. It can be said that these games tend to foster an element of escapism and allure of instant fortune.

But, often the classification of games, as skill-based or chance-based, becomes contested. The classic example is Poker, which is viewed alternately across various jurisdictions. This has major regulatory implications as often games of chance (which include betting or gambling) are strictly regulated with winnings taxed at much higher rates than those applied to the game of skills.

The key question to ascertain a game’s classification is whether skill dominates chance in it? The differentiating factor for a game of skills is that performance is predictable. In a game of chance there would be no correlation in the winnings of players across successive periods, whereas there would be in a game of skill. More skilled players are more likely to win and a less-skilled player, through practice and patience, can better his chances of winning with time.

The problem of classification is compounded when the online variants or spin-offs of popular offline games emerge. There has been a proliferation of many illegal betting/gambling apps/websites with questionable sources of funding or country of origin, which aim to lure users.

In India, betting and gambling is a state subject, with states legislating their specific laws, modeled on the old public gambling act 1867, prohibiting all forms of gambling and betting in their respective states. Only Goa, Sikkim and Meghalaya permit it under specific regulations. Since most of the gambling legislations which have been enacted were done prior to the advent of online or virtual gambling or betting, thus, the gambling legislations primarily refer to gambling activities in physical form.

This regulatory ambiguity often leads to penalizing legitimate online gaming businesses as argued by Mr. Gullapalli (CEO, Head Digital Works, which operates popular gaming apps such as rummy, carrom and pool) here.

As the gaming sector continues to see rapid growth, one can hope that the government would focus on promoting legitimate gaming firms and advocate for increased compliance measures, including the establishment of self-regulatory bodies, will create opportunities and avenues for more online businesses in gaming to flourish.

Startup Funding Summary

Leverage Edu, Delhi-based ed-tech startup, has raised $40 Mn in Series C funding from Educational Testing Service and other HNIs – Read More

Battery Smart, Delhi-based EV startup, has raised $33 Mn in Pre-Series B funding from Tiger Global, Blume Ventures, The Ecosystem Integrity Fund and British International Investment – Read More

GIVA, Bengaluru-based jewellery brand, has raised $33 Mn in Series B funding from Premji Invest, Alteria Capital and A91 Partners – Read More

KaarTech, Chennai-based consulting firm, has raised $30 Mn in funding from A91 Partners – Read More

Smartstaff, Bangaluru-based worker management platform, has raised $6 Mn in Series A funding from Nexus Venture Partners, Arkam Ventures, Blume Ventures and Alteria Capital – Read More

M&A Snippets

Bengaluru-based ed-tech startup Toprankers has acquired Indore-based ed-tech startup The Lex Guru for an undisclosed amount – Read More

Pune-based digital entertainment and gaming company, JetSynthesys has acquired Mumbai-based media company KidzByte for an undisclosed amount – Read More

What is w-commerce?

July 2, 2023

Often opportunities for building a sustainable business are hidden in plain sight. Waste management could be one such sector which is belatedly receiving the attention it deserves.

Waste management in India can be big for the simple reason that waste being generated, by one sixth of humanity, is enormous. More the consumption, more would be the waste generated, more are the opportunities for innovation in waste management, which is unorganised and hyper localized across India.

Simplistically, waste management would involve two sets of parties. On one hand there are waste collectors (neighbourhood kabadiwalah would be one), waste aggregators and then there are recyclers. Recyclers are specialised as each category of waste (such as plastic, glass, metal, electronics) would have its own supply chain. Thus,the acronym w-commerce simply refers to the digitally enabled trade between waste management stakeholders.

Waste management in India differs from the west culturally and economically. In India we tend to extract value out of the waste whereas in the west people would pay for waste management services. It would be surprising for many to know that there might be over 50 lakhs garbage pickers in India and 1.5% of population livelihood is connected to waste management.

With renewed thrust on public awareness on cleanliness through the swatchta abhiyaan in recent years, there exists a possibility of moulding societal behavior on waste management, provided awareness campaigns and incentives are sustained for the long run.

Building on these trends, one of the successful startups in the waste management space is Recykal founded by Mr Abhay Deshpande. Recykal is a B2B waste marketplace. Two interesting concepts from their business model are worth knowing.

First, a relatively new concept in India, is deposit refund system (DRS). DRS is an incentive system aimed at encouraging consumers to bring back their waste for a refundable deposit that is collected at the time of purchase. E.g. If I purchase a plastic mineral water bottle, a depost of Rs 5 is charged, which I get reimbursed when I return the bottle. Advanced economies may have a substantial chunk of their waste recycled through DRS but even a 10% waste collection through DRS in India would be big. Linked to the DRS is the ability to create a network and manage designated collection centres or machines. With DRS hyperlocal partners will collect, process, and sell waste on the platform.

Second, EPR (Extended Producers Responsibility) is an environmental policy approach in which a producer’s responsibility for a product is extended to the post-consumer stage of a product’s life cycle. This entails the shifting of responsibility (physically and/or economically; fully or partially) upstream toward the producer and away from municipalities. Recykal helps brands in achieving their sustainability targets with offerings such as EPR registration and fulfilments, plastic takeback, certified disposal solutions, and awareness programmes, for which Recykal charges a fee.

As per the reported figures, Recykal claims their GWV (gross waste value) traded on their platform is ~ ₹750 Crores, with a 5-8% in gross margins on marketplace transactions between waste collectors and buyers (recyclers). Margins with companies to enable their sustainability targets are upwards of 20%. Recykal had raised $22 million (around Rs 165 crore) in funding by investment funds managed by Morgan Stanley India in 2022.

It would be interesting to see how Recykal grows and achieves their stated target of achieving GWV of over $ 1 Bn in the coming years.

Startup Funding Summary

Lendingkart, Ahmedabad-based fintech startup, has raised $24 Mn in debt funding from EvolutionX Debt Capital – Read More

Scapia, Bengaluru-based fintech startup, has raised $9 Mn in Seed funding from Matrix Partners India, Tanglin Venture Partners and 3STATE Ventures – Read More

Koskii, Bengaluru-based apparel brand, has raised $7 Mn in Series A funding from Baring Private Equity Partners India – Read More

Oben Electric, Bangaluru-based EV startup, has raised $5 Mn in Pre- Series A funding from Stride Ventures, Indian Renewable Energy Development Agency, Mumbai Angels and other HNIs – Read More

BluJ Aero, Bangaluru-based aviation startup, has raised $2 Mn in a funding from Endiya Partners, Ideaspring Capital and Rainmatter Foundation – Read More

M&A Snippets

Secunderabad-based phosphatic fertilizer company Coromandel has acquired Chennai-based drone manufacturer Dhaksha Unmanned Systems for $29 Mn – Read More

Ahmedabad-based pharmaceutical manufacturer Corona Remedies has acquired Paris-based pharmaceutical manufacturer Myoril for $29 Mn – Read More

Nothing angelic about the angel tax

June 25, 2023

The word angel, derived from the Greek angelos, means a spiritual being serving as a divine messenger and intermediary and often as a special protector of an individual or a community. In the startup world it is aptly used for investors at the ‘seed’ or early stage funding round, where investors are akin to special divine protectors, who are betting on the startup idea & team to generate massive returns in the future.

Armed with the angel investments, startups evolve and grow to raise larger rounds through the next set of larger investors. Few startups are exceptionally successful, some are decently successful, and a lot of them plateau or fail after sometime.

Since exceptional returns are possible in a short period of time, it is not unlikely that illicit sources of money may find startup investments as a lucrative way to legitimize their funds. Second, the government loves taxes and never misses an opportunity to deploy a new one.

Angel tax was first introduced in 2012, with the noble intention of curbing illicit gains and taxing the income generated on the returns made on startup investments. It was called angel tax as it applied primarily to Indian angel investors—HNIs and family offices who invested in startups. Despite the name, it was applied to startups and not the investor. The impact was restricted primarily to early-stage as most of the capital in later stages comes from foreign funds. Angel tax is based on the difference between the actual value of shares issued and their fair market value.

Unfortunately, good intentions do not necessarily lead to good outcomes. Since its inception, the rationale of angel tax was challenged by startups and investors, as a speed barrier to the nascent startup ecosystem in India, and few exceptions to it were hard bargained from the government.

Initially, angel tax was limited to investors who are ‘residents’ of india. Budget 2023 expanded it to include ‘non-resident’ foreign investors, despite many such investors being registered and regulated by their securities regulators. In May 2023, a belated amendment was introduced which excludes residents from certain geographies from the purview of the angel tax. Still countries with sizable investor and fund inflow, such as Singapore, Netherlands, Mauritius, and gulf countries have not been included in the list.

Misapplication of angel tax is the critical issue rather than creating post-facto piece-meal exceptions.

The provisions provide arbitrary and discretionary powers to the tax department. Tax officials can literally question any valuations by comparing them to actual performance. Deviations were taken as a sign of money laundering, thus attracting the section. This has disincentivized Investors to invest further as any capital would be used to clear the angel tax liability. Numerous startups have shut down due to this, with entrepreneurs choosing to set up in Singapore or the US instead of India. India has lost job creators due to misapplication of angel tax provisions.

It is understandable to tax the gains made on an investment. We have the short term and the long term capital gains tax. If a startup becomes successful, its profits are going to be taxed. Similarly, the investors who made gains on their startup investments can be taxed.

But taxing the private activity of raising capital between two consenting parties seems far fetched and counterproductive.

Let us hope better clarity emerges on this issue and startups and investors are saved from the bureaucratic misapplication of angel tax in future.

Startup Funding Summary

Digantara, Bengaluru-based space-tech startup, has raised $10 Mn in Series A1 funding from Peak XV Partners, Kalaari Capital, Global Brain, Campus Fund and other HNIs – Read More

Eye Mantra, Delhi-based eye care hospital chain, has raised $10 Mn in a funding from MantraCare – Read More

Good Flippin’ Burgers, Mumbai-based food & beverage startup, has raised $4 Mn in a funding from Tanglin Venture Partners – Read More

Navadhan Capital, Mumbai-based fintech startup, has raised $2 Mn in Seed funding from Varanium NexGen – Read More

Truliv, Chennai-based hospitality startup, has raised $2 Mn in Pre-Seed funding from Conquest Global Ventures VCC and Vara Future LLPs – Read More

M&A Snippets

Bengaluru-based fintech startup CRED has acquired Bengaluru-based micro-savings platform Spenny for an undisclosed amount – Read More

Will other VC funds follow Sequoia’s geographical split strategy?

June 18, 2023

One of the most discussed news from the startup ecosystem has been the geographical split of Sequoia in three entities.

Sequoia Capital, founded in 1972, is one of the most prominent private equity and venture capital firms in the world. Focusing predominantly on technology and innovation, Sequoia औ Capital is a stage agnostic investor that has funded and supported over 1500 companies worldwide.

On June 6, Sequoia announced a split which created three units — Sequoia Capital US and Europe under Roelof Botha; the India and Southeast Asia firm, which has been rebranded as Peak XV Partners, under Shailendra Singh; and the China firm, now called HongShan, under Neil Shen. The profit-sharing agreement between the VC firms would be dissolved which meant the entire sum would now go to the revamped Peak XV team, in the case of India.

Opinion has been divided on the probable reasons for the split. The officially stated reason has been to avoid the potential portfolio conflicts, and operational hassles, across the three major geographies. Shailendra Signh, explaining the strategy behind the move, opined

My team and I believe that we will have parallel ecosystems of software companies, development tools companies, infrastructure, and cloud computing, all built by Indian brands. And that’s our biggest common brand conflict. If it was one or two deals a year, we could deal with the conflict. But if this conflict is a weekly issue for us. It’s a big issue.

Peak XV partners are now hopeful of greater agility and complete freedom in making Indian and global investments. For example, by eliminating centralized legal and compliance functions, Peak XV partners can make decisions on the basis of our nuanced understanding of local regulations, rather than be constrained by regulations that may have no bearing in our region.

On the other hand, a section of VCs was circumspect about the Sequoia split. According to them, delinking China might make sense, but not India. According to them, Sequoia India’s less optimal performance and recent controversies related to management control at a couple of their unicorn portfolio companies, might have led to the move. It is true that the average returns for global VC funds in India has been lower as compared to other major geographies.

It would be interesting to see if the investment thesis of the new entity is radically different from its former self. Peak XV, which will continue deploying its latest $2.85 billion fund, currently manages $9 billion worth of assets in the India and Southeast Asia region. More than 50 companies in its portfolio are valued at $1 billion or more.

As we have argued multiple times in this newsletter, the era of easy money is long dead. Investors and funds, big or small, are likely to graduate towards lesser deals but with far greater due diligence.

At Ecosystem Ventures, we have never played along the common VC investment thesis, wherein, exceptional returns of one of the portfolio companies, subsidize exceptional losses of the rest.

None of the eighteen of our past investments has been written off since we are highly selective in sourcing startups and pride ourselves on our investor risk mitigation strategy. We are in for the long game and sustained results.

Ecosystem Ventures This Week

We are thrilled to share that Ecosystem Ventures hosted the 4th pitch event of 2023 this week, where one of our portfolio startups pitched to angel investors, who joined either remotely or graced our office with their presence.

To view our active deals visit here.

Startup Funding Summary

Indifi Technologies, Gurgaon-based lending platform, has raised $35 Mn in Series E funding from ICICI Venture, British International Investment, OP Finnfund Global Impact Fund I, Omidyar Network India, Flourish Ventures and CX Partners – Read More

AVIOM India Housing Finance, Delhi-based housing finance company, has raised $30 Mn in Series D funding from Nuveen – Read More

Everest Fleet, Mumbai-based fleet management startup, has raised $20 Mn in a funding from Uber – Read More

HomeLane, Bengaluru-based home interiors brand, has raised $9 Mn in a funding from existing investors – Read More

BASIC Home Loan, Gurgaon-based fintech startup, has raised $5 Mn in Pre-series B funding from Ashish Kacholia, Gruhas, Venture Catalysts, Dexter Angels, IIM Indore Alumni Angel Fund and CommsCredible Venture Fund – Read More

M&A Snippets

Ahmedabad-based pathology-focused diagnostic lab chain Sterling Accuris Wellness has acquired Ahmedabad-based pathology service provider VIP Labs for an undisclosed amount – Read More

 

AI Neeti-Shastra

June 11, 2023

With the proliferation of user-friendly generative-AI apps, people are realizing, contemplating, and predicting the scale and timeline of transformative impact, AI is likely to unfold, in our economy or society at large.

Would AI lead to massive job cuts in the near future? If yes, which sectors are going to be affected more and by when? If we increasingly depend on algorithms for decision making, who is accountable when AI falters? Wouldn’t AI be increasingly used to deepen the fragile fault lines embedded in our societies by those who stand to gain the most by it?

Such questions on the potential contours of AI regulation, with no easy answer, are on the minds of tech leaders, governments, and thoughtful internet users, like this newsletter community.

All major nations of the world, including India, started to engage deeply with AI, a few years back, and have come out with their respective preliminary vision documents. India can play a decisive role in navigating the global AI discourse, provided it evolves a thoughtful framework of AI within the country.

Simplistically, key issues to be addressed in an equitable yet robust AI regulation are the following –

First, democratize AI technologies and enable access to clean curated data. This would lead to sector-specific, demographically-diverse AI solutions, critical for addressing public issues in health, education and finance.

Large quantities of data alone does not translate into better results. Accuracy and curation are necessary prerequisites. There are two major sources of such curated data. One can be open-access government data and second is private data. There is a need to explore different models of enabling access to private sector data while ensuring and protecting users rights and company IP.

Second, ensuring adequate government funding and investment in AI R&D, enabled through industry and academia collaboration. As of now, AI is expensive, it is the prerogative of few corporations who can make long-term strategic bets on it. Public funding for AI would enable creation of a talent pool outside of big corporations.

Third, it is critical to develop an AI focused intellectual property framework that encourages innovation. AI systems are trained by reading, viewing, and listening to copies of human-created works. These resources such as books, articles, photographs, films, videos, and audio recordings are all key subjects of copyright protection. How does the regulation minimizes unauthorized infringement and incentivizes creator-led access to the copyrighted human generated data, would be a challenging task.

Fourth, enabling and strengthening the complementary legal framework, where AI technologies may impinge the most. This includes – data protection laws, competition laws, consumer protection laws, and non discrimination laws.

Lastly, beyond any policy document, however nuanced it may be, unlocking prosperity through latest AI technologies, is contingent on the desire and collective awareness of the society it is deployed in.

We all, as individuals and citizens, would have to play our part in increasing awareness and prioritizing ethical use of the latest technologies.

Ecosystem Ventures This Week

We are happy to share that Mr. Abhishek Sanghvi (Partner, Ecosystem Ventures) was invited as a Speaker & Moderator of Startup and IT Conclave on the occasion of “Indore Gaurav Diwas”.

Startup Funding Summary

HealthifyMe, Bengaluru-based health-tech startup, has raised $30 Mn in Pre-Series D funding from LeapFrog Investments, Khosla Ventures, FinnFund, Van Lanschot Kempen, Unilever Ventures, Blume Ventures, Chiratae Ventures and Healthquad – Read More

Lentra, Mumbai-based cloud lending company, has raised $27 Mn in Series B funding from MUFG Bank and Dharana Capital – Read More

River, Bengaluru-based EV startup, has raised $15 Mn in a funding from Al Futtaim Group, Lowercarbon Capital, Toyota Ventures, Maniv Mobility and Trucks VC – Read More

Genwise, Delhi-based elderly focused startup, has raised $4 Mn in seed round funding from Matrix Partners India, DBR Ventures, Climber Capital, Kunal Shah, Suhail Sameer and Achal Mittal – Read More

TradingLeagues, Bengaluru-based fantasy stock gaming startup, has raised $4 Mn in Pre-Series A funding from Leo Capital, Jeejeebhoy Family Office and KP Balaraj Family Office – Read More

M&A Snippets

Delhi-based Fintech startup CredFlow has acquired Kenya-based business management startup TechBiz for an undisclosed amount – Read More

Foraging Finfluencers

June 4, 2023

We are evolutionarily programmed to be lazy. We would rather spend the least amount of mental effort and expect maximum output in return. This could be one of the reasons for our fascination with schemes or claims promising quick money in no time.

This age-old human weakness is exploited in newer ways by enterprising individuals. The latest being the rise of the tribe of ‘Finfluencers’.

Influencer is a person who commands a sizable audience on social media platforms, and makes money through monetising his large follower base through affiliate marketing & brand collaborations with companies. While influencers generally operate in segments such as beauty or lifestyle, finfluencers operate in a very niche area — finance. They offer unauthorized financial advice and tips, on a range of topics such as stock market trading, personal finance, and mutual funds.

Finfluencers make the boring and complex jargons of finance relatable through their engaging content. In this way, they can be credible enablers of financial education in a country where financial literacy is estimated to be ~27%. But they have been in the news for all the wrong reasons.

SEBI on May 25 penalised and barred popular youtuber and options trader Mr PR Sundar from trading for a year over alleged violation of investment adviser’s norms. There have been reports, since last November, that SEBI would formalise rules for this growing group of financial influencers, with SEBI chairman Ms Buch, cryptically acknowledging the same at an event related to the Mutual Fund industry.

Contrary to Registered Investment Advisors (RIA) who are regulated by SEBI to safeguard investor interests, finfluencers aren’t in the regulatory ambit yet. There exists a clear conflict of interest and public risk. Conflict arises as finfluencers typically have revenue sharing arrangements with the stock brokers or fintech companies with whom they have an affiliate relationship. Thus, their advice, wrapped in the package of engaging content, may not be objective.

Nehal Mohta, founder of Finnovate Financial Services, summed up the inherent public risk succinctly –

Money and health are two areas of our life that have a lot in common. In both, the gap between what we know and what the experienced practitioners know is very vast.

Finfluencers are to financial advice what health websites are to managing illness. They are good to consume as long as one is not treating oneself based on the advice one receives online,

Suggestions on regulating finfluencers include creation of a self-regulatory body or by setting up a standard operating procedure (SOP) for financial content creation and distribution.

Social media, by design, doesn’t have a barrier to entry. This further complicates the issue around regulation as lifestyle influencers, not finfluencers, have been increasingly found to indulge in affiliate marketing and collaboration with trading platforms, reproducing the platform’s sales script without acknowledging their vested interests and risks involved for the viewers.

Perhaps a similar trend has emerged in the startup ecosystem as well, where articulate self-styled content creators often end up misleading people on startups, for want of likes and views.

At ESV, we pride ourselves on our due diligence, where every startup which comes to us, is evaluated meticulously on its merits, before being shared with you.

It is a slow and a grueling process, but it is effective.

Ecosystem Ventures This Week

We are happy to share that Mr. Shailesh Jain (Partner, Ecosystem Ventures) has participated in a panel discussion on “Opportunity for startup in Central India and perspective toward funding” at WIRC OF ICSI event, held in Indore.

Startup Funding Summary

CleanMax, Mumbai-based renewable energy company, has raised $360 Mn in a funding from Brookfield Renewable – Read More

Atomberg Technology, Mumbai-based consumer appliances brand, has raised $86 Mn in Series C funding from Temasek, Steadview Capital, Trifecta Capital, Jungle Ventures and Inflexor Ventures – Read More

Pixxel, Bengaluru-based spacetech startup, has raised $36 Mn in a funding from Google, Radical Ventures, Lightspeed Venture Partners, Blume Ventures, growX, Sparta, and Athera Venture Partners – Read More

NewTrance, Bengaluru-based climate technology startup, has raised $6 Mn in a funding from Sequoia Capital India, Aavishkaar Capital, Speciale Invest, Micelio Fund, Ashish Goel and IKP Knowledge Park – Read More

KarmaLife, Bengaluru-based fintech startup, has raised $6 Mn in Pre-Series A funding from Krishna Bhupal’s family office, Artha Venture Fund, Net Graph Investments, Singularity Ventures, LogX Venture Partners, Balesh Sharma, Amit Jain, Vikram Kailas and Shaji Kumar Devakar – Read More

M&A Snippets

Mumbai-based proptech platform Aurum PropTech has acquired Bengaluru-based online home rental startup NestAway Technologies for $11 Mn – Read More

Taste of profitability in the food delivery space

May 28, 2023

Food delivery has been a hotly contested space in India over a decade. It has now evolved into a duopoly between Zomato & Swiggy.

Last week, Sriharsha Majety, CEO of Swiggy announced in an official blog post –

 ‘Our sharp focus on innovation, coupled with strong execution has led to yet another milestone- As of March 2023, Swiggy’s food delivery business has turned profitable (After factoring in ALL corporate costs; excluding employee stock option costs). This is a milestone for food delivery globally, not just for us, as Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than 9 years since its inception’

Swiggy’s announcement follows a similar news from Feb 23, where Zomato’s Co-founder Deepinder Goyal, had tweeted –

 Zomato hit a milestone in January 2023 – becoming EBITDA +ve (ex Blinkit). We are on track with our path to profitability by Q2FY24.

It is a significant milestone which has been achieved after years of effort. In order to contexualise the news let us recap the strategies deployed by players in the food delivery space.

There are two sides to the food delivery business. First is the demand – characterized by users like you and me, who enjoy food but with varying tastes and preferences. Second is the supply – characterized by the local restaurants who can cater to those varying tastes & preferences. Platforms like Zomato match them efficiently and create value for both.

Zomato & Swiggy, through their relentless focus on seamless user-experience and delivery logistics, were able to acquire a substantial user base, with an expectation of unlocking the value of acquired aggregate demand in future. But profitability was hard to arrive from the demand side. There is an upper cap to increasing ARPU and offering discounts is the expected norm. Other players in the food-tech either shut shop or were acquired.

In search of profitability, Zomato & Swiggy, both tried to focus on the supply aggregation as a next step. Zomato started Zomato Infrastructure services (ZIS) and Swiggy started Swiggy’s Cloud Kitchens. ZIS was described as a service (physical kitchen) where current business owners can expand their business to new locations without the hassle of investing in kitchens or infrastructure. These kitchens were equipped with the most sophisticated amenities.

But both Zomato and Swiggy have closed their supply aggregation businesses. Perhaps the only food tech player which has been able to achieve supply aggregation at scale is Rebel Foods – which owns popular brands such as Fassos, Behrouz Biryani, Oven Story, Firangi Bake etc. As a next step, Rebel foods launched an exclusive app Eat Sure for users to order from their set of owned brands, signifying the shift in its focus from supply to demand aggregation, where it faces stiff competition from established might of Zomato & Swiggy.

Thus, it appears, if one had demand aggregation at scale, then supply aggregation efficiencies are missing and if a player had supply aggregation at scale, then demand (user) aggregation efficiencies are absent.

One of the successful and profitable examples in the food delivery space at scale is Jubliant food works better known by the brand name Dominos. Jubilant foodworks has the advantage of extracting efficiencies from both the supply and demand side as Domino’s started as a chain of physical outlets spread across all over the country with a delivery fleet of its own. It would be interesting to see if Jubilaint food works can add and service more brands successfully through their network strength.

For Swiggy & Zomato, it appears they are geared towards making their quick commerce businesses efficient, by leveraging their acquired user base over the years, as an ultimate path to company-wide profitability, not just limited to food delivery.

Startup Funding Summary

PhonePe, Bengaluru-based fintech company, has raised $100 Mn in a funding from General Atlantic – Read More

Chalo, Mumbai-based bus tracking and ticketing startup, has raised $57 Mn in a funding from Avataar Ventures, Lightrock India, Waterbridge Ventures, Amit Singhal, Trifecta and Stride Ventures – Read More

Infinite Uptime, Pune-based software development company, has raised $19 Mn in Series B3 funding from GSR Ventures, VenturEast, Mayfield and THK – Read More

Walko Food, Pune-based food and beverage manufacturer, has raised $11 Mn in a funding from Jungle Ventures – Read More

XFlow, Bengaluru-based financial services and infrastructure company, has raised $10 Mn in Pre-Series A funding from Square Peg Capital, Moore Strategic Ventures, Lightspeed and General Catalyst – Read More

M&A Snippets

Mumbai-based financial services provider Capri Global Holdings has acquired Delhi-based new-car selling platform CarLelo for $18 Mn – Read More

Chennai-based fintech company Yubi has acquired Mumbai-based digital credit analytics company FinFort Infotech LLP for an undisclosed amount – Read More

« First‹ Previous678910Next ›Last »