Tag: Startup

Google’s Bard vs OpenAI’s ChatGPT

February 12, 2023

Big tech companies have their dedicated cult followership. There are those who swear by Google and would have purposely stayed away from Microsoft technologies. Similarly, Apple loyalists would not venture beyond their ecosystem.

Brand loyalties were tested this week with two major announcements by Google & Microsoft respectively, which happened in close succession. But first, let us recap the context.

Earlier in Nov 2022, ChatGPT (a dialogue-based AI-chatbot developed by OpenAi), took the world by storm by its intuitive human-like conversational ability and the inherent potential to transform businesses and industries. The most talked about application of chatGPT was the Internet Search, which Google has single handedly lorded over for close to two decades. Google possesses a market share of ~92% in Internet Search whereas Microsoft’s Bing has ~2%.

Appreciative posts trickled in about the strategic foresight of Microsoft to invest $1 Bn in OpenAI, the benefits of which the company can now reap. It was reported in Jan 2023 that Microsoft is planning to bring chatGPT in its Office Suite and the search engine Bing.

On Monday 6th February, Google announced – Bard, an AI chatbot to take on the potential threat posed by the chatGPT.

Bard, so named because it is a storyteller according to Google, is based on experimental technology called LaMDA, short for Language Model for Dialogue Applications, which Google has been testing inside the company and with a limited number of outsiders for several months.

Sundar Pichai, CEO of Google, explained in a blogpost – “Bard seeks to combine the breadth of the world’s knowledge with the power, intelligence and creativity of our large language models. It draws on information from the web to provide fresh, high-quality responses. Bard can be an outlet for creativity, and a launchpad for curiosity, helping you to explain new discoveries from NASA’s James Webb Space Telescope to a 9-year-old, or learn more about the best strikers in football right now, and then get drills to build your skills.”

He further elaborated on Google’s longterm AI strategy – “Two years ago, we introduced MUM, which is 1,000 times more powerful than BERT and has next-level and multi-lingual understanding of information which can pick out key moments in videos and provide critical information, including crisis support, in more languages.

Now, our newest AI technologies — like LaMDA, PaLM, Imagen and MusicLM — are building on this, creating entirely new ways to engage with information, from language and images to video and audio. We’re working to bring these latest AI advancements into our products, starting with Search.”

On Wednesday, Microsoft announced the incorporation of ChatGPT’s capabilities into its search engine Bing to be made publicly available. CEO Satya Nadella opined on the launch event – “AI will fundamentally change every software category, starting with the largest category of all – search, “Today, we’re launching Bing and Edge powered by AI copilot and chat, to help people get more from search and the web.”

Which technology is superior – Google’s Bard or Microsoft backed OpenAi’s chatGPT? This has become the major discussion point on social media. Tech geeks, on either side of the divide, have claimed their respective victories.

The services of ChatGPT and Bard will be similar, with users typing in a query to receive a human-like response. The difference would be on the underlying data source on which they have been trained. Google of course maintains the most up to date record of web content on Earth, and no doubt Bard will be using that information to its benefit, but exactly how it processes and packages that information would become clear once people start using it.

From a startup ecosystem perspective, it reaffirmed the exponential scalability of a robust innovation. A relatively unknown tiny startup OpenAI managed to decisively leapfrog and become synonymous with AI technologies, which Google had pioneered in the past.

As this article argues about openAI’s success – “The short explanation is that tech moves fast and big companies move slow, and while Google released paper after paper and tried to figure out how to fit AI into its existing business strategies, OpenAI has focused on making the best models and let people figure out their own applications”

Exciting times never end in the startup world.

Startup Funding Summary

Mensa Brands, Bengaluru-based D2C house of brands startup, has raised $36 Mn in a funding from TradeCred – Read More

Entropik, Bengaluru-based AI-integrated market research platform, has raised $25 Mn in Series B funding from Bessemer Venture Partners, SIG Venture Capital, Trifecta Capital, Alteria Capital and Bharat Innovation Fund – Read More

Zypp, Gurugram-based EV-as-a-service platform, has raised $25 Mn in Series B funding from Gogoro, Goodyear Ventures, 9Unicorns, WFC, Venture Catalysts, LetsVenture, IAN, IVY Growth, Grip, global impact fund IIX and other HNIs – Read More

Simple Energy, Bengaluru-based EV startup, has raised $20 Mn in a funding round from Dr Arokiaswamy Velumani, Ashwin Hinduja, Sanjay, Sandeep Wadhawa, Sripriya Kalyanasundaram, Lambda Test, Purple Moon Ventures, Manish Bharti and Vasavi Green Tech – Read More

Bluelearn, Bengaluru-based edtech startup, has raised $4 Mn in Seed funding from Elevation Capital, Lightspeed, Titan Capital, 2AM VC, Vidit Aatrey and Sanjeev Barnwal – Read More

M&A Snippets

Bengaluru-based financial services provider Siply has acquired Hyderabad-based digital savings app myPaisaa for $8 Mn – Read More

Bengaluru-based healthtech startup MediBuddy has acquired New Delhi-based wellness and fitness startup vHealth for an undisclosed amount – Read More

Mumbai-based music company Warner Music India has acquired Chennai-based digital media & music company Divo for an undisclosed amount – Read More

Market lessons from Hindenburg vs Adani

February 5, 2023

In this edition let us analyse the biggest news of the week – Adani Enterprises Ltd (AEL) calling off their ~₹20k Cr follow-on public offer (FPO). Let us recap the facts.

A publicly listed company raising funds through fresh equity is termed as a FPO. Market watchers had long expected an Adani FPO, as a strategic move to monetise on the dream rally Adani stocks have had in the past 2.5 years. In Mar 2020 AEL stock was trading at ₹128 which had reached ₹3903 on 25th Nov 2022. A valuation jump (price/earnings ratio) from ~12x to 361x. Even best performing tech companies cannot command such valuations.

Banking on this market-defying performance, AEL (incubator company of many of the Adani businesses) had announced its FPO of $2.4 Bn last November, which opened for subscription on 27th January with a price band of ₹ 3100-3300. As per the market reports, ~50% of 2.4 Bn was earmarked for retail investors, ~21% for Non-institutional investors (NII), ~28% for Qualified Institutional Investors (QIB) and a small portion for Adani group employees.

On 24th January, US short-seller Hindenburg Research published a report accusing the Adani Group of stock-price manipulation and accounting fraud for decades. Short-sellers aim to profit from overvalued stocks by betting on their imminent fall in stock price. They announced the seven key listed Adani companies have a significant downside of 85% due to over valuation.

First, Hindenburg alleged ‘Stock Parking’ by the Adani group. Stock Parking is the illegal practice of selling shares to another party with the understanding that the original owner will buy them back after a short time. The goal of parking is to conceal a stock’s real ownership while maintaining the appearance of regulatory compliance.

Indian Securities Regulator SEBI’s rules require a minimum public shareholding of 25% in listed companies to ensure a minimum level of liquidity, to reduce insider trading, market manipulation, and to minimize volatility.

Hindenburg produced a list of suspected offshore funds & shell companies closely linked to Adani group that own stock in the listed companies which effectively breaches the 25% public holding rule.

The report alleges this mechanism is affected by diverting funds from listed Adani companies to Adani family private offshore trusts & companies. These trusts & companies, helmed in most of the cases by Gautam Adani’s elder brother Vinod Adani, redirect the funds to Mauritius based shell entities which then invests or trades in Adani group stocks. Hindenburg lists 5 such funds with cumulative assets over $8 Bn almost exclusively invested in Adani group stocks.

Hindenburg Research alleges that suspected stock parking entities have accounted for as high as 30-47% of the ‘Delivery Volume’ in Adani stocks, suggestive of circuitous trading and manipulation. Delivery volume refers to the number of shares that are traded over a given period of time. It simply shows the level of participation (interest) of the market participants at a particular price point.

Second, Hindenburg Research alleges that capital is moved from offshore entities to private Indian companies in Adani group often through ‘undisclosed related party transactions’ which are violative of the law. Capital is then transferred to the listed companies, in order to make them appear more creditworthy or solvent.

Third, Hindenburg Research alleges that AEL lacks robust financial checks & controls, expected of a conglomerate of such global size. This is reflected in lack of credible independent auditors, lack of stability in the CFO role (5 changes in last 8 years).

Fourth, the report points out that investment banks and professional investors have steered clear of Adani listed companies. Despite Adani listed companies featuring in domestic and overseas indices, no active local fund owns Adani Green, Adani Enterprises, Adani Total Gas or Adani Transmission above 1% of equity, according to shareholding disclosures.

Fifth, the report also brings about the historical cases, inquiries initiated against the Adani group leadership team members for financial impropriety, and ends with a pointed list of 88 questions for clarification.

On 25th January, stock prices of all Adani listed companies plummeted and continued their free-fall in the following days. Adani group fervently rejected all the accusations by projecting a nationalist posture and ascribing all allegations as a conspiracy.

The FPO was fully subscribed due to oversubscription by QIBs and NIIs. Expectedly, retail investors stayed away with only a 12% subscription of their earmarked share.

But global finance is an interconnected world. The repercussions of the Hinderberg Report went beyond the FPO with global media outlets turning their gaze on the Adani group. Credit Suisse halted accepting Adani linked bonds as collateral. One of the Dow Jones indices, decided to drop AEL from its index. Demands for a regulatory probe became loud in India.

On 1 Feb, AEL in its wisdom decided to scrap the FPO and announced to return the proceeds claiming to respect investor sentiments. As I write, the stock surged 21% on Friday. But this issue goes beyond what ultimately happens to the stock prices of Adani listed companies.

The long-term significance lies in how big business relations with the government are structured in India. It would be in the best interest of all Indians that we evolve towards a pro-market rather than a pro-corporate economy.

By pro-corporate I mean, the widespread perception that select big business houses get preferential treatment either through government actions or deliberate inactions.

Markets function on trust. Efficient markets lead to economic growth which leads to equitable prosperity in the long term. Cutting edge research, innovations and startups are more likely to emerge and scale in efficient markets.

Role of the state should be of a neutral enabler rather than a selective arbiter for few. This is best ensured through various independent regulatory institutions and a vibrant media.

Ecosystem Ventures This Week

Key Highlights – Events

We are pleased to announce that Ecosystem Ventures had the inaugural pitch event of 2023 this week, where two of our shortlisted startups pitched to more than 60 angel investors, who joined either remotely or graced our office with their presence.

To view our active deals visit here.

Startup Funding Summary

Enzene Biosciences, Bengaluru-based biotech company, has raised $50 Mn in a funding from Alkem Laboratories, Eight Roads Ventures and F-Prime Capital – Read More

Freightify, Chennai-based freight rate management SaaS platform, has raised $12 Mn in Series A funding from Sequoia Capital India, TMV, Alteria Capital, Nordic Eye Venture Capital and Motion Ventures – Read More

CapGrid, Gurgaon-based B2B cloud manufacturing startup, has raised $70 Mn in a funding round from Nexus Venture Partners, Axilor, Anicut Capital and Deepak Jain – Read More

The Esports Club, Bengaluru-based gaming marketing services provider, has raised $3 Mn in a funding from KOMLAY Group and SAMBAVANATH Group – Read More

Saarthi Pedagogy, Ahmedabad-based edtech startup, has raised $1 Mn in Series A funding from GVFL Limited and Pinnacle Investments – Read More

M&A Snippets

Bengaluru-based IT service assistance provider ReadyAssist has acquired Vadodara-based two-wheeler servicing firm SpeedForce for $10 million – Read More

Hard Work or Harvard?

January 29, 2023
I wish you had a great Republic day celebration.
 
The English word ‘republic’ is derived from Latin – ‘res publica’, the public thing. This translates in the political domain into decision-making in the open, in full view of all. It follows that informed, vigilant, and articulate citizens are the foundations of an ideal republic. Universities, through good quality education, are expected to nurture such citizens.
 
In this edition, let us touch upon one of the forthcoming policy changes in higher education, which has been widely discussed in the past weeks.
 
Earlier this month, University Grants Commission (UGC), apex body regulating the universities in India, released the draft guidelines to allow foreign universities in India. Thus, we would have the likes of Harvard & Cambridge University to open their campuses in India.
 
First, it is important to acknowledge the sad reality that Indian universities, whether public or private, do not feature in the top global rankings. Second, we often create a false equivalence between the premium standalone technology or management institutes (IITs/IIMs) and the top ranking universities from abroad. Harvard university is much more than the Harvard business school. A world class university has high ranking departments, schools across disciplines.
 
This leads us to a set of fundamental questions –
1. What goes into making a world class university? 
2. Why would the best known universities of the world open their campuses in India? 
3. Why has India been unable to create public or private universities, which could become the default low-cost destinations for higher education in the world?
 
First, a world class university marries teaching with research. Unit economics for a full-fledged Ivy League university campus are not likely to work in India. Funding research is a long drawn process with no immediate return on investment. Most of the foreign universities receive state subsidies and grants as fees alone cannot support the research.
 
Moreover, in its guidelines UGC has allowed repatriation of profits made in India. Hence there exist no structural reason for long term investment in research. Most likely, a ‘center’ offering a couple of professional courses (such as MBA) might be replicable but not a campus offering research across various disciplines.
 
Second, there seems to be no economic or lifestyle incentive for top-notch exceptional faculties from abroad to shift their base to India unless their existing salaries are matched or exceeded.
 
Third, only a small segment of the Indian consumers can afford foreign education. Incentive to go abroad is partly cultural as well, to experience life and network beyond India. Would the price differential in Indian campuses be significant enough to forgo non-financial incentives? To flip the question – If IIM A opens a campus in another Indian city, e.g. IIM A Bhopal. Would people who can afford IIMA originally switch to IIMA Bhopal? The cultural vibe and ethics of the original university are hard to replicate elsewhere.
 
Fourth, it would be quite paradoxical of UGC which is pushing for standardization in entrance, assessments, and syllabi across public universities to create exceptions for campuses of foreign universities which thrive on their autonomy and diversity.
 
Data seems to suggest full-fledged foreign campuses of best known universities are hard to find, except for a couple of exceptions.In this C-BERT database of foreign campuses, we do not see names of the biggest brands – such as Stanford, Oxford, Princeton etc. You may find one off ‘centre’ or ‘school’ but not full campuses.
 
The third question – why are there no world-class Indian universities? – is more significant than foreign universities opening campuses in India. It would be in the national interest that the startup and investor community reflects on it. It appears we do have the intent and a community of financially capable entrepreneurs who can establish low-cost world class universities.
 
The most likely reason lies in the complex and bureaucratic regulatory system of higher education in India. On one hand it has deteriorated public universities beyond repair and not incentivised quality private universities to flourish on the other. 
 
It remains to be seen which universities finally arrive in India but let us strive to do ‘hard-work’ to create world class Indian Universities which would nurture our republic and become the next “Harvard’ for the world to look upto. 
 
Jai Hind!
Startup Funding Summary
Log9, Bengaluru-based nano-materials manufacturer and RnD startup, has raised $40 Mn in Series B funding from Amara Raja Batteries, PETRONAS Ventures, Incred Financial Services, Unity Small Finance Bank, Oxyzo Financial Services and Western Capital Advisors – Read More
Ecozen, Pune-based deep tech startup, has raised $25 Mn in Series C funding from Nuveen, Dare Ventures, India EXIM Bank, Caspian and Hivos-Triodos Fonds – Read More
FuelBuddy, New Delhi-based mobile energy distribution platform, has raised $20 Mn in a funding round from Jindal Power Limited, RJ Corp, and Nilesh Ved – Read More
Rigi, Bengaluru-based community management platform, has raised $12 Mn in Series A funding from Elevation Capital, Accel, Stellaris, Sequoia, Mahendra Singh Dhoni, Kunal Shah, Amit Agarwal, Chakradhar Gade, Sharan Hegde and other HNIs – Read More
Landeed, Bengaluru-based proptech startup, has raised $8 Mn in Seed funding from Draper Associates, Y Combinator and Bayhouse Capital – Read More
M&A Snippets
Bengaluru-based IT services firm Happiest Minds has acquired Madurai-based IT services company Sri Mookambika Infosolutions for $14 Mn – Read More
Pune-based gaming and entertainment firm JetSynthesys has acquired US-based media and entertainment company Fanory for an undisclosed amount – Read More
New Delhi-based online travel company Easy Trip Planners has acquired Hyderabad-based hotel booking platform cheQin for an undisclosed sum – Read More
Noida-based fintech company Pine Labs has acquired Bengaluru-based enterprise platform Saluto Wellness for an undisclosed sum – Read More

Competition Commission of India’s penalty on Google India

January 15, 2023
In this edition we would briefly discuss the widely reported news of Competition Commission of India (CCI) imposing penalties on alleged anti-competitive practices of Google India.
 
CCI was established after the enactment of Competition Act, 2002 which mandates CCI to promote and sustain an enabling competition culture through engagement and enforcement that would inspire businesses to be fair, competitive and innovative; enhance consumer welfare; and support economic growth.
 
In Oct 2022, on an appeal filed by three advocates in 2018 against Google India, CCI had passed two orders imposing penalties on Google. First order of Oct 20, with a fine of ~1337 Cr, relates to the anti-competitive practices with respect to Android (mobile operating system). Second order dated 25 Oct, with a fine of 937 Cr, alleges Google abusing its dominant position by way of its Play Store policies and asked Google to cease its “abusive” practices.
 
Google’s Android is the dominant operating system for smartphones in India with over 95% market share. As per the complaint to CCI, smartphone manufacturers (OEMs) have no choice but to agree to Google Mobile services (GMS) through which proprietary applications & services such as Google search, Google Chrome & Youtube come pre-installed on the device which cannot be removed. Such conduct was claimed to have hindered the development and market access of rival mobile applications or services.
 
In the second case, Google, through its control over the Play Store, is favouring Google Pay over other competing apps, to the disadvantage of other UPI apps and end users. In simple terms, apps have to necessarily enable their in-app purchases through Google Pay services only. This amounts to abuse of its dominant position by Google.
 
Google challenged both of these CCI orders in the appellate authority – The National Company Law Appellate Tribunal (NCLAT). NCLAT declined to provide interim relief to Google, following which Google has approached the Supreme Court which would listen to its plea on Monday 16 Jan 22.
 
Meanwhile through a comprehensive blog post, Google initiated its public communication exercise where it emphasised on the significant role Google and its products have played in ushering digital transformation in India.
 
“Over the last 15 years, through Android’s free open source software and suite of high quality apps, Google has helped device manufacturers make smartphones more affordable by a vast margin. Today, any user can get their hands on a fully functional smartphone at less than Rs. 6000 from numerous brands.”
 
Secondly, on impact of the CCI orders, Google has argued – “As we look beyond the estimated 700 million users who are already online, safety, affordability and expanded use cases for the next wave of users will be the pillars that will determine digital adoption. Unfortunately, the ordered remedies on Android strike blows to these very areas’’.
 
In other words, Google is making an argument against the CCI orders on increased security risks due to multiple unique android versions (called forks), lesser smartphone affordability due to increased software development costs, and higher user exclusion due to higher cost for app developers.
 
It is worth noting that, as brought about in this insightful piece, mobile broadband users through smartphones in India have plateaued. After a burst of rapid growth in the earlier half of last decade, it has become stagnant.
 
This leads to expanding the existing monetisation opportunities from the crowded top of the bracket 10 Mn indian internet users. E.g. in yet another news from last month, Google is set to launch Youtube Courses, a structured learning experience on Youtube, in direct competition to ed-tech apps. Thus, if Google apps are pre-bundled and configured in the device, it creates an unfair advantage for market access for others.
 
It would be interesting to see how the Supreme Court leans on this issue which would have bearing on the startup ecosystem.
Ecosystem Ventures This Week
Key Highlights – Events
We are happy to share that Mr. Abhishek Sanghvi, Mr. Abhijeet Bhandari (Partners, Ecosystem Ventures) and Mr. Shailesh Jain (VP, Ecosystem Ventures)  participated in the 17th Pravasi Bharatiya Sammelan and Global investor meet 2023, held in Indore.


Startup Funding Summary

Wakefit.co, Bengaluru-based furniture and fixture improvement brand, has raised $40 Mn in Series D funding from Investcorp, Sequoia Capital India, Verlinvest and SIG – Read More

LEAD, Mumbai-based edtech startup, has raised $20 Mn in series C funding from Stride Ventures, Alteria Capital, Standard Chartered Bank, HDFC Bank and ICICI Bank – Read More

Toddle, Bengaluru-based edtech startup, has raised $17 Mn in Series A funding from Sequoia Capital India, Tenacity Ventures, Trifecta Capital, Matrix Partners, Beenext and Better Capital – Read More

Park+, Gurugram-based car owners-focused app, has raised $17 Mn in Series C funding from Epiq Capital, Matrix Partners India and Sequoia Capital India – Read More

ApnaKlub, Bengaluru-based B2B wholesale firm, has raised $16 Mn in Series A funding round from TrueScale Capital and ICMG Partners – Read More

M&A Snippets

US-based private equity firm Carlyle has acquired Bengaluru-based beauty and personal care entity VLCC for $300 Mn – Read More

Bengaluru-based D2C brand aggregator Goat has acquired Bengaluru-based home and lifestyle brand Chumbak for an undisclosed amount – Read More

New Geo-spatial policy as an enabler for startups

January 8, 2023

In this edition we would briefly discuss the new geo spatial policy notified by the Government of India on 28 Dec 2022. The policy has been commended by the sector stakeholders and may usher innovation in Geo-spatial based products & services for India and the world.

The policy builds on the Feb 2021 document titled ‘Guidelines for acquiring and producing Geospatial Data and Geo-spatial Data services including Maps’. Through these guidelines GoI had defined Geo-Spatial data as any positional data with or without attribute data. E.g Positional data of any place is derived from latitude, longitude and the elevation of the place from a reference point. Attribute data is any data when associated with Positional Data gives additional meaning to it.

Historically, the most common representation of positional data has been through printed maps. For their strategic significance and perceived security risk, the production and dissemination of maps has been strictly controlled through the Survey of India, the apex organization tasked with maintaining the datasets related to Geo-spatial information.

Guidelines enable a new approach whereby – “there shall be no requirement for prior approval, security clearance, license or any other restrictions on the collection, generation, preparation, dissemination, storage, publication, updating and/or digitization of Geospatial Data and Maps within the territory of India. Individuals, companies, organizations, and Government agencies, shall be free to process the acquired Geospatial Data, build applications and develop solutions in relation to such data and use such data products, applications, solutions, etc by way of selling, distributing, sharing, swapping, disseminating, publishing, deprecating and destructing. Self-certification will be used to convey adherence to these guidelines.’

The guidelines proposed a ‘negative-list’, whereby sensitive attribute data would be put on a list, which would not be made available, unless under specific regulation, as part of Geo-spatial applications. Rest of the data is being made available to companies and individuals.

To decide as the final authority on what constitutes the negative list, the Feb 2021 guidelines envisaged formation of GDPDC Geospatial Data Promotion and Development Committee, which has now been announced in the policy document.

Furthermore the new policy outlines a vision and time-bound milestones to achieve the goals. E.g by 2025 the enabling legal framework that supports liberalization of Geospatial sector and democratization of data for enhanced commercialization with Value Added Services is expected to be put in place.

By 2030, High resolution topographical survey & mapping (5-10 cm for urban & rural areas and 50 cm-100 cm for forests & wastelands), High accuracy Digital Elevation Model (DEM) for the entire country (25 cm for plain, 1-3 meter for hilly and mountainous areas) is expected.

Similarly, by 2035, high resolution/accuracy Bathymetric (measurement of depth) Geospatial Data of inland waters and sea surface topography of shallow/deep seas – to support Blue Economy is expected.

It would be interesting to see how new startups emerge in the geo-spatial space following the liberalization of policy. One of our portfolio companies is creating value for many businesses through their location intelligence platform. You may explore more about them here.

Startup Funding Summary

KreditBee, Bengaluru-based fintech startup, has raised $100 Mn in Series D funding from Advent International and Avendus Capital – Read More

SarvaGram, Mumbai-based financial service provider, has raised $35 Mn in series C funding from Elevar Equity, Elevation Capital, Temasek and TVS Capital – Read More

VilCart, Bengaluru-based rural commerce startup, has raised $13 Mn in Series A funding round from Asia Impact, Nabventures Fund and Texterity – Read More

Jupiter, Mumbai-based fintech startup, has raised $12 Mn in a funding from Alteria Capital – Read More

Varthana, Bangaluru-based NBFC startup, has raised $7 Mn in a funding from MicroVest – Read More

M&A Snippets

Mumbai-based fintech startup InCred Capital has acquired Mumbai-based wealthtech startup Orowealth for an undisclosed amount – Read More

Noida-based travel and hospitality services provider RateGain will acquire California-based data exchange platform Adara for $16 Mn – Read More

Ghaziabad-based FMCG Company Dabur India has acquired Mumbai-based spices maker Badshah Masala for $71 Mn – Read More

Being resolute on resolutions!

January 1, 2023

It is quite refreshing and motivating to write to you on the morning of Sunday, 1 Jan 2023. It is likely that I am adding to a long list of good wishes, and promotion messages which have filled our social feeds and inboxes. Hence, I wish to keep this short.

Let me share one of the key learnings from past months which relates to the flavor of the day – New year resolutions!

We tend to make new-year resolutions personally. But more often than not the resolutions are indirectly dependent on external factors. E.g. in personal life, taking time out for yourself is contingent on the roles and responsibilities with respect to the immediate family.

Thus for resolutions to succeed, an enabling environment beyond personal determination might be required. In management lingo, we can think of resolutions as ‘change management’.

Change management is a painstakingly slow and often frustrating exercise. As you are aware we have three aspects to our business – deploying our prop capital in early stage startups, being investment bankers to do fund-raise for growth stage startups, and being founders’ trusted confidante through our strategic consulting initiatives.

Long term consulting invariably happens to positively influence the first two aspects related to fund-raise. But the key challenge in long term consulting with a startup is nothing but change management. Striving balance between the well-entrenched org culture and motivations of a talented team on one hand and the key financial/ operational metrics, if conquered soon, which may propel a startup in the next league, is not an easy task.

Making startup team members incrementally cognizant and mature about their daily/weekly /monthly ‘small resolutions’, in the form of processes and systems, and simultaneously keeping the big picture in our resolutions, is the way forward.

We call this a ‘growth oversight framework’ and I am pleased to share that from Jan 2023 we are implementing this framework for change management in our long-term consulting projects. If you are interested in driving change management in your organization, I would be more than happy to share the change management template with you.

My best wishes to you and your family for a prosperous year ahead. May 2023 be the year for resolute resolutions.

Ecosystem Ventures This Week

Key Highlights – Events

We are glad to share that, this week we celebrated “Zayeka 2k22”, an annual Food Fest organized by iLead Group (Parent Company of Ecosystem Ventures). It brings all of us to celebrate the togetherness of being part of one big family. It is a good fun activity through which everyone gets to interact with each other interdepartmentally and participate in various activities.

Startup Funding Summary

Money View, Bengaluru-based fintech startup, has raised $75 Mn in Series E funding from Apis Partners, Tiger Global, Winter Capital and Evolvence – Read More

Eduvanz, Mumbai-based fintech startup, has raised $13 Mn in a funding from Rethink Education, Sequoia Capital, Juvo Ventures and Unitus Ventures – Read More

Ecozen, Pune-based agritech startup, has raised $10 Mn in Series C funding from Nuveen Global Fund – Read More

Rebel Foods, Mumbai-based foodtech startup, has raised $7 Mn in Debt funding from existing investors – Read More

GearHead Motors, Hyderabad-based e-bike startup, has raised ~$1 Mn in Pre-Seed funding from Hemin Shah and Sudhakar Moparthy – Read More

M&A Snippets

Boston-based private equity firm Advent International will acquire Hyderabad-based pharmaceutical manufacturer Suven Pharmaceuticals for $763 Mn – Read More

Impact of recessionary fears in US on capital flows to India

December 25, 2022

Nearly all major US stock markets declined around 2% last week on the probable fears of an impending recession. The YTD index returns on NASDAQ and S&P 500 stand at -30% & -17% respectively. In this newsletter we would simplify the concept of recession and the likely impact of recession in the US has on capital flows in India or the world economy in general.

Stock market movements are a signal of how investors perceive the near term economic prospects. Latest inflation figures or a less business friendly comment from a minister may lead to stock market decline. But it is not a macroeconomic indicator to qualify a recession.

Expansion is the opposite of recession. During expansion the economy grows. Recessions are brief and episodic whereas expansion is the natural state of any economy. If we drill down, there is a concept of ‘Recession’ and ‘Technical recession’. Economy is said to be in a technical recession when it contracts consequently for two quarters. The indicator used for measuring the economy is the GDP. Thus, for example, if GDP had contracted by 4% and 3% in the first two quarters of FY23, then the economy is considered to be in a technical recession. The US economy has grown in Jul-Sep 22 quarter thus it would not be considered in technical recession.

But when we use the term recession, it becomes more subjective as different apex national agencies (which collect, analyse, publish official economic statistics) define recession differently. In the US, the National Bureau of Economic Research (NBER) defines recession as

“a significant decline in economic activity that is spread across the economy and lasts more than a few months.” “The committee’s view is that while each of the three criteria—depth, diffusion, and duration—needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another,”

Thus, it is a subjective assessment based on their reading of objective figures. NBER would take into account not only GDP (de)growth but a host of other macroeconomic indicators and hasn’t declared that the US is in a recession as of now.

The present public discussions stem from the fact that a set of lawmakers and business leaders are unconvinced about the US Federal Reserve’s (central bank) continued stand of maintaining high interest rates to curb historically high inflation rate and bring down price levels. Thus, they would argue recession is being induced by the Fed’s actions.

Since, the US is the world’s dominant economic power, irrespective whether recession is declared or not, a slowdown in the US impacts the world economy at large, India being no exception. Hence, investment inflow is likely to reduce. Opening lines of RBI’s December monthly bulletin on state of the economy attest this –

‘The balance of risks is increasingly tilted towards a darkening global outlook and emerging market economies (EMEs) appear to be more vulnerable, even though incoming data suggest that global inflation may have peaked.’

As per the official RBI figures upto Oct 2022, there was net foreign investment outflow of $623 Mn in Sep 22 whereas a net inflow of $3.3 Bn in Oct 22. When compared YTD, net inflow for Apr-Oct 22 stood at $14.8 Bn, around 37% decline from Apr-Oct 21. If we look historically, the last major recession in the US, during the financial crisis of 2008, foreign investments to India declined by over 30% in 2008-09.

It would be interesting to follow the figures in coming months as macroeconomic conditions in the US become less ambiguous and we have a definitive answer on the duration and intensity of the economic slowdown.

Ecosystem Ventures This Week

Key Highlights – Events

‘Stay Hungry Stay Foolish’ team at ESV tried to ‘connect the dots’ while chatting with the insightful bestselling author – Rashmi Bansal (IIM A) who visited our office last week.

Startup Funding Summary

Bigbasket, Bengaluru-based online food and grocery store, has raised $200 Mn in a funding from Tata Digital – Read More

Tredence, Bengaluru-based online global data science and AI solutions company, has raised $175 Mn in Series B funding from Advent International – Read More

Aquaconnect, Chennai-based platform for aquaculture farmers, has raised $15 Mn in Series A funding from Lok Capital, Louis Dreyfus Company Ventures, Suneight Investment, Omnivore, Rebright Partners, Flourish Ventures, HATCH and Other HNIs – Read More

TruCap Finance, Mumbai-based financial service provider, has raised $13 Mn in a funding from Zeal Global Opportunities Fund – Read More

CollegeDekho, Gurugram-based edtech startup, has raised $9 Mn in Series B1 funding from Winter Capital Partners – Read More

M&A Snippets

Mumbai-based conglomerate company Reliance Industries will acquire Germany-based B2B wholesaler Metro Cash & Carry India for $344 Mn – Read More

Noida-based edtech firm PhysicsWallah has acquired Bengaluru-based edtech startup iNeuron Intelligence for $30 Mn – Read More

Gurugram-based logistics company Delhivery will acquire Pune-based logistics company Algorhythm Tech for $2 Mn – Read More

The implication of Paytm buying back its shares at a premium

December 18, 2022

In this edition we would explore one of the major news of the week, the buyback of shares by Paytm.

Paytm, best-known as a wallet & payments app over UPI platform, is one of the earliest fintech unicorns from India. Over the years the company has tried to venture into ecommerce, financial services & banking with limited success. Paytm’s pivotal moment occurred on 8 Nov 2016 when the government surprisingly announced ‘demonetisation’ of higher denomination currency notes. Within the next two weeks Paytm boasted of over 50 million app downloads, app availability in five new regional languages, and positioned itself as the torch bearer of enabling a cashless digital economy in India.

Paytm had last raised $1bn at a valuation of $16 bn in 2019. T Rowe Price, along with Discovery Capital and D1 Capital had put in about $400 million, while existing investors SoftBank and Ant Financial had put in $200 million and $400 million respectively.

In Nov 2021 Paytm had launched India’s largest IPO with an issue size of ₹18300 crores. The IPO price band was fixed at 2050-2180 per share. The stock has been one of the worst performers among recent large initial public offerings (IPOs) and has eroded 75% of investors’ wealth. In the last one year, shares have delivered a negative return of ~64% to its shareholders, while it has dropped 12% in the past six months and 16% in a month. The stock hit an all-time low of ₹439.60 on November 24, 2022, while it touched a record high of ₹1,961.05 on its listing day.

In addition, earlier this month, Reserve Bank of India (RBI) refused to grant payment aggregator license to Paytm’s subsidiary, Paytm Payments Services Limited (PPSL). The RBI has asked PPSL to re-submit its application. The central bank has also barred PPSL from onboarding new online merchants.

It is under this larger context the share buyback plan must be seen. Paytm has announced a buy back scheme worth ₹850 crore at ₹810 a piece, a premium of 50% as compared to the current market price of ~₹540 on the BSE. This would be enabled through the open market route via the stock exchange method and the process is expected to be completed in a maximum of six months.

Buybacks are seen as a way by the company to reward its shareholders. The repurchase of stocks from the shareholders would reduce the number of existing shares and push the price upward.

Though, market participants were unconvinced about the buyback method. Under the open market method, a company buys back shares through the market and therefore, shares can be purchased at any price up to the cap provided by the company. This is different from the tender route, wherein shareholders can tender their shares for buyback at the fixed price set by the company. Also, in the tender route 15 % of buy-back shares are reserved for retail investors whereas no such condition exists in the open market route.

Analysts are also divided on the objective of a loss making company like Paytm utilising its cash to repurchase the shares. Initial market response was tepid as on the day of the announcement share price dropped by ~2.6%.

Paytm stock performance post IPO highlights the differing set of challenges faced by startups in the open market as compared to the private venture capital world. Soundness of a company’s financials is bound to be scrutinized to a much greater degree in the open market, whereby managing investor sentiment becomes a difficult task.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that Mr. Abhishek Sanghvi (Partner, Ecosystem Ventures) has participated as an investor at the TiE Global Summit 2022 event, held in Hyderabad.

TiE Global – The Indus Entrepreneurs is the single largest non-profit organization in the world devoted to fostering entrepreneurship through networking and bringing VCs and startups together.

Startup Funding Summary

Virgio, Bengaluru-based fashion tech startup, has raised $37 Mn in Series A funding from Prosus Ventures, Accel and Alpha Wave – Read More

NeoGrowth, Mumbai-based fintech startup, has raised $36 Mn in a funding from FMO and other HNIs – Read More

myTVS, Chennai-based automobile aftermarket player, has raised $25 Mn in Series C funding from Exor fund – Read More

82°E, Mumbai-based self-care brand, has raised $8 Mn in Seed funding from DSG Consumer Partners, IDEO Ventures and other HNIs – Read More

SafeHouse Tech, New Delhi-based cybersecurity startup, has raised $6 Mn in Pre-Series A funding from Gonpo Tsering and other HNIs – Read More

M&A Snippets

US-based financial service provider TPG has acquired Pune-based financial service provider Poonawalla Housing Finance for $471 Mn – Read More

Mumbai-based pharma company JB Pharma has acquired Mumbai-based pharma company Glenmark Pharmaceuticals for $38 Mn- Read More

Mumbai-based food and beverage company Hindustan Foods has acquired Himachal Pradesh-based conglomerate company Reckitt Benckiser Health India for $19 Mn – Read More

Kolkata-based cement brand Dalmia Cement will acquire Istanbul-based construction company Clinker for an undisclosed amount – Read More

Kolkata-based machinery manufacturer Ramkrishna Forgings has acquired Delhi-based EV startup Tsuyo Manufacturing for an undisclosed amount – Read More

Have you chatted with ChatGPT yet?

December 11, 2022

We had closed the 15th Oct edition of this newsletter, where we were discussing AI, with the following lines –

“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.

It appears reality may arrive sooner than we might have expected because on 30th Nov, Open Ai, an AI research & deployment company, launched their AI Chat bot named ChatGPT for public use. The bot takes human inputs in the form of questions and statements to generate human-like text responses, The tool has already garnered over million users, who are simultaneously amazed, excited and feel threatened as social media, especially twitter, is abundant with screenshots of responses received by coders, writers, academics, who had put it to test.

Given the buzz, I tried to test it myself, with the wish I have posted above. After couple of input iterations, following was the response generated by chatGPT –

Dear Startup Community,

As we celebrate the festival of Diwali, the festival of lights, I wanted to take a moment to wish you all prosperity and happiness. May the light of this joyous occasion shine brightly on your businesses and ventures, bringing success and growth.

As members of the startup community, we are always striving to innovate and push the boundaries of what is possible. May this Diwali bring you new ideas and the determination to bring them to life. May it also bring you the support and collaboration of your fellow entrepreneurs, so that together we can create a brighter future.

Here’s to a Diwali filled with fireworks, sweets, and, most importantly, the spark of entrepreneurship. Happy Diwali!

Best regards, [Your Name]

I leave it to your judgment whether the above response passes the Turing test. Alan Turing, the famous computer scientist, in the 1940s had proposed a test for assessing AI. in simple terms, the Turing test is – Can a human judge conversing with a human and with a computer tell which is which? You may try ChatGPT yourself here.

The full form of ChatGPT is Chat – Generative Pre-trained Transformer. More accurately, it is an application based on a language model, being refined by OpenAI since its first launch in 2018. A language model is a software that prints out a sequence of words as output that are related to some words given as input with appropriate semantic relation.

ChatGPT is also a neural network. Simplistically, a neural network would be a large network of computers that can fine tune its output of words based on the feedback given to it during the stages of training. These networks have refined over time significantly. E.g. If we recall early computer generated translations, often the words were translated without context, often resulting in hilarious nonsense. This was overcome with a further refining technique called “Transformer”, through which a neural network can accurately “understand” the context of a sentence or a paragraph. This refined “comprehension” can be used for multiple purposes like answering a question, summarising a paragraph or an article.

One of the most talked about advantages or possibilities of ChatGPT is – whether it is the next big thing in internet search? Or in other words can it be an alternative to Google? The reason being we do not receive contextual answers when we search on Google. What we end up receiving is a list of often irrelevant links to pages which would not solve our pointed query. That is not to say Google does not have a language model of its own but ChatGPT is much more conversational.

The most significant limitations of ChatGPT have been clearly outlined at OpenAi page itself which everyone should read –

‘ChatGPT sometimes writes plausible-sounding but incorrect or nonsensical answers. Fixing this issue is challenging, as: (1) during RL training, there’s currently no source of truth; (2) training the model to be more cautious causes it to decline questions that it can answer correctly; and (3) supervised training misleads the model because the ideal answer depends on what the model knows, rather than what the human demonstrator knows.’

For all of its limitations, generative AI is here to stay. The key takeaway for startups is that applicability and usage of AI, might be dependent on easy to use human-centric conversational interfaces rather than robustness of the underlying complex models.

Ecosystem Ventures This Week

Key Highlights – Events

We are happy to share that Mr. Shailesh Jain (VP, Ecosystem Ventures) was a part of a panel discussion as a moderator at the PRARAMBH event, a Start-up summit 2022 where 10 shortlisted startups across India pitched to the panel, organized by AIC-Prestige, held in Indore.

Startup Funding Summary

Renee Cosmetics, Ahmedabad-based makeup brand, has raised $25 Mn in Series B funding from Evolvence India, Edelweiss Group, Equanimity and 9Unicorns – Read More

Vidyut, Bangalore-based EV financing startup, has raised $4 Mn in a funding from Force Ventures, Veda VC, Sujeet Kumar, Sahil Barua, Kunal Shah, Sriharsha Majety and Rajat Verma – Read More

Accacia, Gurgaon-based real estate platform, has raised $3 Mn in Seed funding from B Capital Group, Accel, Blume Ventures, Good Capital, Zerodha’s Rainmatter Fund, Loyal VC and other HNIs – Read More

AlgoBulls, Mumbai-based retail stock-trading platform, has raised $2 Mn in Pre-Series A funding from Venture Catalysts, DSP Group, Findoc Finvest, Nitin Shahi, LetsVenture, Dishant Milan Parikh, Yuvraj Thakker, Sharath Kumar and other HNIs – Read More

Mabel, Bangalore-based jewellery marketplace startup, has raised $2 Mn in Seed funding from Whiteboard Capital, Sauce VC and Incubate Fund – Read More

M&A Snippets

Gurgaon-based food and beverage company Biryani By Kilo has acquired Mumbai-based food and beverage startup Get-A-Whey for $2 Mn – Read More

Mumbai-based consumer goods company Hindustan Unilever will acquire Mumbai-based food nutrition company Nutritionalab for $9 Mn – Read More

What is a Digital Rupee?

December 4, 2022

On 1st Dec, RBI launched the first pilot of retail digital Rupee (e₹-R) in select cities with a closed user group of individuals and merchants. In this newsletter we would discuss the salient features of digital Rupee.

Digital Rupee or e₹ is a centrally backed digital currency (CBDC). In other words, it is just like cash (currency notes) but in digital form. e₹ would be in the form of a digital token that represents legal tender. e₹ would have the same denomination as paper currency and coins in circulation. This means for a balance of Rs 600 you would hold eR in one of the possible combinations. E.g. – 500*1+100*1, 100*6, 200*3, 500*1+50*2 …etc. The digital wallet of the participating banks (four as of now) would allow the user to choose the denominations. Just like cash, e₹ would not earn any interest and can be converted to other forms of money such as bank deposits. Digital Rupee will be distributed through banks and accessed through a digital wallet.

The most obvious question which arises is how is e₹ in practical terms any way different from the money sitting in our UPI digital wallets which we seamlessly transfer either to peers or transact with merchants?

The key difference for e₹ is its ‘settlement finality’. In simple words, if I give cash to enable a transaction with you, it is complete then and there itself. On the other hand, if money is moved through cheques/NEFT/UPI etc, the final settlement is done at the backend by the corresponding banks. Once, I have transferred digital Rupee to you, the transaction is settled just like cash.

There are a few advantages often quoted for CBDRs. First, it may lead to reduction in currency management costs as borne by the central bank. Printing, safekeeping, transporting, issuing currency notes is an operationally complex exercise fraught with safety risks. Digital currency eliminates a lot of steps as only a unique token is to be generated digitally.

Second, is the concept of ‘programmable money’. As of now a currency holder can use the cash in any way he wants. I can either buy medicines or a lottery ticket. On the other hand, digital rupee can be programmed to be used for a limited set of transactions. The argument made is of better targeting of government spending as per the intended purpose.

Third, from the liquidity risk point of view, e₹ would be safer from bank deposits as in case the bank goes bust, only the insured portion deposit amount is statutorily made available to the depositor but since e₹ are digital cash, they have no such risk.

Any advantage should be weighed against the potential of its misuse. It is still a long way for digital transactions to be as ubiquitous as cash transactions, since a substantial portion of the Indian population is still new to it.

The second likely risk is the security of digital transactions and loss of anonymity. Big business and Government inevitably emphasize on centralised systems for want of greater efficiency and control respectively. This is often achieved at the expense of sacrificing individual privacy and autonomy. The biggest advantage of physical cash is its anonymity, whereas any digital transaction is bound to leave a trail. If in long term, digital Rupee replaces physical cash, it leads to increased cybersecurity risk for users.

It would be interesting to see how any ecosystem of new functionalities emerge around the eR, a good opportunity for startups to make the most of it.

Ecosystem Ventures This Week

Key Highlights – Clients

We are delighted to share that we participated in the investment round of Logistics-focused SaaS-based startup “Intugine” that has raised $2.3 Mn (INR 19 Cr) in Pre-Series A funding led by Mela Ventures.

Please click here to read more about Intugine, a multi-modal visibility platform that helps the world’s largest enterprises to build resilience in their supply chains, which has helped 100+ Manufacturers, 3rd-Party Logistics, and E-Commerce companies in the past 4 years, including Flipkart, Xiaomi, Philips, Ultratech Cements, Arvind Fashion, Kuehne + Nagel, SpotOn Logistics.

Startup Funding Summary

KreditBee, Bengaluru-based fintech startup, has raised $80 Mn in Series D funding from MUFG Bank, Premji Invest, Motilal Oswal Alternates, NewQuest Capital and Mirae Asset Ventures – Read More

DeHaat, Patna-based agritech startup, has raised $60 Mn in Series E funding from Sofina Ventures, Temasek, Prosus Ventures, RTP Global India and Lightrock India – Read More

Prismforce, Mumbai-based vertical SaaS platform, has raised $14 Mn in Series A funding from Sequoia Capital India and other HNIs – Read More

MoooFarm, Gurugram-based agritech startup, has raised $13 Mn in Series A funding from Aavishkaar Capital, Accel Partners, Aditya Birla Ventures, Rockstart, Navus Ventures and Alteria Capital – Read More

Blox, Mumbai-based proptech startup, has raised $12 Mn in Series A funding from Kunal Shah and other HNIs – Read More

M&A Snippets

Bengaluru-based biosimilars manufacturing unit Biocon has acquired US-based pharmaceutical company Viatris’ global biosimilars business for $3 Bn – Read More

Hyderabad-based generic injectables maker Gland Pharma will acquire France-based pharma company Cenexi for $124 Mn – Read More

Bengaluru-based manufacturing services marketplace Zetwerk has acquired US-based manufacturing services company Unimacts for $39 Mn – Read More

Kolhapur-based FMCG enterprises Ghodawat Consumer has acquired Mumbai-based beverage startup Coolberg for an undisclosed amount – Read More

Bengaluru-based edtech startup Simplilearn has acquired US-based edtech company Fullstack Academy for an undisclosed amount – Read More

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