Few startups corner bulk of funding; RBI rule disrupts auto pay

India’s startup ecosystem is in the midst of an unprecedented funding boom, but the top two or three companies in each sector have cornered the lion’s share of investments this year, according to data sourced from Venture Intelligence.

Also in this letter:

  • New RBI rule plays havoc with auto payments
  • Tata Group tests super app in two towns
  • Good Glamm acquires ScoopWhoop

In India’s startup funding boom, the spoils go to a few

VC investment

Indian startups raised $24.5 billion between January and September, but as much as $12.9 billion of this went to 73 startups that had scooped up previous rounds. This shows how the top two or three startups in high-growth sectors are cornering most of the investor capital.

Companies with the most funding rounds in 2021

Examples: PharmEasy closed five deals this year and raised a total of $975 million, while business-to-business (B2B) commerce startup OfBusiness raised $504 million across four deals in the same period.

Ed-tech decacorn Byju’s raised over $1.5 billion across three deals and is currently valued at $18 billion.

Companies that have raised the most funds

What else the data showed: Nine companies that became unicorns before 2021, such as Pine Labs, Swiggy and Dailyhunt, have raised more than one round this year, amassing a total of $5.6 billion in venture funding.

  • About $5.5 billion has flown into 14 startups — such as Apna.co, BharatPe, Digit, and Meesho — that entered the unicorn club this year and raised more than one round.
  • The early stage investing space has also been action-packed. A total of 455 startups have raised seed and Series A rounds this year.
  • Fifty startups — not part of the unicorn list — such as FloBiz and CityMall have raised funds more than once this year.
Follow on fundraising by year

Capital attracts capital: Niraj Singh, founder and CEO of online used car platform Spinny, said “If you have business momentum, it is easier to raise follow-on capital as lots of new investors are looking to enter the Indian market, as you become an obvious choice. If you can show execution and stitch a unique narrative, you will get money irrespective of what’s happening with your competitors.”

Spinny, which recently closed a funding round led by Tiger Global, has raised over $170 million this year across two rounds.

What’s driving this? The fear of missing out may be driving the investor frenzy. From the incessant Twitter threads by investors rueing the missed opportunity of investing in a unicorn, it seems the VC community is moving in herds.


Customers, companies furious as new RBI rule disrupts auto payments

rbi

Indian customers of news platforms such as The New York Times and streaming services such as Netflix and Amazon Prime saw their monthly automatic subscriptions fail in October. Those affected also include software as a service (SaaS) businesses, media platforms, and even telecom companies that offer subscriptions based on one-time mandates.

Why? Most domestic banks are yet to comply with the new Reserve Bank of India (RBI) rules for standing instructions-based payments, which kicked in at the start of this month.

What are the rules? The RBI’s new rules effectively take the auto out of auto pay. They say that banks can only process auto-debit transactions if they send a pre-debit notification to customers at least 24 hours before the payment is due. They also say that automated transactions above Rs 5,000 will need a separate process in which customers must authenticate the payment manually with a one-time password.

Confusion everywhere: Three weeks in, confusion still persists on how merchants, especially those with international acquiring partners, can re-enable automatic payments for customers. This has sent many large merchants scrambling to provide alternative payment methods to retain their users.

  • Apple is advising its subscribers in India to top-up their Apple IDs through the App Store to ensure smooth payments and is offering a 20% bonus to customers who do so.
  • Amazon has discontinued free trials for its Prime subscription in India, citing friction in auto payments.
  • Netflix is prompting customers to reset their payment mode and choose to auto pay through the Unified Payments Interface (UPI) – a service it enabled only last month.
  • Google is asking customers of its cloud services to add a new primary payment method “that’s compliant with the RBI”.
  • YouTube and Facebook have put out similar instructions as well.

Seething: All this confusion this has caused has not gone down well with customers or entrepreneurs who run subscription-based services.

“The most hated organisation in founder circles right now is RBI,” tweeted Kushal Bhagia, CEO of VC firm Firstcheque. “Every founder whose s biz ran on subscriptions is seething with rage and helplessness watching their retention cohorts get nuked by this random new regulation on credit card subscriptions (sic).”


Yes, but: Experts pointed out that the RBI had given banks more than two years to ensure compliance. “RBI’s new rules are good for customers in the mid to long term as it ensures visibility and control over many of their billings,” said Vishwas Patel, the executive director at payment gateway firm CC Avenues. “It’s very disappointing that banks have not heeded repeated reminders to ensure requisite compliances.”

Tweet of the day


Tata Group tests super app in Jamshedpur, Mithapur

Tata

The Tata group is piloting its super app in Jharkhand’s Jamshedpur and Gujarat’s Mithapur before it rolls out its much hyped ecommerce platform across the country, sources told us.

What’s happening? Tata Digital is currently testing its TataNeu super app — which seeks to bring almost all of Tata’s consumer and financial products rolled into one application — among more than half a million Tata Group employees.

  • As part of this initiative, services of Taj Hotels, Tata Cliq, BigBasket, Croma and AirAsia are uploaded onto the app.
  • TataNeu is in the process of integrating online pharmacy 1mg with the super app, after which it will bring in retail arm Trent and Titan in the coming weeks.
  • Tata also plans to onboard Vistara, Starbucks and even Air India once it completes the acquisition of the airline next year.

Why only two cities? Both places are major production hubs for the Tata Group — Jharkhand for steel and Mithapur for salt and chemicals. Both are largely Tata-managed cities and house a large number of Tata employees.

What’s next? The salt-to-software conglomerate plans to roll out the super app in January or February.


Good Glamm continues its acquisition spree with ScoopWhoop

good glam

Darpan Sanghvi, cofounder and CEO of Good Glamm Group

Good Glamm Group, the parent company of direct-to-consumer (D2C) beauty and personal care brand MyGlamm, has acquired new-age media startup Scoopwhoop for an undisclosed sum in an all-cash transaction.

Confirming the development, cofounder and CEO Darpan Sanghvi said with this acquisition, the group will enter the men’s grooming space, in which it will invest Rs 500 crore in the next two years.

For ScoopWhoop, which is backed by Kalaari Capital, the acquisition is an opportunity to build its content platform at scale. Founded in 2013 by Sattvik Mishra, Rishi Pratim Mukherjee and Sriparna Tikekar, it claims to have around 70 million monthly active users.

All investors will exit ScoopWhoop as part of the deal, except Kalaari Capital, which will stay on and invest in the Good Glamm Group, Sanghvi said. Kalaari Capital had invested $4 million in ScoopWhoop in 2015.

India

Sources told us that Good Glamm is also looking at a fresh financing round, the details of which are yet to be firmed up. As part of its extended Series C round last month, it picked up an additional Rs 255 crore in a mix of debt and equity, taking the round size to Rs 755 crore ($100 million).

Shopping spree: ScoopWhoop is Good Glamm’s fourth big acquisition after The Moms Co (September), Baby Chakra (August) and content and commerce platform POPxo (August 2020).

The goal: Good Glamm’s aim is to create a larger ‘Unilever-style’ umbrella of FMCG brands. “We are looking at making four to six acquisitions across categories such as Hygiene, Bath and Body, Skin, Hair and Naturals over the next 90-180 days,” Sanghvi had told us last month.

India’s D2C boom: D2C brands are finding growing acceptance among Indian consumers. Brands in the beauty and personal care category have been growing at an unprecedented rate and attracting capital from risk investors. Companies such as IPO-bound Nykaa, Sugar Cosmetics, Purplle, Plum and Mamaearth are the other big players in the market.

  • We reported in August that the broader D2C space has seen a funding boom, with 146 firms raising a combined $500 million since the start of 2020. That’s almost the same amount they raised in the previous five years.
  • According to a report by Avendus Capital, D2C will be a $100 billion market opportunity in India by 2025.

Clubhouse in Indian languages by end of year

Clubhouse

Social audio app Clubhouse will soon launch local language versions of its Indian app. The move comes at a time when the audio-based live social networking space is heating up.

The plan: Clubhouse will begin with the top four to six regional languages, including Hindi, Telugu, Tamil, Malayalam, and Bengali, and add others along the way.

Quote: “We are working on localisation right now. We expect to have it all rolled out before the end of the year. We are doubling down on what our creators are telling us in India, and just asking us for features, product additions, things like that, and working through that,” Aarthi Ramamurthy, head of international at Clubhouse, told us in an exclusive interview.

Vocal for local: With smartphone and internet reach percolating to smaller towns, vernacular content is in high demand across the country. Google, Facebook and Twitter have localised their products in Indian languages to widen their audience base.


Facebook to change its name next week to reflect metaverse focus

Facebook

Facebook CEO Mark Zuckerberg

Facebook—the company—is planning to change its name next week to reflect its focus on building the metaverse, The Verge reported, citing a source.

It said CEO Mark Zuckerberg plans to talk about the name change at the company’s annual Connect conference on October 28, but it could be revealed before that.

But why? The move is meant to signal the company’s ambition to be known for more than social media, which isn’t exactly a surprise. Facebook is facing increasing US government scrutiny over its business practices, thanks in large part to the actions, and testimony, of whistleblower Frances Haugen, a former employee.

Also Read: Facebook whistleblower Frances Haugen and the power of one

Metaverse future: Facebook’s future lies in the ‘metaverse’, Zuckerberg had said after an earnings call in July. If you’re wondering what the metaverse is (or rather could be one day), here’s our handy explainer.

On Monday, Facebook said it plans to hire 10,000 people in the European Union over the next five years to help build the metaverse. The company also plans to invest $50 million to partner with organisations to responsibly build the virtual world.

It has invested heavily in virtual reality (VR) and augmented reality (AR) and intends to connect its nearly three billion users through several devices and apps.

Won’t be the first: It’s not uncommon in Silicon Valley firms to change their names as they look to expand their services. Google established Alphabet Inc. as a holding company in 2015 to expand beyond its search and advertising businesses to things like self-driving vehicles, health technology, and providing internet services in remote areas.

Also Read: What is the metaverse and why is everyone talking about it?

Fine for Giphy deal: Meanwhile, Britain’s competition regulator has fined Facebook 50.5 million pounds ($69.6 million) for breaching an order imposed during its investigation into Facebook’s purchase of Giphy, the agency said.

The Competition and Markets Authority (CMA) said Facebook had deliberately failed to comply with its order, and the penalty served as a warning that no company was above the law. The company said it strongly disagreed with the CMA.

Also Read: Facebook to pay $14.25 million to settle claims it favoured H1-B visa holders


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As Foxconn, Tesla plan forays, here’s a snapshot of India’s EV market: India has set an ambitious target of achieving 100% electrification by 2030. According to a CEEW Centre for Energy Finance (CEEW-CEF) study, the Indian EV market will be a $206 billion opportunity by 2030 if India maintains steady progress to meet its ambitious 2030 target.

CoinDCX launches OTC desk for institutional crypto trading in India: CoinDCX, India’s first crypto unicorn, has launched an over-the-counter (OTC) desk to facilitate bulk trades by institutional investors, at a time when the country is fuelling one of the fastest-growing crypto regions in the world.


Global Picks We Are Reading

  • PayPal explores purchase of social media firm Pinterest (Bloomberg)
  • UK fines Facebook $70 million for breaching order in Giphy deal (Reuters)
  • Mark Zuckerberg will be added to a Facebook privacy lawsuit (NYT)

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