Startup funding uptick in Nov; how logistics fleets are driving record EV sales

For Indian startups and their global peers, 2022 has been one long winter marked by austerity, layoffs and a distinct dearth of deal-making. But fundraising perked up a little, leading to capital inflows of $1.27 billion for Indian startups in November – the most in a month since June.

Also in this letter:
■ Ecomm, food-delivery logistics fleets are driving EV sales
■ AIIMS cyberattack raises concerns about security of critical infra
■ More firms are doing pre-hiring checks of IT job seekers


Indian startups raise $1.27 billion in November, highest since June

Startup funding

Indian startups raised as much as $1.27 billion in November – the highest amount in a single month since June.

Driving the deals: The growth in funding has mostly been led by early and growth stage rounds, which crossed $1 billion in November after more than five months, according to data from Venture Intelligence.

Late-stage funding remains severely hit, as has been for most of 2022.

It’s worth noting that this data represents deals that would have closed a few months ago and were officially announced in November.

Yes, but: This slight increase in deal activity does not point to a sustained recovery, tech investors have said.

Investments in Indian startups

By the numbers: After June, when Indian startups raised $2.36 billion, there was a sharp fall in funding activity.

Companies only picked up around $877 million in July, $981 million in August, and $787 in September.

The past two months, however, have seen a gradual recovery with $1 billion being mopped up in October, as per Venture Intelligence data.

Data from market intelligence platform Tracxn showed that nine of the top 10 deals in 2022 closed in the first half of the year.

Ten biggest funding deals in 2022

Valuation reset: Another VC investor we spoke to said founders were initially waiting for better valuations, but eventually signed off on deals as they began to approach the end of their cash runway.

Reality bites: “In the first quarter of 2022, there were founders who wanted the typical $5 million for 20% seed funding, but investors had become realistic by then. One founder who wasn’t ready to do a $3 million deal with us in February-March, came back and signed a $1 million raise in August”.

Also Read | Big valuation reset coming for Indian startups next year: Flipkart’s Kalyan Krishnamurthy


Ecomm, food-delivery logistics fleets are driving EV sales

EV sales

Electric two- and three-wheeler sales, which hit yet another high in November, are being driven primarily by logistics fleet operators that are ramping up their fleet to meet rising demand from ecommerce and food delivery firms, industry officials said.

By the numbers: For Hero Electric, which claims to be the market leader in the business-to-business (B2B) segment, sales to ecommerce logistics operators now account for 23% of its total sales, up from 14% a year ago, company CEO Sohinder Gill told ET.

At least 80,000 electric two-wheelers have been added to the country’s last mile two-wheeler delivery fleet of 450,000-500,000 vehicles this year, according to industry estimates.

Electric two-wheelers in the price range of Rs 80,000 to Rs 1.1 lakh are most popular for logistical operations and last-mile delivery, industry insiders said.

Doubling down: Despite tech companies like ecommerce giant Amazon shutting down various businesses, many of them continue to double down on converting their delivery fleet to electric.

Multiple logistics executives told us that Amazon is prioritising more orders with fleet operators that have electric vehicles on their fleet.

To meet the demand, electric fleet providers such as Zypp, Electrev, Zyngo and Yulu Bike are ramping up their capacity and increasing orders to EV makers.


AIIMS cyberattack raises concerns about security of critical infra

Cyber attack

The cyberattack on All India Institute of Medical Sciences, which has paralysed the premier healthcare institution for two weeks now, has raised several concerns about the preparedness of the country to ward off similar – or bigger – attacks on its critical infrastructure.

Warnings: More such attacks could happen as India’s data infrastructure gets further integrated and connected, said experts, who asked the country to strengthen its defence against such threats.

India is extremely prone to such attacks, especially on health organisations as there is no law that mandates regular audits for healthcare or a body to oversee these organisations, experts we spoke to said.

Attacks rising: Data from cybersecurity firm CloudSEK showed the number of cyberattacks against the healthcare industry globally increased 95.34% in the first four months of 2022 from a year earlier.

The report said India saw the second-highest number of attacks worldwide, with a total of 7.7% of the total attacks on the healthcare industry in 2021.


More firms do pre-hiring checks of IT job seekers as cheating cases rise

IT hiring

Close to one-fourth of large enterprises in India are now conducting background checks of IT employees before hiring them amid an increase in cases around cheating during virtual interviews, moonlighting, low productivity and fraudulent experience certificates provided by employees.

Change: This is a departure from the earlier practice of doing two rounds of background checks after an employee formally joined the firm, background check and staffing firms told us.

Enterprises that have made the switch include PwC India, Mphasis, Vodafone Group and HDFC Bank, our sources said.

Cheating on the rise? There is an increasing trend of background verification (BGV) failure, largely on account of moonlighting/dual employment and fake offer letters, said Gaurav Vasu, CEO of Unearth Insight, an IT Industry market intelligence firm.

In the recent past, top IT firms such as Cognizant and Accenture have let go of employees after they identified that employees had submitted fraudulent experience certificates.


ISRO’s open infrastructure is giving wings to startups

Isro

Just after the onset of the Covid-19 pandemic in June 2020, the Department of Space decided to set up an independent authorising body to vet private sector applications and enable startups to use the Indian Space Research Organisation’s facilities.

This has given wings to a clutch of startups such as Agnikul Cosmos, Skyroot, Pixxel, Bellatrix, Astrogate Labs, GalaxyEye, and others.

Space startups

Finding their niche: The budding space tech startup community has already identified niche areas, with a clear sense of market size and global opportunity.

For example, Pixxel says its demo low-earth orbit satellites are already paying off for the front-loaded investments that went into making them. Agri-tech companies pay Pixxel for data on pest infestation, crop damage, and so on, while oil companies want their assets (pipelines and other infrastructure) monitored. Mining companies want to keep track of the damage to the environment around their mines.

And last month, Hyderabad-based Skyroot launched the first-ever privately built rocket from Isro’s Sriharikota launch centre. There is tremendous demand for dedicated launch service providers globally.

Also Read | Exploits in Space: Startups to play larger role in space programmes across the world


Myntra expects small towns will continue to drive sales

Ecommerce sales

Myntra, online fashion arm of Flipkart, said small towns could account for more than half its sales in the next three to four years driven by high demand for discretionary products including premium and international brands, a sharp contradiction to the rural slow down even in basic staples and groceries segment.

At present, tier-2 markets contribute 40% to its sales especially during mega sale events.

Quote: “If you look at the next three-four years, it will definitely be closer to 55%. It will be a journey that we will make and it has nothing to do with a low value or budget. That’s the myth that we all are discovering that is to be busted,” said Nandita Sinha, chief executive at Myntra.

Within the overall ecommerce category, fashion accounts for 10-12% and Myntra said a large part of the growth and new shoppers will come from non-metros.

Fashion is the fastest-growing category in India’s tier-2 and tier-3 cities, with over 93% YOY growth in FY 2022.


Other Top Stories by Our Reporters

Tech hiring

Tech M to set up delivery centre in Egypt, hire 1,000: Tech Mahindra said it has signed a memorandum of understanding (MoU) with the Information Technology Industry Development Agency (ITIDA) to establish a global delivery centre in Cairo, Egypt. It aims to hire more than 1,000 employees over the next three years to serve both global and local customers from the new centre.

Innovations in India are benefitting people globally, says Pichai: Google looks forward to a “great partnership” with India as it works to bring the benefits of technology to more people, Alphabet chief executive officer Sundar Pichai said on Friday, upon receiving the Padma Bhushan award from the Indian envoy to the US. The innovations created in India benefit people worldwide, from digital payments to voice technology, Pichai added.

How TCS uses marathons to boost brand recognition, demonstrate innovation: Tata Consultancy Services (TCS), India’s largest IT services provider by revenue, is deepening focus on sports sponsorship programmes to increase brand awareness and recognition, a senior company executive said.

Despite funding winter, some Esop buybacks continue: Startups have hunkered down to allow the stormy blast of a protracted funding winter to pass, but some in the industry are still very much keen on rewarding loyal talent now.


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