ETtech Morning Dispatch on March 3, 2021: All aboard the tech IPO train!

Hi everyone, Samidha here.

This year has been different for me as a reporter-editor who covers the technology and startup sector. In my many years, almost a decade now, of being on the inside track of this industry, I have always asked why startups (especially ones that have scooped up billions of dollars in investor capital) do not go public in India. Isn’t that the holy grail for all venture-funded companies?

I was always given answers like: the India market is still small compared to those in China and the US… startup valuations are simply out of whack… founders aren’t building companies with the kind of discipline that’s needed to take them to IPO, what with all those quarterly earnings being a pain, etc.

But it looks like things are finally changing in 2021.

We have never previously covered as many stories about realistic IPOs by tech startups. And never have I seen this sort of aggression to take companies public. There have always been those stories of founders saying things like “we plan to go IPO in three years”. But I knew that was only to grab headlines.

Zomato IPO could rake in $1 billion

Which brings me to what’s happening over at Zomato, the food-delivery app which seems poised to be the first among the lot to make its debut on Indian bourses. I wrote today that Zomato
is going to raise around $750 million to $1 billion through its public float, but it’s unlikely that existing investors will be selling any shares for now.

100% primary IPO: Deepinder Goyal, co-founder of Zomato, told the company’s employees on Monday that its IPO will most likely be a 100% primary offering. This means the company will end up raising more money, rather than existing investors selling their shares to public market investors. He told the Zomato staff in a town hall that, “No existing shareholder is willing to sell any shares in our IPO. Everybody believes so much in our team and our execution that they want to hold our shares for years to come… People think that Zomato will be a $50 billion company in five years and that it would be unwise to sell shares right now.”

Read all our recent coverage on Zomato:

Goyal’s message comes at a time when Zomato’s closest rival, Swiggy,
has closed a $700 million to $800 million financing round at a valuation of over $4 billion, as we reported last month.

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From the first few months of the pandemic, when the sector came to a grinding halt, to the DoorDash IPO and major growth in demand that followed, we are keeping a keen eye on the food-delivery sector.

Track our in-depth coverage leading up to Zomato’s and other potential IPOs.


PolicyBazaar shuffles investors ahead of IPO


PolicyBazaar, the online insurance policy aggregator, has executed yet
another secondary share sale worth about $45 million, in which private equity firm True North and some angel and individual investors sold their stakes, sources told ET. The transaction values the company at about $2.4 billion, the sources said. A secondary transaction is one in which investors are swapped but no fresh capital is infused into the company.

like Zomato, is planning to go public soon and is expecting a valuation of $3.5 billion for its planned IPO. The incoming investors include Bay Capital, IIFL Wealth, White Oak Global Advisors and Cyrus Poonawalla Group.

Nykaa pads up too: Another Indian startup looking to go public in the near future is Nykaa, the online fashion and cosmetics retailer. Sources have told ET the company
is in talks to raise $50 million to $150 million in a secondary financing round that is expected to value it at $2 billion.

Industry insiders say this is a valuation exploration exercise for the firm ahead of its IPO, which is expected in 2022.

With a revenue run rate of around $600 million, the company is seeking a valuation of around $3.5 billion (Rs 25,000 crore) for the IPO, sources said. Revenue run rate, aka annual run rate, is a method of projecting upcoming revenue, typically over a year, based on previously earned revenue.

Tweet of the Day

ETtech Done Deals

The ePlane Company, a startup that is trying to build flying electric taxis to alleviate congestion in cities,
has raised around $1 million in seed funding, led by Speciale Invest and Indian-American entrepreneur-investor Naval Ravikant. The round, which is expected to help the startup through its prototyping stage over the next year, also saw participation from Java Capital, and IIMA’s CIIE incubator.

IdeaForge, a homegrown unmanned aerial vehicle (UAV) startup, has
picked up Rs 15 crore in venture debt from BlackSoil as it looks to fulfil a recent order from the Indian Army, worth about Rs 145 crore. The Mumbai-based drone startup said it will use the debt capital to meet its working capital requirements and service its large order book.

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Instacart has
more than doubled its valuation in less than six months to $39 billion with a $265 million funding round from existing investors, as the grocery delivery startup benefits from a surge in online orders during the Covid-19 pandemic. Reuters had reported in November that Instacart picked Goldman Sachs Group Inc. to lead its IPO at a valuation of around $30 billion.

For more startup funding and deals news, click here

The rise of the Indian influencer-investor


Top content creators are
turning angel investors in early-stage startups. From producing content for such companies, many creators are now investing anywhere between Rs 2 lakh and Rs 20 lakh in them.

But why? Content creators are keen to invest in direct-to-consumer brands, fintech startups, and platforms that are building monetisation tools and avenues for the creator economy.

  • Until now, creators made money from startups eager to leverage their reach to market their products. With the growing interest in startups and their rapidly increasing valuation figures, many creators now think it’s wiser to be a part of the brand’s journey as an investor instead.
  • In turn, startups see value in their vast distribution channel and their storytelling abilities.

Infographic Insight

Ride hailingETtech

On the anvil: Flexible hours for gig workers

A panel set up by Nasscom
has started consultations to usher in flexible work conditions for gig workers and part-time IT professionals. The industry body is also examining state and central laws to ascertain if there could be legal challenges for such workers in the IT and business process management industries.

What’s the purpose? A new framework, Nasscom said, would allow companies to manage their employees’ working hours efficiently and figure out hybrid working models that would improve collaboration between workers.

Gig policy: Last year, in one of the biggest reforms for the Indian tech industry, the government allowed permanent ‘work from home’ and ‘work from anywhere’ for IT companies after
removing most of their registration and compliance requirements. Nasscom said the reviewed norms have made it easy for IT and BPM companies to hire more women professionals and others who can only work remotely.

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India’s FMCG sector is fast moving online

The hard work that you have been putting into your side hustle — from your kitchen or home workshop — may just pay off. Make your product attractive (and lucrative) enough and India’s biggest FMCG firms may just buy into you.

From Nestle India to Tata Consumer, traditional consumer goods firms are increasingly focusing on online brands. They are setting up dedicated venture funds or investing directly in startups selling niche consumer products.

Think Beardo or a Bombay Shaving Company. Or even SimplyCook, Soulfull and OneLife. FMCG firms want a slice of that growing pie. Sales of many such niche brands have doubled during the pandemic.
(read more)

Top Stories We Are Covering

Twitter-COVID MisinformationAP

Twitter Spaces comes to Android users in India, globally: After testing its Clubhouse-like feature on Apple phones, Twitter
is rolling out its live audio chat tool to select Android users in India and around the world. After the expansion, Android users will now be able to listen to and join conversations on Twitter Spaces. This comes as the social-audio space is heating up with apps like
Clubhouse gaining popularity and Facebook also reportedly
building an audio chat product to compete with it.

Smartworks taps into the coworking boom: Smartworks is on an expansion spree—planning new facilities in Noida, and more coworking spaces in the IT hubs of Hyderabad, Bengaluru and Pune—as the demand for flexible office space surges in post-lockdown India. The homegrown coworking startup
has leased 2,50,000 square feet in Hyderabad’s Aurobindo Galaxy, taking its total operational space in the city to 4 lakh square feet.

Wirecard’s Indian deal started with ‘fraud’, UK judges say: A series of controversial deals that took place before Wirecard AG bought an Indian business appeared to be an
“evolving international fraud”, a panel of London judges said.

The transactions from 2015 are being scrutinised in courts in London and Chennai, with the former minority holders of Hermes I-Tickets Private Ltd. saying they were cheated of millions of dollars. They allege they were duped into selling their stake in the business to the company’s majority shareholders only to see it sold on again at a vastly inflated price to Wirecard.

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