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Galloping Unicorns


Good morning,

A little over a fortnight ago, we reported that early-stage startups are witnessing a funding frenzy, reminiscent of the go-go days of 2014-15. Turns out, unicorns are making the most of the investor interest—in fact, between January and March, fundraising was at a record high for the fourth quarter of any fiscal.

Also in today’s newsletter:

  • TikTok restructuring India team
  • Reliance’s NUE global plans
  • Boom time for Indian IT

Startup funding in Q4 — $3.65 billion

startup-funding

Some of India’s most-valued startups—from Byju’s to Zomato—witnessed large funding rounds in the first three months of 2021, bucking the trend set in the pandemic year.

  • Overall fundraising in financial year 2020-21 fell 21.1% to $12.36 billion, but more than a quarter of the amount—$3.65 billion—was raised in the three months ended March 31. That’s 10% year-on-year growth for the fourth quarter.

Who raised funds

  • Byju’s: $456.7 million in a Series F round
  • Dream11: $400 million in a Series F round
  • HighRadius: $300 million in a Series C round
  • Udaan: $280 million in a Series D round
  • Zomato: $252 million in a Series J round

Do you see a pattern emerging here?

The biggest deals (these are the top five in the fourth quarter) were struck by some of the largest tech-first companies in India’s startup ecosystem. So, is funding concentrated for a few?

Yes, and no. While it’s true that unicorns raised the bulk of the $3.65 billion—$2.8 billion, to be precise—in late-stage funding rounds, early-stage startups too are making the proverbial hay while the sun shines. 2020 was a record-breaking year for early-stage funding—242 Series A rounds averaging $4.77 million were signed off last year, according to ETtech’s March 18 report. In fact, the newbies have raised more capital than they initially planned.

The IPO angle: While funding is likely to stay buoyant in 2021-22, industry watchers are keenly looking at the upcoming public listings of India’s tech startups. While Zomato has made clear its intentions for an initial public offering, others in the fray are PolicyBazaar, Flipkart, Droom, Grofers and Delhivery.

Also Read: Startup salaries swell amid pandemic-induced funding boom

READ  Chinese tycoon abruptly quits tech giant he founded

Bytedance restructuring TikTok team in India

bytedance

ByteDance, which did not get any immediate relief from the Bombay High Court last week over the freezing of its bank accounts in India, is restructuring its TikTok team in the country.

What’s happening:

  • Most employees in functions such as sales and marketing have left the company.
  • The tech team has been moved to clusters that handle the Middle East regions.
  • TikTok India head Nikhil Gandhi has been appointed as the head of Middle East, North Africa, Turkey and South Asia.

The restructuring is in line with TikTok Global’s planned initial public offering in October this year, wherein employees who have been retained can redeem their ESOPs.

The court case: In mid-March, India’s tax authorities ordered HSBC and Citibank in Mumbai to freeze the bank accounts of ByteDance India, a move that the Chinese firm challenged in the Bombay High Court. The tax investigation revolves around potential tax evasion related to online advertising and other financial dealings between ByteDance India and its parent entity in Singapore, TikTok Pte Ltd.

ByteDance said the freeze on its bank accounts in a probe of possible tax evasion amounts to “harassment” and has been done “illegally”. The Bombay High Court declined to grant ByteDance immediate relief last Wednesday.

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Reliance’s NUE global plans

Reliance gets shareholders, creditors nod for hiving off O2C business into separate unit

Reliance Industries’ proposed New Umbrella Entity (NUE) for payments services, in a consortium with Infibeam Avenue, Google and Facebook, has plans to make it a global payments player, according to two people familiar with the matter.

What’s the plan: The oil-to-retail conglomerate, which also runs Jio Payments Bank, will likely offer payment services overseas, probably pitting it against giants Visa Inc. and Mastercard Inc. in some markets if it gets the operating licence.

  • “RIL has already started weaving a long-term plan with NUE, which should generate many leads for the future,” one of the persons cited above said.
  • “RIL is now focusing on building the company, roping in veteran experienced hands as the association of Google and Facebook could pave way for their global ambition,” said another executive.

NUE details: The NUE will be jointly promoted by a Reliance unit and Infibeam Avenue’s subsidiary So Hum Bharat along with Facebook and Google. Reliance is likely to hold 40% while the other three are expected to own about 20% each.

The consortium applied for the licence last week.


Q4 Preview: Indian IT firms

software-getty

Indian IT services firms are expected to report their best fourth-quarter results in five years, analysts said, as business from clients in the United States and Europe—who are investing heavily in digital technologies—grow at a fast clip.

The attrition rates, however, are likely to be higher due to the battle for talent between the established tech firms and startups.

Analysts’ take:

  • HDFC Securities: “Over the 5% QoQ posted in 3QFY21 and 6% in 2Q, we expect the sector to deliver 3.9% QoQ growth during the January-March quarter.
  • Motilal Oswal: “We expect Tier-I IT companies to report growth between 2.5% and 3.4% QoQ in constant currency terms (barring Tech Mahindra)—strongest 4QFY21 performance in the last five years. Tier II IT should deliver 3.3-5.2% QoQ CC growth (except Mphasis and Zensar).”
  • ICICI Securities: “Ongoing second wave of Covid-19 in India, relatively higher uncertainty in domestic sectors and expectations around a weaker INR (rupee) may translate into a tactical capital rotation into IT. TCS, HCL Tech, Mindtree, Cyient should be key beneficiaries of this trade, in our view.”

Tata Consultancy Services (TCS) will kick off the Q4 results season on April 12. Infosys on April 14 and Wipro on April 15 will follow.

Infographic Insight

Fintech Investments

Ashok Soota’s newest venture: Philanthropy

Serial IT entrepreneur Ashok Soota has committed Rs 200 crore to launch SKAN, a not-for-profit trust for medical research into ageing and neurological disorders.

In elite company: Soota, the executive chairman of Happiest Minds that he founded a decade ago, joins other entrepreneurs from Bengaluru—such as Wipro’s founder-chairman Azim Premji, Infosys’ co-founders Nandan Nilekani and Kris Gopalakrishnan, and Biocon’s Kiran Mazumdar- Shaw to pledge significant amounts towards philanthropy.

The work: SKAN will focus on projects done in-house and through partners such as the Centre for Brain Research (CBR) at Indian Institute Science, Bangalore (IISc). Soota has committed Rs 100 crore to the partners and the remaining to in-house projects.


Smartphone industry braces for second wave

India’s smartphone industry—from makers to sellers—are bracing for impact of the second wave of the Covid-19 pandemic sweeping the country.

The supply side: Foxconn, Samsung, Xiaomi and Lava have increased precautionary steps—tying up with hospitals and hiring more workers—to ensure that production isn’t hampered in any way.

The demand side: Rising Covid-19 cases and the consequent regional lockdowns can potentially wipe out the recovery in offline smartphone sales and dent 2021 estimates, market watchers say.

More than 37,000 mom-and-pop stores will either remain closed or reduce workforce by half in Chhattisgarh, Maharashtra, Madhya Pradesh and Karnataka where lockdowns have been announced. Consumer footfall in many areas has started declining as buyers hold back on discretionary spends and venturing out.


Top Stories We Are Covering

India Accelerator plans to expand its startup portfolio by more than three-fold in 2021 with investment in around 100 such ventures. The company is close to launching SEBI-approved alternate investment funds, which will be providing more funding opportunities for startups.


Global Picks We Are Reading

■ Pinterest is said to be in talks to acquire VSCO photo app (NYT)

■ The next electric-car battery champion could be European (Bloomberg)

■ You might’ve just missed the best time to sell your startup (TechCrunch)





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