Startups tap new pools of capital; consumer lending apps hit profitability

Happy Monday! There’s a shift in how founders and dealmakers are approaching funding in today’s times. Details on this and more in today’s ETtech Morning Dispatch.

Also in this letter:
■ Challenges awaiting new Wipro CEO
■ Filter Capital’s final close of maiden fund
■ Illegal betting sites back in action for IPL

ETtech In-depth: How source of capital is changing for Indian startups

Entrepreneurs and dealmakers are beginning to look at potential funding transactions differently given that investor classes — not part of earlier funding cycles — are starting to get active and relevant.

Trendspotting: Capital pools have diversified amid the broader tech slowdown with large global, crossover and hedge funds mostly staying away from cutting new cheques. Domestic firms and family offices such as those run by Zerodha cofounder Nikhil Kamath, Manipal Group chairman Ranjan Pai, and Premji Invest have backed startups including Subko, Quorum Club, Kites Seniorcare and The Sleep Company.

Public to private: Bankers said investors that typically focused on public markets are now finding value in venture-backed private assets, and contributing to the growing domestic pool of capital.

These include ValueQuest, which recently backed Wow Momos; ace investor Ashish Kacholia’s Lucky Securities, which pumped Rs 70-80 crore in homegrown burger chain Jumboking; and Singularity Ventures, run by Yash Kela and CaratLane’s Mithun Sacheti, which has backed a clutch of startups including skincare brand Mcaffeine and battery materials maker Lohum.

The bottom line: With a wider array of investors throwing their hats into the ring and secondary stake sales picking up—as reported by ET on March 21—founders are also increasingly turning to investment banks. This is a departure from when entrepreneurs would close deals independently during the funding boom.

Also read | Exclusive: Lenskart, Purplle, Healthkart may raise fresh funds as big-ticket startup deals gain momentum

Consumer lending startups find profitability post Covid challenges

Consumer lending apps which had faced massive challenges during the pandemic years, are finally finding stable ground. Most of the large players have been reporting profits for the last few quarters; now Freo (previously Moneytap) has also joined them.

Headline numbers: Peak XV-backed Freo has reported cash profitability since last December and is set to become net profitable by 2025, its cofounder Anuj Kacker told us. Freo joins others like Navi Finserv, Fibe and Kreditbee which have been profitable in their core lending business for some time now.

What is working? Diversification of businesses and creation of new categories are helping these startups, according to industry insiders. Fibe is now getting around 25% of its new customers from segments like education, upskilling and healthcare.

Also read | Sachin Bansal’s fintech Navi in talks to raise new funding at $2 billion valuation

Freo wants to offer all forms of financial services to middle-income Indians. Kreditbee wants to be the go-to platform for anyone looking for a quick unsecured personal loan online. Navi is using technology to offer personal loans quickly and also collect efficiently.

Fintech industry stabilising: Covid19 impacted this segment the most, since startups with large unsecured exposure to middle-class Indians were not able to collect from them. Many ‘course-corrected’ after the pandemic by going for colending to reduce their own exposure, such as Kreditbee and Fibe.

Also read | MSME fintechs steal show as consumer lending loses fizz

Challenges await new Wipro CEO Srinivas Pallia

Srinivas Pallia, the new chief executive of Wipro, will need to deal with a challenging business environment, shareholders who are getting impatient due to a delayed turnaround, and sky-high expectations as he takes the baton when the $245-billion Indian IT industry is facing one of its toughest times.

Task at hand: Some quick to-dos as he takes charge, experts said, are to boost the morale of employees and reverse senior level attrition. Pallia will need to get back Wipro’s mojo to become a sought-after employer once again, they said.

Pallia is one of the rare candidates to rise up the ranks within Wipro and become its CEO. The 56-year-old, a Wipro veteran of 30 years and chief executive of its largest and fastest growth market, Americas 1, took charge of the company Sunday.

Also read | Who is Srini Pallia, Wipro’s new CEO and MD?

Expert views: “He will need to bring large deals to move the needle in performance like Wipro’s large peers and also focus on more client mining to increase $100-million-plus accounts,” said Pareekh Jain, CEO and lead analyst of information platform EIIRTrend.

Delaporte’s exit predicted: Azim Premji’s flagship firm on Saturday announced the resignation of its CEO Thierry Delaporte just days ahead of its full-year financial results.

Most industry experts saw Delaporte’s exit coming. “Despite the CEO being in Europe, Wipro struggled to win deals in the region as compared to its larger rivals TCS and Infosys,” a person told us.

Filter Capital logs final close of Rs 800-crore maiden fund

Filter Capital cofounders and managing directors (L-R) Nitin Nayar and Sumit Sinha

Technology-focused investment firm Filter Capital has made the final close of its first fund at Rs 800 crore (about $96 million).

Driving the news: The Mumbai-based fund, run by former Warburg Pincus and Multiples Private Equity executives, has received as much as 60% of the capital commitments from domestic limited partners (LPs), with the rest coming from international investors.

Filter Capital India Fund I has so far invested about Rs 225 crore from its corpus in four entities — enterprise loyalty software provider Capillary Technologies, bus mobility platform Chalo Mobility, ecommerce logistics services firm LoadShare Networks, and healthcare enterprise software company THB.

Tell me more: The LPs included institutional investors and family offices such as HDFC Fund of Funds, Small Industries Development Bank of India, DSP family office, Amansa Capital founder Akash Prakash, and Dream Sports cofounder Harsh Jain.

Other Top Stories By Our Reporters

Illegal sports betting sites revive activities amid IPL | Illegal sports betting platforms such as Parimatch, Betway, 1XBet, Betfair, Crickex, Fairplay, and Lotus365 have stepped up their operations in India amid the ongoing Indian Premier League (IPL), offering discounts and ‘treasure hunts’ for match tickets to entice cricket fans.

The rise of the GCC ecosystem in India | Global capability centres (GCC) have been mushrooming in India over the past few years, with over 1,580 GCCs and an installed talent base of over 1.66 million currently. A new report by IT industry apex body Nasscom and Zinnov found that in the fourth quarter of calendar year 2023, India saw 10 new GCCs established, marking the entry of key MNCs like Edge Cortix, M31 technology Corporation, Signature IP into the Indian market.

Prompt in progress: GenAI text-to-code tools boost productivity | Software developers across organisations are taking to generative artificial intelligence (AI) text-to-code tools such as IBM Codenet, Microsoft’s GitHub CoPilot, Amazon’s Code Whisperer as well as StarCoder by Service Now and Hugging Face etc, to enhance productivity. Some of these tools claim to increase efficiency by up to 50%.

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