Whilst the Indian startup ecosystem is still quite young, and we are hearing chatters about investor worries in the Indian fintech space as mentioned in our analysis last week, this is not representative of the whole market.

A notable event was Flipkart’s acquisition by Walmart in a $16 billion deal demonstrated that lucrative exit was an option for early investors. This was especially important for instilling optimism in the market because lack of exists had existing investors anxious. This is also essential for investors looking to enter this market.

It took several decades to lobby the Indian government to open up the retail market and Walmart finally found the opportunity to squeeze into India.

The last investment wave in India was in 2014-15. In hindsight, many of the investment decisions made then were a shot in the dark. After the 2014-15 wave, a large number of startups went bankrupt. Even some big companies that became unicorns also experienced the pain of down rounds. And then of course, there were the various scandals.

Rahul Yadav, ex CEO of housing.com, who was once considered a child prodigy and was later dismissed

Since the new round of capital in 2017, we have seen that investors have eased up a lot. The amount of investments have become larger, but the number of companies that have received investments has decreased significantly.

New trends since 2016: total investment has increased, but investment projects have decreased

2018 was also a turning point in terms of exits. The exit size of PE and VC reached $26 billion, almost equal to the size of the previous three years combined. Many investors received handsome returns in the Indian market. 

However, the total investment amount in startups in 2018 decreased compared to 2017. In 2018, there were 720 startups that received a total funding of about $10 billion; This is lower than in 2017 – where there were 885 startups that received funding of about $13.5 billion. In 2017, Flipkart, Ola, and Paytm – all received capital injection of more than $1 billion. However, in 2018 only one crossed this mark.

Let us explore the 2018 top 10 largest startup financing in India:

1. Swiggy, $1.31 billion

Founded in 2014, Swiggy, a food delivery startup, was the biggest dark horse in the Indian VC circle in 2018, having received three financing rounds in just one year.

It first raised $100 million in February, led by Naspers; then it raised $210 million in June, led by DST Globe and Naspers; and it finally raised $1 billion in December, again led by Naspers, with new and old investors including Tencent, Meituan-Dianping, and Hillhouse Capital Capital.

The 2018 rounds saw the valuation of Swiggy jump almost 5 times from $700 million in February to $3.3 billion in December.

Swiggy is known to have a larger delivery man-power and a wider choice selection of food options compared to others

Swiggy’s huge funding rounds makes it yet another big player in India’s well-funded food delivery market: UberEats (which is responsible for Uber’s listing), Ola (India’s travel giant that purchased Foodpanda), and Zomato (backed by the heavyweight Alipay).

2. OYO, $1 billion

In 2018, India’s budget hotel chain OYO became a unicorn after Softbank announced an $800 million investment in September 2018. Following this, Southeast Asian super-app platform Grab announced a $100 million investment as part of the same funding round.   

OYO attracted the interests of investors after it began its international expansion with China followed by Japan, Indonesia, Malaysia, Nepal as well as the UK.

Majority of the funding will be directed towards China and the rest will be used to strengthen its position in India and support its expansion and growth in other new markets.

China is the biggest and most challenging market that OYO will tackle. China is twice the size of India’s market yet the penetration of rooms is very low –  4 rooms per 1,000 people as compared to 20 in the US. OYO seems to have started on a good note. In a short period of time, OYO claims that the number of hotel rooms in China has exceeded that of India’s. However, China will be a tough market to crack especially in the accommodation segment, as we had written earlier about Airbnb.

OYO on the western Sichuan plateau, China spotted by an MW colleague

OYO is also trying to expand into other market segments. It has acquired a number of startups in India as a part of this plan such as wedding banquet company Weddingz, serviced apartments company Novascotian, and an IoT company AblePlus.

3. BYJU’s, $540 million

BYJU’s, an online education startup, received a total of $540 million in 2018. The round was led by Naspers, which does not come as a surprise since it has other online education platforms in its investment portfolio such as Udemy, Codecademy and Brainly.  

Other major investors include General Atlantic, Canadian Pension Plan Investment Board, Zuckerberg and his wife Chan Zuckerberg’s Initiative, Sequoia Capital and Tencent.

The investment caused a significant jump in the company’s valuation which went from $800 million in July 2017 to 3.8 billion post the recent round. This makes it one of the highest values startups in India  after Paytm, Ola and OYO.

According to BYJU’s data, it’s revenue in the 2017-18 fiscal year was $6.94 billion, which is seeing a healthy upward trend as can be seen below.

With the new capital, BYJU’s plans to expand overseas and is said to be eyeing for partners in English-speaking markets such as the US, UK, Canda, Australia, Singapore, etc.

4. Paytm Mall, $445 million

In April 2018, Softbank invested $400 million into Paytm Mall, while Alibaba contributed $45 million.

In addition to receiving huge capital, it also hit $3.5 billion in annual sales. The revenue of this fiscal year increased by 104.42%, and it successfully held the first version of “Double Eleven” in India, during Diwali promotions.

Paytm Mall launched its first physical store in New Delhi

The latest funding will give Paytm Mall more resources to take on e-commerce giants like Flipkart and Amazon.

To reach out to more customers, Paytm Mall has introduced an offline retail model (similar to Alibaba) so customers can visit these physical stores, scan QR codes of products they like, browse through product information and buy it via the Paytm Mall app.

They are also planning to strategically partner with the online grocery site Bigbasket which will be included in the Paytm Mall app from where groceries can be ordered. It has also entered into an agreement with the giant supermarket chain Future Retail. These moves will diversify its revenue model, strengthen its O2O presence and help resolve last mile issues by using these local retail stores all over the country as delivery points.

5. Zomato, $410 million

Like Paytm Mall, Zomato is also backed by Alibaba. In 2018, Ant Financial invested twice in Zomato –  $200 million in February, and $210 million in October.

It’s strategy in 2018 involved acquiring two companies namely, the caterers and restaurants aggregator platform TongueStun and the drone startup TechEagle Innovations, which plans to explore drone-based food delivery. With the new capital, Zomato’s goal is to expand to more than 100 cities in India.

Truth be told, we have worked in India and we can’t imagine this to work

Previously, Zomato had expanded to 24 countries around the world. This aggressive international expansion did not bring much practical benefit to Zomato. After struggling for a while in many countries, the company retreated and instead worked hard to run the Indian base camp. It especially suffered huge losses in the 2015-16 period. This explains its focus on Indian cities currently.

Zomato started international expansion very early

2018 also saw Zomato bid sudden farewell to its co-founder Pankaj Chaddah, which shocked many employees. This is one of many shuffles Zomato has undertaken in its top management this year. Goes on to show that its feeling the pressure to scale and show bottom lines especially since the food delivery space is highly competitive and crowded.

6. Udaan, $275 million

Udaan is a B2B e-commerce company with a total investment of $275 million in 2018. The main investors were DST Global and Lightspeed Venture Capital. This company, which was recently established in 2016, has reached the ranks of unicorns in just two years.

Udaan’s three co-founders Sujeet Kumar, Amod Malviya, and Vaibhav Gupta were Flipkart’s CEO, CTO, and SVP business finance & analytics, respectively.

Momentum Works has always felt that doing B2B in India at this stage may be more reliable than B2C.

7. Pine Labs, $207 million

Pine Labs is a mobile payment solutions provider founded in 1998 to provide POS collection solutions. In addition to allowing merchants to accept credit card and debit card payments, it also supports latest payment solutions such as e-wallet, QR code, and the Indian Unified Payment Interface (UPI) payment service.

Pine Labs received two grants in 2018 for a total of $207 million. Major investors include Temasek, Paypal and British private equity firm Actis.

With the new investments the plan is to keep growing in the Indian market as well as expanding to international markets where resources will be required to set up the payments infrastructure.

8. PolicyBazaar, $200 million

PolicyBazaar is India’s largest online insurance product comparison platform that also provides financial advisory services. In June 2018, it received a $200 million F-round funding led by Softbank Vision Fund. Other participating investors include Temasek Holdings and Info Edge.

The investment is said to have propelled PolicyBazaar to the unicorn club as its valuation post this round crosse the $1 billion mark.

PolicyBazaar states that they attract 100 million website visitors in a year and process transactions volumes of nearly 300,000 per month. They are now targeting 10 million transaction customers by 2020. The insurance market is untapped in India and PolicyBazaar looks to continue cementing its growth in this segment.

9. GreyOrange, $140 million

GreyOrange is a robotic start-up company that provides automated robots for e-commerce and warehousing, reducing warehouse labor costs. The company was incorporated in Singapore in 2011 with offices in India, Japan, Germany and the United States.

In September 2018, GreyOrange announced the completion of a $140 million Series C round of funding, led by Silicon Valley investment giant Peter Tyre’s investment company Mithril Capital. Flipkart co-founders Binny Bansal and Blume Ventures also participated in the investment.

GreyOrange currently focuses on three robotic automation products: the Profiler is a weighing system, the Sorter is a high-speed sorting system for sorting parcels and distributing them, and the Butler is a robot that helps with parcel storage and retrieval. Among them, Butler has been used by Flipkart’s e-commerce business, competing with the Amazon logistics robot Kiva.

Grey Orange’s Butler robots are used by Flipkart to help with parcel storage and retrieval

10. Cure.Fit, $130 million

Cure.Fit is a one-stop healthcare platform founded in 2016 by co-founders of former Indian e-commerce Flipkart executives Mukesh Bansal and Ankit Nagori. Cure.Fit received a total of $130 million in funding in 2018, with major investors being IDG, Kalaari Capital and Accel Partners.

Mukesh Bansal founded the Indian e-commerce platform Myntra and later sold it to Flipkart for $300 million. In the process, he met Flipkart’s then-business executive Ankit Nagori, who selected health management as a business direction.

In India, where deserts are basically sugar balls, there is a huge demand in the health management market.

Cure.Fit operates mainly through online and offline combination, using AI technology to provide health solutions. The online app contains 4 sections: Sports Health Cult.fit; Nutritional Health Eat.fit; Meditation Health Mind.fit and Elementary Medical Health Care.fit. They also have a 100 centers across various cities. With hitting the basic target number of centers in India, they are now preparing for overseas expansion starting with Dubai in 2019.

Concluding thoughts

India’s entrepreneurial ecosystem is maturing and becoming more optimized. For example, Walmart’s acquisition of Flipkart, has led to a secondary wave of entrepreneurs with practical experience who can now contribute to other startups. The two new unicorns mentioned in this article, Udaan and Cure.Fit, are built by Flipkart former executives.

We are of the opinion that Softbank is feeling the urgency of fully investing the Vision Fund. India is a good destination for this. This explains its series of investments in Indian companies such as OYO Rooms, Flipkart, PolicyBazaar, Paytm parent One97 Communication among others.This is corroborated by the fact that 2018 saw Japanese SoftBank recruit an Indian country head Sumer Juneja, demonstrating its keen interest in strengthening its position in India.

The total funding may have been lower than last year’s but 2018 saw five new unicorns, more global expansions of startups and more growth and late stage investments- all which indicate quality over mere quantity of investments.

This article was originally written by Yating in Chinese and translated to English by Antarika.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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