India Deal Review: Startup funding jumps 30% in Feb led by logitech, financial services

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Funding activity gained momentum in February, the shortest month of the year, as Indian startups raked in $1.3 billion on the back of heightened deal-making in the logistics/distribution and financial services sectors.

The funding uptick in the two sectors has been largely on account of growth in the e-commerce sector as more and more consumers order online in the wake of the global healthcare crisis.

According to proprietary data compiled by DealStreetAsia, February recorded nearly 75 transactions compared to 89 deals in the previous month (January). Although deal volume was comparatively higher in January, startups raised a lower amount of funding at about $1 billion.

In the corresponding period last year, the fundraising scenario was very different when the pandemic was yet to hit India. Startups garnered at least $1.5 billion in venture capital funding across 75 deals in February alone in 2020.

In February this year, there were about six $100-million plus rounds accounting for nearly 60% of the total funding amount, indicating that investors have once again started writing bolder cheques to late-stage startups.

Food ordering and delivery platform Zomato raised the largest round of $250 million from Tiger Global Management, Kora Management, Fidelity, Bow Wave Capital Management, and Dragoneer Investment Group, LLC in February. While the Series stage was not known, the Gurugram-based company was valued at $5.4 billion post the investment, Info Edge (India) Ltd disclosed in a regulatory filing.

Others to have raised mega rounds during the month included manufacturing services platform Zetwerk, payments platform Bharat Pe, healthcare technology company Innovaccer Inc, local language tech platform VerSe Innovation, and Infra.Market, a marketplace for construction materials.

Logitech grabs investor attention

The logistics industry has been on the radar of venture capitalists as COVID-19 has accelerated online transactions and triggered demand for truck aggregators and warehousing firms. The sector had taken a hit last year due to the pandemic-induced lockdown, but as the market opened, it paved way for several new avenues of growth and opportunities for Indian startups. Pushed by e-commerce transactions, logistics and distribution startups together mopped up $278.5 million across three investments in February.

Financial services startups occupied the second spot with $249.4 million funding across 12 transactions led by Bharat Pe, which raised $108 million at $900 million valuation. The round was led by the company’s existing investor Coatue Management. All seven existing investors – Ribbit Capital, Insight Partners, Steadview Capital, Beenext, Amplo and Sequoia Capital – participated in the round.

While financial services sector has overall been under stress due to the pandemic, it has also put a spotlight on the increasing need for digital tech adoption. The Indian fintech market was valued at Rs 1,920 billion in 2019. It is expected to reach Rs 6,207 billion by 2025, expanding at a compound annual growth rate (CAGR) of about 22% during the 2020-2025 period, according to a report released by RBSA Advisors.

Together the top five sectors comprising, logistics/distribution, financial services, industrial machinery, healthcare IT, and construction, mopped up $853 million accounting for 65% of the total funding in February. Meanwhile, edtech, which was investors’ favourite in 2020, took a backseat with mere $45 million funding through 8 transactions in February compared with $350 million in the same month last year.

Growth-stage deals grab lion’s share

Investors have started to pursue early-stage deals in the past three months. Pre-seed and seed stage funding rose marginally to $29.4 million in February from $28 million in January and about $12.7 million in December. The number of these deals, however, dropped to 17 in February from 23 in January.

As many as 15 pre-Series A and Series A funding deals, worth $88.3 million, were clocked in February. This is an increase of about 59% over January in value.

In terms of value, growth-stage startups led February’s fundraising. Companies in the Series B or post-Series B rounds collected an aggregate of $842.6 million — about 65% of the total deal value — through 15 investments.

Late-stage deals had hit a hurdle after Indian tightened restrictions on capital inflow from neighboring countries, particularly China. Till last year, Chinese investors, such as Alibaba and Tencent, were active investors in Indian growth-stage startups.

Most active investors

Palo Alto-headquartered VC firm Accel was the top investor in February with at least five deals in its kitty including, microblogging app koo, sales acceleration platform Zomentum, cross-border neobank Zolve, ready-to-cook food brand Fingerlix, online procurement marketplace Infra.Market. Accel had raised $550 million for its sixth India fund in December 2019.

Blume Ventures, which had reached the final close of its third fund at $102 million a year ago, was the second most active investor with four investments. This January, Blume Ventures had also launched Blume Founders Fund to invest in startups outside its main funds. The fund will utilise 1-2% of the core investment funds.

Meanwhile, venture capital firms Lightspeed Venture Partners, Better Capital, Tiger Global, and Sequoia Capital India made at least three investments each.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.