India Deal Review: Funding sees uptick in August as startups raise $646m

Photo: Reuters

Even as COVID-19 continues to hound India’s overall economic growth, startup funding, which had plunged after the first nationwide lockdown in March, is showing some green shoots of revival.

Indian startups raised $646 million funding across 84 venture capital and private equity transactions in August led by investments in the education technology space, according to proprietary data compiled by DealStreetAsia. This is a marginal increase from July when startups had collectively raised at least $611.22 million across 82 deals.

Of the total transactions in August, value of as many as 23 deals were undisclosed.

Bengaluru-based edtech unicorn Byju’s raised the largest financing in the month—$122 million from DST Global, the investment fund headed by tech billionaire Yuri Milner, as part of its Series F funding round. The Byju Raveendran-led company has raised around $1 billion since January, a sign of surging interest in Indian edtech firms as the pandemic has brought online learning to the forefront.

The venture capital world is also investing more in software startups as they are helping businesses with unheard-of solutions. The financial services sector, too, is prominent in investors’ radar as more consumers switch to digital modes of payment.

Meanwhile, many other industries are struggling to stay afloat, including those in the travel, consumer services, food, and hospitality space. E-commerce was among the big losers in the initial months of the lockdown due to fears of supply chain disruptions, but it has now started to witness an uptick in demand.

Edtech continues to grab investors’ eyeballs

Three industries — education/training, software, and financial services — together raised $497 million through 36 deals in August, accounting for about 77 per cent of the total funding.

Startups in the education/training industry alone raised $309.20 million across 11 deals. Apart from Byju’s, Mumbai-based Eruditus raised the second-largest round of $113 million within education, led by Leeds Illuminate and South African internet giant Prosus Ventures (formerly Naspers Ventures).

Other education technology startups to have secured funding during the month include Springboard, Teachmint, Masai School, Lead School, and upGrad Education, among others.

 

Investments in India’s financial technology firms, too, continue to grow. Financial services startups raised a total of $74 million through 12 transactions in August. ISFC, a non-bank lender focused on lending to educational institutions and entrepreneurs managing such institutions, raised the largest round of $30 million within the financial services industry from existing investor Gray Matters Capital and non-banking financial companies (NBFCs) including Incred, U Gro Capital, and Profectus Capital.

Eduvanz Financing, Aviom India Housing Finance Pvt Ltd, FPL Technologies, iServeU Technologies, and Avail Finance were among the other financial services startups that raised financing during the month.

According to a RedSeer Consulting report, digital payments in India are expected to grow over three-fold to Rs 7,092 trillion by 2025 on account of government policies around financial inclusion and the growing digitisation of merchants. According to the report, wallets will continue to play a key role in its growth with the continuous increase in both frequency and user base. The country’s digital payments market was worth around Rs 2,162 trillion in 2019-20.

After the financial services industry, healthcare services garnered the highest funding at $37.4 million across four deals. On the other hand, the internet industry raised a total of $31.7 million through 11 transactions.

Investors pursue early-stage deals

Increased investor interest in good business ideas is evident from the rise in the number of early-stage deals. As many as 15 pre-Series A funding deals, worth $17.4 million, were clocked in August. Meanwhile, about nine Series A transactions were closed, which together raised $43.6 million.

Investors have also started to pursue seed-stage deals again in the past two months. The number of pre-seed and seed-stage deals in August stood at 21 last month that raised about $26 million, particularly in the areas of healthtech, software as a service (SaaS) and edtech.

In terms of value, growth-stage startups led August’s fundraising. Companies in the Series B or post-Series B rounds collected an aggregate of $425.75 million — over 66 per cent of the total deal value — through nine investments.

Moreover, with India’s new foreign direct investment policy in place amid the military standoff with China, inflow of Chinese money into the Indian startup ecosystem has slowed down. Earlier, Chinese investors, such as Alibaba and Tencent, were active investors in Indian growth-stage startups.

Most active investors

Silicon Valley investor Sequoia Capital topped the most active investors’ list by backing at least eight startups. Some of its investments during the month included video analytics firm Wobot Intelligence, water purifier startup DrinkPrime, education loan platform Eduvanz Financing, and healthtech platform Practo, among others.

Earlier this year, Sequoia Capital India mentioned in its newsletter that its existing portfolio across India & ASEAN raised a total of $2.8 billion in Q1 2020 from a clutch of investors. In July, Sequoia India also raised a total of $1.35 billion for two new funds that will invest across India and Southeast Asia.

Venture capital firm Better Capital and startup accelerator Y Combinator were the second most active investors backing at least four startups each in August. Other investors including 3one4 Capital, Inflection Point Ventures, Keiretsu Forum, Matrix Partners, and Venture Catalysts made at least three investments in August.

The $50 million-plus club

Three startups made it to the $50-million-plus club in the month—Byju’s, Eruditus, and Redis Labs.

Database software startup Redis Labs bagged the unicorn (over $1 billion valuation) status in the month by raising $100-million in Series F funding led by Bain Capital Ventures and TCV.

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.