Startup funding: Money will not dry up, will look for quality

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

According to Indian Angel Network president Padmaja Ruparel, there has been an increase of 20% in the number of deals but the overall amount has gone up by 12%

While there are concerns about money drying up for start-ups in the country this year, venture capitalists say there is more money coming into the country but it will find its way only into quality ventures.

As a result, venture capitalists are going into a lot more details than before. So no more raising of funds and picking up cheques in coffee shops. And this is not bad, they reckon, as many people were starting up ventures just because capital was easily available.

Indian Angel Network president Padmaja Ruparel said that he has seen an increase of  20% in the number of deals but the overall amount has gone up by 12%.

“There is a huge interest among the investor groups in a variety of sectors. But there is much more diligence on how much money is required,” said Ruparel. There will be much deeper, sharper diligence and unit economics would be in focus, she said at a panel discussion on Raising and Deploying Funds in a Changed World at TieCon Pune, 2016.

Amid this talk of gloom and doom, people have raised huge funds but then they will be deployed carefully, said Sanjay Nath, co-founder Blume Ventures. “There is no rush to deploy funds and more time will be taken on deals,” he said adding, “good companies and quality founders are raising larger rounds of money.”

SAIF Partners MD & Advisor Alok Goel said around $2.5 billion would be deployed in two to three years and all this talk of money not being there was not true. “The most risk averse guys were becoming entrepreneurs just because capital was available and this was a risk. The craziness of the last 15 months of funding was worrying,” Goel said.

Remaining bullish about 2016, he said the consumer pain points were still there and those who could cut through the clutter would get funding.

Goel said the VC industry had seen three distinct phases in the country – prior to 2013 it was all about replicating successfully models of the West here; between 2013 an 2015 ideas were being copied here before even being tested and tried in the US, which doubled the risk in the business and was not going to work. The new phase is about looking at India specific problems and solving them instead, he said.

Qualcom Ventures VP Karthee Madasamy said such ups and downs were part of the cycle and they remain unfazed. “We have done six plus follow-on and new deals last year. We will do the same this year and have no plans to change that,” said Madasamy.

He expects India to do well in the area of hardware in the next few years with lot of start-ups coming up in India in this sector.

Source: http://www.financialexpress.com/article/industry/companies/deeper-due-diligence-precedes-start-up-funding/239822/

Lending for small companies is a $300 million business

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

While bigger SME lending players like Lending Kart and Capital Float aim to close their next funding rounds, a slew of smaller players have emerged in the last year viewing the space as a segment where at least 10 strong players can coexist.

Amongst the new players, Puneet Dalmia-backed CoinTribe, which was launched in February, uses a proprietary algorithm to link up multiple data sources ranging from the credit bureau to social media determining the credit worthiness of an SME within minutes. The startup has tied up with private sector banks that use their platforms to process SME loans.

“Our ticket size for loans range between Rs 30,000 to Rs 20 lakh. We offer an interest rate of 13-18% and receive upto 30 applications on a daily basis,” said Amit Sachdev, cofounder at CoinTribe. The fintech player has an acceptance rate ranging between 25 and 30% for all of its applicants.

Tracxn Labs-backed LoanZen has not tied up with any banking partners yet and focuses on disbursing its loans from the capital raised in its first round. The startup, which claims that it receives up to 20 applications daily, offers loans up to Rs 10 lakh at an interest rate, ranging between 18 to 24%.

“We aim to complete the credit risk evaluation in a matter of minutes and disburse loans within 3 days. Since sectors like kirana stores and budget hotels cannot avail of loans from traditional banks, there is a lot of room for several players to emerge in this space,” said Madhu Sudhan, cofounder of LoanZen. The startup uses an artificial intelligence-based system to carry out the credit risk evaluation and looks at parameters like bank, taxation and accounting data. LoanZen claims to have disseminated loans up to Rs 50 lakh in the month of March.

According to Gaurav Hinduja, the co-founder of Capital Float, SME lending is a very deep vertical in India, despite banks and NBFC’s lending approximately $150 billion to this sector.

The unmet need is still over $300 billion and at least 20% of this can be tapped by new age tech lenders.

“It’s definitely not a winner take all market and we will see several startups attacking different niches in the market. We are likely to see at least 10x growth in fintech alternate lenders. There will also be a growing number of interesting partnerships between institutions and new fin tech lenders,” added Hinduja. Abhishek Goyal, the founder of Tracxn, believes that despite several players entering the SME lending sector, few will survive the current funding climate.

Source: http://economictimes.indiatimes.com/articleshow/51818398.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Sebi may soon revisit start-up listing norms

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

The Securities and Exchange Board of India (Sebi) may soon review its framework for listing of start-ups, including e-commerce firms, while incorporating suggestions from various stakeholders to make this platform much more vibrant.

The Institutional Trading Platform (ITP) is yet to see any start-up listing ever since an easier set of compliance and disclosure requirements was notified in August 2015.

These norms have been put in place to encourage Indian start-ups and entrepreneurs to remain within the country rather than go abroad for funds.

Under the rules, start-ups can list on the separate ITP of stock exchanges such as BSE and NSE.

The platform is open to only institutional investors and high networth individuals (HNIs), while retail investors have been excluded in order to safeguard small investors against a higher level of risks associated with this platform.

Many start-ups believe that the current listing norms are unattractive for them to list in India. Moreover, not a single company got listed on the relaxed ITP platform.

Now, Sebi is likely to review the ITP norms soon. It will also incorporate suggestions from various stakeholders to make this platform much more vibrant, sources said.

Sebi’s Primary Market Advisory Committee (PMAC) has also suggested that norms should be reviewed as the matter progresses.

Under the notified rule, minimum trading lot and the minimum application size have been kept at Rs 10 lakh so that only sophisticated and large investors come in.

For their listing, Sebi also relaxed the mandatory lock-in period for promoters and other pre-listing investors to six months, as against three years for other companies.

Besides, the disclosure requirements for these companies have been relaxed.

The companies can, however, graduate to the main platform later and the small investors can also invest at that time.

Earlier this month, Infibeam Incorporation made a stock market debut becoming the first e-commerce player in the country to get listed. The firm got listed on the main-board instead of institutional trading platform.

Source: http://www.business-standard.com/article/markets/sebi-may-soon-revisit-start-up-listing-norms-116041500531_1.html

Korn Ferry to help Indian start-ups

by | posted in: Corporate Updates, Cross Border Transactions, M&As, Joint Ventures, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0
Stephen Kaye, CEO of Korn Ferry Hay Group

US-based global management consultancy giant Korn Ferry Hay Group has embarked on an ambitious plan to support for free 100 start-ups from India that have potential to grow big, its CEO Stephen D Kaye said on Friday.

Talking about the group’s ambitious NextBig100 programme, Kaye said it is supporting the next big-100 start-ups in India and would help them as they go through various growth stages.

“We are working alongside those companies to help them move forward and to support the development of business in India.”

Source: http://www.thehindubusinessline.com/companies/korn-ferry-to-help-indian-startups/article8451964.ece

Private sector lender Federal Bank to support startups

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Jumping on to the startup bandwagon, Kerala based private sector lender Federal BankBSE -1.38 % is opening incubation centres in Bangalore and Ernakulam exclusively for startups. These would be specialised lounges within Federal Bank branches meant for funding advisory, regulatory support and if required even for direct investment.

“We have a dedicated startup fund worth Rs 25 crore which we would like to use to fund or lend to promising startups. These lounges, named Launchpad, with fast internet connections, support staff from the financial world and advisory mechanisms would be the perfect breeding ground for future entrepreneurs,” said Shyam Srinivasan, managing director, Federal bank.

The lounge would be manned by bank officers who would be capable of dealing with the financial requirements of the startups as well as local specialists who would be able to advise on regulatory issues that entrepreneurs need to handle.

“We are talking to 3 or 4 startups daily. The challenge for a bank is to move away from a conservative credit mind set to a more entrepreneurial mind set and to accept the fact that out of 40 or 50 investments only one might take off. So even we are in the process of understanding how to engage with startups better,” he said.

The bank follows the footsteps of HDFC Bank and Bank of Baroda to integrate their platform with mobile payments application Chillr. The addition that Federal Bank brings to the Chillr app is that they would allow even non Federal Bank users to instantly open a Federal Bank account through a selfie and Aadhar identification number and allow them to receive payments through Chillr.

“This is just another offer in the suite of offerings for the customer. We are in the major discovery process slowly there would be convergence in this field,” said Srinivasan.

E-commerce sees major money inflow

by | posted in: Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

It is not only Uber, the American taxi-hailing app, that is going all guns blazing in India with massive investment plans. Its biggest competitor, Bengaluru-based Ola, as well as e-commerce entities Flipkart and Amazon, are all planning to pump in big money to stay ahead, even in a scenario when investors are not as ready as earlier in opening their purse-strings.

Uber India has readied itself for another $500 million (Rs 3,300 crore) investment in the next three months, reports suggest. The app service had only nine months earlier committed $1 billion (Rs 6,600 crore) in India. Uber could not be reached for a comment.

For foreign giants such as Amazon, Uber and Alibaba, this country is a big market they all want to capture. Experts believe this is a trend which will continue, as a global economic slowdown will push a chunk of new investments towards India.

“We can clearly see a slowdown in overseas markets, while India is still managing annual growth of seven to eight per cent. So, companies such as Uber, Amazon and Alibaba want to bet big on India. While Amazon was not able to make a dent in China and Alibaba in Europe, they do not want to lose out on India. We will see this trend through the year,” says Amarjeet Singh, partner – tax, KPMG in India.

Ola, rival of Uber in the same segment, is on track to invest a chunk of its $1.3 billion (Rs 8,650 crore) capital raised so far. The firm recently announced it would invest Rs 200 crore in the Delhi-National Capital Region area over the next six months, “towards innovative green fuel technology, leasing of CNG cars and strengthening the system to catalyse greater CNG adoption in the region”, Rahul Maroli, its vice-president for strategic supply initiatives had said.

According to sources, Ola will further make strategic investments in all metro cities, as well as in Tier-II and Tier-III towns. “The company plans to add at least another 550,000 vehicles by the end of this year,” said one. Ola has at least 350,000 cabs and 80,000 auto rickshaws on its platform across 102 cities in the country.

American e-commerce major Amazon had said in October 2014 it was investing $2 billion (Rs 13,200 crore) in India. Later, its executives said the group had an open chequebook for the market. In February, it bought Noida-based payments services provider Emvantage, its first acquisition. This is aimed to help Amazon accelerate the development of payment solutions for customers.

As for Alibaba, the Chinese e-commerce giant, it already has a foothold in Indian e-commerce through its investments. The group is majority stakeholder in One97Communications, owner of mobile payments giant Paytm. Also, online marketplace major Snapdeal raised $500 million (Rs 3,300 crore) from a group of entities last year which included Alibaba.

The Chinese company now plans to directly enter India.

“We plan to enter the e-commerce business in India in 2016,” recently said J Michael Evans, group president. “We have been exploring very carefully the opportunity in this country, which we think is very exciting against the backdrop of (the) Digital India (programme of the government).”

Indian e-commerce giant Flipkart had, in March, infused Rs 338 crore into its online fashion store, Myntra, documents filed with the registrar of companies stated. Flipkart has so far raised $3 billion (nearly Rs 20,000 crore).

Source: http://www.business-standard.com/article/companies/e-commerce-sees-major-money-inflow-116032800986_1.html

Indian start-ups get back to basics

by | posted in: Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs, India & International - Corporate updates | 0

India’s start-ups have a new catchphrase – back to basics. Traditionally, these businesses have focused on fundamentals -invest to grow while ensuring one doesn’t burn money in chasing eyeballs that do not translate into revenue and profit.

The year 2015 was an aberration, with soaring valuations and nearly Rs 36,000 crore or $5 billion in venture capital and private equity money pumped into start-ups. Now, with a global reset by investors to tighten their belts and relook at how businesses are run, India has also been hit.

TREADING CAUTIOUSLY
  • Investors pumped $5 bn in start-ups in 2015
  • As global investors tighten belts, Indian start-ups are impacted
  • Investors seek to look at business value than valuation of business
  • Morgan Stanley writes down investment value in Flipkart by 27 per cent
  • Now, investors are focusing on business fundamentals
  • Start-ups shed jobs, cut down on high spends and focus on building sustainable business

Several entities that followed the burn-cash model have been forced to shed jobs and improve their business models. Among the more known names, Zomato, Housing and TinyOwl have shed jobs. Flipkart, the largest e-commerce company and the most highly valued start-up, saw investor Morgan Stanley mark down the value of its (minority) stake by 27 per cent. While factors such as growing competition and not meeting the growth targets could have influenced this, the message for the rest of the start-up system was clear – pull up your socks.

“One thing which certainly happened was that the valuations of B2C (business to consumer) companies weren’t justified. What you’re seeing is more in terms of right-sizing or to be fairly valued,” said Sanjay Nath, managing partner at Blume Ventures. “I wouldn’t use the term ‘bubble’, as that would signify India’s fundamentals are not strong. That’s definitely not the case.”

The fundamentals of India as a market are very strong, he adds. There’s a huge growth in smartphone sales, the uptake of third-generation (3G) technology data connectivity is growing and 4G services are coming in. Growth in tier-II and tier-III cities is very high, and as these are highly underpenetrated, the opportunities are immense.

“Recession is when good companies are built. I’m not saying there’s one, so these are good times,” says Shashank N D, co-founder and chief executive officer of Practo, a health care technology entity.

To grow fast and outdo the competition, several start-ups in the B2C space, especially the segments of foodtech and hyperlocal, began to offer discounts and cash-backs, despite making a loss on each such transaction. This unsustainable model of business is on the way out. Investors now are pressurizing companies in their portfolio to focus on operational efficiency, improve productivity, keep costs low and move to profitability.

“Suddenly, a view to profitability is coming in and the view of discounting and cash-backs is being rolled away slowly. It’s being done very subtly, which is why nobody is noticing it, but it’s happening,” said Ash Lilani, managing partner and co-founder at Saama Capital. “A lot of good investors are making sure their good companies are financed for the next 18-24 months. But, it’s rationalisation, it’s (about) coming back to earth.”

Start-ups have begun looking at ways to conserve cash, with the slump in funding the market is currently going through. Despite this, there’s a lot of optimism that the market will recover and investors will open their purse strings, though it is presumed the pace of investments would substantially reduce.

“The overall investment in the latter part of 2016 should catch up, as you can’t just not make investments and sit because the money is there. Unnecessary funding or crazy funding which was happening will slow down a bit but good companies will raise much more money this year,” said Shekhar Kirani, managing partner at Accel Partners India.

Rajan Anandan, managing director of Google India and prolific backer of start-ups as an angel investor, says the best is yet to come out of India. “If you think of this evolution as a series of (cricket) test matches, let’s say it’s a five-test series and we’re at the first test in the third day. We have to finish the first test, go to the second, then the third. It’s very early. There are going to be periods of ups and downs; it’s a bump in the road,” was the way he put it.

Source: http://www.business-standard.com/article/companies/indian-start-ups-get-back-to-basics-116030700027_1.htm