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Investors race to win early-stage startup deals in India – | #Tech

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Investors race to win early-stage startup deals in India – TechCrunch

India may be grappling with the second wave of the coronavirus, rising unemployment, and a dwindling economy, but the South Asian nation’s burgeoning startup ecosystem has never had it better.

High-profile investors in India have long aggressively chased growth-stage, and late-stage deals, pouring record amounts of capital into the world’s second largest internet market. But in a sign of the growing investor bullishness regarding Indian startups, even early-stage companies that have largely been bereft of much similar attention in recent years are now sharing the limelight.

More than 70 early-stage Indian startups are currently in advanced stages of talks to raise money, according to sources familiar with the matter. The size of the investments vary from a few million dollars to up to $100 million. TC is reporting some of the more notable deals today.

The usual caveat — that many of deals haven’t yet closed, and that their terms could change or the talks may not materialize into an investment — applies in our reporting. The deals described below have not been previously reported.

Sequoia Capital India, the most prolific investing firm in the country, is in talks to make bets in over two-dozen Indian startups including Register Book, a firm that operates an eponymous bookkeeping app; Vah Vah, which runs an app to educate people about makeup from artists; SaaS platform BambooBox, and email marketing software provider MailModo.

The firm is also in talks to back, alongside venture fund Nexus, OneCode, a startup that runs an app to connect digital-first brands with sellers. Sequoia Capital India, which launched a dedicated fund for early stage startups called Surge two years ago, is also in talks to invest in Probo, an app to predict future trends; and Rattle.

Vaibhav Domkundwar, who runs Better Capital, said the early-stage startup scene in India has never been this hot.

“Pre-seed and seed stage momentum is at its peak, but we are also seeing pre-emptive rounds at Series As and Bs now,” he told TC.

Domkundwar, who has backed over 140 startups including Khatabook and neobank Open, attributed some excitement to the new generation of founders in India, who he said are building product-first and distribution-first companies. “We are seeing the fastest pace of investment in these teams,” he said.

A different investor, who requested anonymity, said that second time founders are now able to raise on a deck or a Notion doc from elite angels, unicorn founders and microVCs. The pace at which these founders are able to close the deal, the investor said, was “stunning.”

The frantic pace of investments in early-stage deals come as many of the more mature bets have become unicorns in India and many established startups are finally exploring taking the public markets.

India has birthed 14 unicorns this year, up from 11 last year and just 6 in 2019. High-profile investors such as Tiger Global and Falcon Edge Capital have increased their focus on India this year and winning founders with their large size of checks, higher valuation, access to resources, and quick turnaround time.

Many established firms are now chasing early-stage deals.

GSV is in talks to invest in Filo, a startup that operates an eponymous tutor app; and payments stack startup Inai has closed a new round from Better Capital and others and will be part of Y Combinator’s next batch. (Speaking of which, Y Combinator’s previous batch featured its largest cohort of Indian startups in history.)

One-year-old startup BrightCHAMPS, which has built a coding and math platform for kids, is currently in talks with GSV and Tiger Global to raise about $70 million.

Indiagold, a startup that allows people in the South Asian nation to access credit against their gold reserve, is in talks to close a new round with two high-profile foreign investors that have traditionally backed growth and late stage deals.

Germany’s Razor Group is in late stage talks to invest in Upscale, a startup that is attempting to replicate the Thrasio model in India.

Fintech investor RTP is in talks to invest in Fleek, a startup that is building “a payments system for subscription economy.” Falcon Edge’s AWI is in talks to invest in Absolute Foods and fitness subscription platform Ultrahuman, while SaaS platform AccelData has been approached by Bessemmer and WestBridge.

For high-profile investors with billions in dry powder, there are many rewards for spotting a promising startup in its initial years. One can buy a much larger stake in a startup for lower prices before the valuation of the startup — assuming things work out well — soars. Investing early also reduces the amount an investor may lose should things with the portfolio firm goes south.

But not everyone is happy with the new dynamics.

An investor with a micro fund told TC — on the condition of anonymity to speak candidly — that involvement of bigger investors in early stage deals has made it tougher for smaller firms to source new deals as the bigger investors are now aggressively trying to close entire rounds by themselves.

The investor said there is an additional competition in the market now: groups of high-profile founders, who tend to collectively back startups.

The investor cited earlier in the story termed these investments as “optionality checks.” These optionality checks — that usually back second time founders or first time founders who previously worked at a unicorn or soonicorn — started with the Series A crowd such as Sequoia Capital India, Matrix, Lightspeed India Partners, he said. Now, the investor said, Tiger and Falcon / AWI are doing it, too.

There are two implications of these optionality checks, the investor said. “They make life more difficult for microVCs / seed VCs as they cannot compete with the Tigers or Falcons or Series A funds who can cut ‘smaller’ checks with impunity, and perhaps even dilute less.”

But the investor cautioned the founders who are raising such optionality checks. “If the same fund doesn’t back them in the next round, then the negative signal can imperil their chances of raising from other VCs. Second, the excess money that they get can sometimes encourage faster expansion and higher spends.

Lightspeed India Partners, best known for its investments in unicorns Oyo Rooms and e-commerce platform Udaan, is in talks to back Vegrow, a startup that partners with farmers; and has held talks to invest in 100ms.live, which operates an eponymous tool to help developers add video conferencing features to their apps, as well as edtech startup Kalaam Labs.

Dyte, which is building a “Stripe for live video calls,” is in talks with Nexus and Sequoia Capital India. Elevation Capital, which is also in talks to invest in VeGrow, is inching closer to investing in FamPay, which offers credit cards to teens at about $150 million valuation. Bangalore-based Chiratae Ventures is in the final stages of talks to invest in AroLeap and analytics startup Locale.ai.

Fanplay, a platform for social media influencers to monetise via mobile games, has already raised from several American microVCs, but the round hasn’t closed yet. Mumbai-headquartered due diligence and monitoring platform Advarisk has been approached by “several investors” but has yet to close the round.

Trading signals provider Tradex is in talks to raise from Leo Capital. Audio social media app Frnd, radio and podcast aggregator app Kuku FM, and crop management platform Bharatagri are also in advanced stages of talks with investors to raise capital.

Plug and play payments provider Card91 has been approached by several investors, but hasn’t closed the round yet. Tournafest has closed a round from a clutch of angel investors, and so have Easy Eat and Stockgro. Kosh has raised from YC, and VentureSouq among others.

Tech veteran Nandan Nilekani’s firm Fundamentum is in talks to back Bijak, which operates a business-to-business marketplace to trade agricultural commodities, and supply chain startup Reshamandi.

A survey by InnoVen Capital, results of which were published on Thursday, said that over 80% of the investors it had surveyed said their dealflow for early-stage startups had increased this year, compared to 2020.

Over 75% of the respondents in the same survey said the valuations in recent deals were on the “higher side” because of the “intense competition for high quality deals and entry of large established VCs in this space.”

“Early-stage investment activity has proven to be resilient despite the pandemic, with bigger transaction sizes and higher valuations, a clear sign of a maturing early-stage ecosystem,” said Tarana Lalwani, Senior Director at InnoVen Capital India.

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How many opinions does it take to hit the $100M ARR Club? – | #Tech

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How many opinions does it take to hit the $100M ARR Club? – TechCrunch

In a world of talking points and corporate jargon, opinions are refreshing — and Expensify CEO and founder David Barrett is full of them. One of his earliest lessons in life, for example, was that basically everyone is wrong about basically everything. If instilling that at a young age doesn’t force you to become an entrepreneur, I don’t know what does.

Barrett’s ethos has, as reporter Anna Heim puts, led to Expensify having “its own take on almost everything” from hiring without job titles and resumes, to going distributed before it was cool, to having an almost non-existent sales team.

And before you roll your eyes at the unconventional, here’s a factoid for you: Today, the 130-person expense management business has reached more than 10 million users and hit $100 million in annual revenue.

Heim has spent months working on the Expensify EC-1 to connect dots and give us a full picture into an anything-but-conventional company as it heads toward an IPO. The final installment published this week so you can read the whole series in one straight shot:

In the rest of this newsletter, I’ll walk you through a refresh of some new investment vehicles and two fintech mega-rounds to know. I also want to give a shout out to our mobility team, with transportation editor Kirsten Korosec and reporters Aria Alamalhodaei and Rebecca Bellan, who led efforts to put on a fantastic event at TC Sessions: Mobility this week.

Ok, into the news!

More money, more representation?

Image Credits: Black_Kira / Getty Images

As I discussed last month, venture capital is going through yet another unbundling process. But, for every savvy fintech syndicate out there, I don’t see the same level of explicitness when it comes to the tools that help the communityless, undernetworked and underestimated access opportunities.

Here’s what to know: Two new efforts this week give me hope. Ten venture capitalists teamed up to launch Screendoor, which Forbes reports is a $50 million fund-of-funds to back emerging fund managers from diverse backgrounds. The partners, which include Charles Hudson, Kirsten Green, Aileen Lee and Hunter Walk, will not take any fee or carry in the fund.

Speaking of cross-fund collaboration, Utah-based startup incubator Altitude Lab had similar news to share. The incubator, which spun out of Recursion and the University of Utah, has launched a 13-investor coalition to back underrepresented health tech founders. This week, it announced a $50 million commitment in funding and mentorship.

And if you want to have more fun(ds):

The Fintech twins

Handle of door to bank vault safe

Image Credits: Janet Kimber (opens in a new window) / Getty Images

Three is a trend, but two means twins, and that matters too! Riddles aside, we saw two fintech giants raise massive tranches of capital within days of each other.

Here’s what to know: Klarna raised $639 million at a $45.6 billion valuation, and Nubank raised $750 million at a $30 billion valuation. Both fintech companies are based outside of the United States, but Klarna attests some of its rapid growth to a growing consumer base in the United States. More than 18 million American consumers are now using Klarna, which is up from 10 million at the end of last year’s third quarter. Meanwhile, Nubank is staying focused on its primary market of Brazil, with some expansion in Colombia and Mexico.

 Demystifying mega-rounds:

The huge TAM of fake breaded chicken bits

Another week, another spicy Equity episode for you. And this week, we mean it literally: Simulate, the company behind those sometimes spicy fake chicken nuggets, raised a ton of money.

Here’s what to know: Beyond fake meat, topics in this week’s episode include worker empowerment, culture in startups, eldercare and a $900 million exit.

Around TC

Across the week

Seen on TC

read more about Apple's WWDC 2021 on TC

Seen on Extra Crunch

Talk next week,

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Jeff Bezos’ Blue Origin auctions off seat on first human spaceflight for $28M – | #Tech

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Jeff Bezos’ Blue Origin auctions off seat on first human spaceflight for $28M – TechCrunch

Blue Origin has its winning bidder for its first ever human spaceflight, and the winner will pay $28 million for the privilege of flying aboard the company’s debut private astronaut mission. The winning bid came in today during a live auction, which saw 7,600 registered bidders, from 159 countries compete for the spot.

This was the culmination of Blue Origin’s three part bidding process for the ticket, which included a blind auction first, followed by an open, asynchronous auction with the highest bid posted to the company’s website whenever it changed. This last live auction greatly ramped up the value of the winning bid, which was at just under $5 million prior to the event.

This first seat up for sale went for a lot more than what an actual, commercial spot is likely to cost on Blue Origin’s New Shepard capsule, which flies to suborbital space and only spends a few minutes there before returning to Earth. Estimates put the cost of a typical launch at someone under $1 million, likely closer to $500,000 or so. But this is the first, which is obviously a special distinction, and it’s also a trip that will allow the winning bidder to pretty much literally rub elbows with Blue Origin founder Jeff Bezos, who is going to be on the flight as well, along with his brother Mark, and a fourth passenger that Blue Origin says it will be announcing sometime in the coming “weeks,” ahead of the July 20 target flight date.

As for who won the auction, we’ll also have to wait to find that out, since the winner’s identity is also going to be “released in the weeks following” the end of today’s live bidding. And in case you thought that $28 million might represent a big revenue windfall for Blue Origin, which has spent years developing its human spaceflight capability, think again: The company is donating it to its Club for the Future non-profit foundation, which is focused on encouraging kids to pursue careers in STEM in a long-term bid to help Bezos’ larger goals of making humanity a spacefaring civilization.

You can re-watch the entire live bidding portion of the auction via the stream below.

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UBS investment makes Byju’s the most valuable startup in India – | #Tech

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UBS investment makes Byju’s the most valuable startup in India – TechCrunch

Edtech giant Byju’s has become the most valuable startup in India after raising about $350 million in a new tranche of investment from UBS Group and Zoom founder Eric Yuan, Blackstone and others that valued the Bangalore-based firm at $16.5 billion (post-money).

In a new filing, Byju’s revealed that scores of investors including Abu Dhabi government fund ADQ and Phoenix Rising had together invested about $350 million in the startup. The new valuation helps Byju’s surpass Paytm, which was last valued at $16 billion, for the crown position in the Indian startup ecosystem. (Paytm is currently working on exploring the public markets and eyeing to raise as much as $3 billion and eyeing a valuation of up to $30 billion.)

The new tranche of investment is part of a larger round that Byju’s kickstarted earlier this year and is looking to secure over $1.5 billion. Some of its recent investors also include B Capital Group and hedge fund XN. The startup was valued at $11 billion late last year, and $5.75 billion in July 2019.

The startup plans to use the fresh capital, in part, to acquire more startups. Byju’s, which acquired Indian physical coaching institute Aakash for nearly $1 billion earlier this year, is conducting due diligence to buy and online learning startup Toppr and has also engaged with U.S.-based Epic, TC reported earlier this year.

Byju’s prepares students pursuing undergraduate and graduate-level courses, and in recent years it has also expanded its catalog to serve all school-going students. Tutors on the Byju’s app tackle complex subjects using real-life objects such as pizza and cake.

The pandemic, which prompted New Delhi to enforce a months-long nationwide lockdown and close schools, accelerated its growth, and those of several other online learning startups including Unacademy and Vedantu.

As of early this year, Byju’s said it had amassed over 80 million users, 5.5 million of whom are paying subscribers. Byju’s, which is profitable, generated revenue of over $100 million in the U.S. last year, Deborah Quazzo, managing partner of GSV Ventures (which has backed the Indian startup), said at a session in March held by Indian venture fund Blume Ventures.

The startup executives said at a UBS event earlier this year that Byju’s current revenue run rate is $800 million, a figure they expect will reach $1 billion in the next 12-15 months. It has also accelerated its international expansion plans in recent months.

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The air taxi market prepares to take flight – | #Tech

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The air taxi market prepares to take flight – TechCrunch

Twelve years ago, Joby Aviation consisted of a team of seven engineers working out of founder JoeBen Bevirt’s ranch in the Santa Cruz mountains. Today, the startup has swelled to 800 people and a $6.6 billion valuation, ranking itself as the highest-valued electric vertical take-off and landing (eVTOL) company in the industry.

As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors.

It’s not the only air taxi company to reach unicorn status. The field is now dotted with new or soon-to-be publicly traded companies courtesy of mergers and special purpose acquisition companies. Partnerships with major automakers and airlines are on the rise, and CEOs have promised commercialization as early as 2024.

As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors. A quick peek at comments and posts on LinkedIn reveals squabbles among industry insiders and analysts about when this emerging technology will truly take off and which companies will come out ahead.

Other disagreements have higher stakes. Wisk Aero filed a lawsuit against Archer Aviation alleging trade secret misappropriation. Meanwhile, valuations for companies that have no revenue yet to speak of — and may not for the foreseeable future — are skyrocketing.

Electric air mobility is gaining elevation. But there’s going to be some turbulence ahead.

Big goals and bigger expenses

Taking an eVTOL from design through to manufacturing and certification will likely cost about $1 billion, Mark Moore, then-head of Uber Elevate, estimated in April 2020 during a conference held by the Air Force’s Agility Prime program.

That means in some sense, the companies that will come out on top will likely be the ones that have managed to raise enough money to pay for all the expenses associated with engineering, certification, manufacturing and infrastructure.

“The startups that have successfully raised or that will be able to raise significant amounts of capital to get them through the certification process … that’s the number one thing that’s going to separate the strong from the weak,” Asad Hussain, a senior analyst in mobility technology at PitchBook, told TC. “There’s over 100 startups in the space. Not all of them are going to be able to do that.”

Just consider some of the expenses accrued by the biggest eVTOLs last year: Joby Aviation spent a whopping $108 million on research and development, a $30 million increase from 2019. Archer spent $21 million in R&D in 2020, according to regulatory filings. Meanwhile, Joby’s net loss last year was $114.2 million and Archer’s was $24.8 million, though, of course, neither company has brought a product to market yet. Operating expenses will likely only continue to grow into the future as companies enter into manufacturing and deployment phases.

What that means for the future of the industry is likely two things: more SPAC deals and more acquisitions.

Mobility companies, including those working on electrified transport, are often pre-revenue and have capitally intensive business models — a combination that can make it difficult to find buyers in a traditional IPO. SPACs have become increasingly popular as a shorter, less expensive path to becoming a public company. SPACs have also historically received less scrutiny than IPOs. Should the U.S. Securities Exchange Commission start to take a closer look at SPAC mergers in the future, it may impair the ability of other air taxi companies to go public this way, Hussain said.

That means market consolidation is nearly guaranteed, as smaller companies may find it more advantageous to sell than continue to raise more capital. It’s already begun: At the end of April, eVTOL developer Astro Aerospace announced the acquisition of Horizon Aircraft.

Horizon cited “greater access to capital” as one of the many benefits of the transaction, and other companies will likely find the buy or sell route to be the most beneficial on the road to commercialization. And just last week, British eVTOL Vertical Aerospace, which has an order for 150 aircraft from Virgin Atlantic, said it would go public via a merger with Broadstone Acquisition Corp. at an equity value of around $2.2 billion.

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SOSV, the global venture firm, just closed a $100 million fund to back its maturing startups – | #Tech

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SOSV, the global venture firm, just closed a $100 million fund to back its maturing startups – TechCrunch

Sean O’Sullivan, the founder of the global venture outfit SOSV, has slowly but steadily built up a sizable operation over the years.

SOSV started off as a family office, investing the capital of O’Sullivan after he cofounded two companies, including MapInfo, an outfit that went public in 1994 before Pitney Bowes it years later, in 2007. The seed-stage investing outfit went on to raise three more funds, including a $277 million early-stage fund that it closed in 2019 and is actively investing from right now.

Now, to complement those funds, the organization has raised $100 million for what it’s calling a Select Fund, a vehicle meant to help SOSV maintain its pro rata stake in some of its breakaway portfolio companies.

Because of other tools in the market, SOSV wasn’t completely hamstrung until now. Instead, SOSV has, on occasion, assembled a special purpose vehicle to re-invest in certain of the startups it has backed. But O’Sullivan says these were relatively small SPVs — think $2 million in size or less. The new fund, he says, is expected to write checks of between $2 million and $5 million and even up to $10 million — or 10% of the fund, per SOSV’s agreement with its investors.

Certainly, the new fund also gives startups even more reason to work with SOSV, which tends to write its seed checks to first-time founders, who O’Sullivan observes are often overlooked — wrongly —  by investors in favor of repeat founders.

He points to Apple, Microsoft, Facebook, Google and Alibaba, noting that landscape would look rather different without them. He says experienced the phenomenon himself when he cofounded a company (NetCentric) after MapInfo. “People were just lining up to invest,” he says. “It was so easy to raise the funds without anything other than a business plan, and these days, you don’t even need one of those.”

That doesn’t mean SOSV will get as big a bite as it might like in every deal. Though SOSV has enjoyed success by betting on new entrepreneurs — it was among the first investors in FormLabs, for example, a company now valued at $2 billion; it also backed JUMP, the bike-share startup that Uber acquired in 2018 — a $100 million fund is small by current standards. SOSV could well find itself competing against players that have billions of dollars to deploy and which are writing bigger checks to younger companies, faster than ever. 

It’s not an absurd concern, agrees O’Sullivan. He says he saw some sharp elbows just this week, in fact. Part of a $100 million-plus round was coming together, and a firm that O’Sullivan declined to mention didn’t want to make room for the startup’s Series B or A investors because it wanted to meet a certain equity threshold.

O’Sullivan says the earlier investors acquiesced. (“They’re giving us a multi-billion valuation” and also “trying to buy secondaries from existing investors,” he explains, while adding that SOSV would generally prefer to hold its shares through an IPO.)

Still, he suggests there’s no need to worry about SOSV. While the earlier investors went with the flow, O’Sullivan says that in “most cases, there’s enough to go around for the previous investors.” He also calls it “good protocol for the late-stage investors [to make room] if they want to continue to have us introducing deals to them.”

Put another way, smaller fund or not, SOSV has a kind of leverage, too.

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Facebook buys game studio BigBox VR – | #Tech

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Facebook buys game studio BigBox VR – TechCrunch

Facebook has bought several virtual reality game studios over the past couple years, and they added one more to their portfolio Friday with the acquisition of Seattle-based BigBox VR.

The studio’s major title, Population: One, was one of the big post-launch releases for Facebook’s Oculus Quest 2 headset and is a pretty direct Fortnite clone, copying a number of key gameplay techniques while adapting them for the movements unique to virtual reality and bringing in their own lore and art style.

As has been the case for most of these studio acquisitions, terms weren’t disclosed. BigBox raised $6.5 million according to Crunchbase, with funding from Shasta Ventures, Outpost Capital, Pioneer Square Labs and GSR Ventures.

“POP: ONE stormed onto the VR scene just nine months ago and has consistently ranked as one the top-performing titles on the Oculus platform, bringing together up to 24 people at a time to connect, play, and compete in a virtual world,” Facebook’s Mike Verdu wrote in a blog post.

It’s not unusual for a gaming hardware platform owner to build up their own web of studios building platform exclusives, but in the VR world things are a little different given that Facebook has few real competitors.

While many of the developers inside Oculus Studios continue to build titles for Valve’s Steam store which are accessible with third-party headsets, most non-Facebook VR platforms seem to be a shrinking piece of the overall VR pie, having been priced out of the market by Facebook’s aggressive pursuit of a mass market audience. Facebooks Oculus Quest 2 retails for $299 and the company has said that it outsold all of its previous devices combined in its first few months.

In April, Facebook acquired Downpour Interactive, maker of the VR shooter Onward.

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