EXIT – Dutch Uncles

The Empress Of Beauty And Personal Care Nykaa Sets The Bar High

Anju Nambiar — Sat, 28 Aug 2021 05:35:07 +0000

Falguni Nayyar, India’s first woman entrepreneur who has led her company to the coveted unicorn status is now taking it to the IPO (initial public offering) stage. She has not just raised the bar for women entrepreneurs, but her company has set new benchmarks for India’s budding internet based beauty companies.

Falguni Nayyar’s Nykaa IPO

Falguni Nayyar’s Beauty Retailer Nykaa filed its IPO documents this month for a share towards the end of 2021. Nykaa is currently one of the most exciting IPO bound companies that could soon be valued at $4 Bn. The company has filed with the regulatory SEBI (Securities Exchange Board of India) and plans to offer up to 43 Mn shares worth $70.8 Mn

How Falguni Nayyar set the bar high for IPO-bound internet companies

Nykaa built an internet giant through a traditional yet unconventional e-retail model that’s now moving towards IPO. The first domestic unicorn backed by a woman founder to go for a public listing, Nykaa is the largest player among Indian internet companies in its segment. Despite being surrounded and dominated by global giants like Amazon and Sephora, Nykaa is India’s one-and-only niche player in e-commerce to go for IPO after declaring a profit.

How Nykaa quietly scaled up the personal care and beauty segment

Nykaa quietly scaled up in personal care and beauty while its big tech competitors like Amazon and Flipkart were looking the other way towards the fashion market. Nykaa reported a net profit for the financial year ending in March 2021. Whereas profitable businesses like Indiamart listed for IPO two decades after getting backed by venture capitalists and declaring a profit. However, Nykaa managed to reach the IPO stage by raising just $78 Mn of primary capital. On the other hand, sector-focused e-tailers like Lenskart and FirstCry raised hundreds of millions of dollars in primary capital. With just 78 Mill, Nykaa reached the same valuation as these companies and is now IPO-bound.

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The first domestic unicorn backed by a woman founder to go for a public listing, Nykaa is the largest player among Indian internet companies in its segment.

What’s in it for me?

Industry analysts have declared Nykaa’s IPO as a timely event, despite the pandemic. Nykaa’s success can be attributed to their strong segmentation of verticals for consumers by providing divisions within beauty. They attracted consumers with several different verticals they may be interested in like men’s, naturals, fashion, jewellery, etc. Also, their large and considerable inventory has been a profitable factor for them.

Nykaa’s inventory-based business model proved to be successful in the beauty space. The single biggest takeaway from Nykaa’s success for D2C and Internet companies is to focus on the core objective of the business. They mainly focused on the top 5 popular brands including Lakme and Maybelline which kept them on par with their competition, most of which were giants like Myntra, Amazon, and Sephora. Internet and D2C companies in the beauty sector must go for a definitive, authentic selection of make-up and beauty brands, through direct sourcing directly from the brand.

You also need to focus on an inventory led model along with providing stellar customer experience. Target the top 15 cities in India before rolling out to Tier II and III cities eventually. Other crucial pointers for start-ups and small businesses in this space would be to showcase exclusive ‘cult brands’ in beauty. Most importantly, invest on your technology as well as on retention and re-engagement strategy, just like Nykaa did.

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Rules to Acquire – Mergers and Acquisitions in India

Aakash Sharma — Fri, 30 Jul 2021 05:35:11 +0000

Acquisitions and mergers are a major route for many start-ups, SMEs and even established companies in their business life. The origin of many of today’s most prominent companies can be traced back to this business practice – Disney/Pixar and Marvel, Exxon and Mobile, and Google and Android, among many others.

In India, various regulatory frameworks manage mergers and acquisitions (M&A) activities. The objective of these laws is to build the process of M&A more transparent so that it will protect the interest of shareholders and entities involved.

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The economic development since 1991 has resulted in a drastic change of economic environment for the commercial sector in India, enhancing the market for commercial control categorized by M&A and other varieties of corporate reformation.

Regulatory Framework for Mergers and Acquisitions

The Companies Act, 2013

The Companies Act is the primary law applicable to all companies registered in India. All business transactions, including mergers and acquisitions, must comply with the Companies Act of 2013.

Securities Laws

The securities in the Indian market are subject to the rules and guidelines issued by the Securities and Exchange Board of India (SEBI). M&A transactions are also dealt with within SEBI’s Substantial Acquisition of Shares and Takeovers amendment of 2018.

Foreign Exchange Management Act (FEMA), 1999

Foreign Exchange Management Act (FEMA) guidelines state that any exchange that intends to settle mergers in India must abide by FEMA guidelines. FEMA guidelines also require the supervision of full-time responsible persons such as administrative staff and secretaries who are members of the companies, as the companies involved in such cross-mergers have a testamentary liability.

Major technology acquisitions in recent years: Flipkart, eBay and Myntra

In 2017, Flipkart raised $ 1.4 billion from global technology leaders eBay, Tencent and Microsoft, announcing a merger with the Indian branch of eBay. eBay invested $500 million in cash and sold their business to Flipkart in exchange for an equity stake in the e-commerce giant. In addition, Flipkart acquired Myntra in 2014 for $300 million. The move consolidated Flipkart’s position in the e-commerce market and placed it on the global map of tech start-ups that “made it big.”

2021 Byju’s Acquisition Spree

Since 2020, edtech decacorn Byju’s has been on an acquisition spree. In July 2021, Byju’s acquired Great Learning, a professional and higher education company, for $600 million, and US-based digital reading platform Epic for $500 million. In April 2021, it bought out Aakash Education Services for a whopping $1 billion, affirming its space in the traditional coaching segment. Most famously, in August 2020, Byju’s bought ‘coding for kids’ edtech start-up WhiteHat Jr for $300 million.

Byju’s acquisition spree is helping the firm increase its lead over its competitors such as SoftBank-backed Unacademy, Simplilearn, UpGrad, Vedantu, Amazon Academy and traditional education institutes.

How do small businesses and start-ups get affected by acquisitions and mergers?

Many financial and business experts argue that acquisitions by big corporates exhibit their predator behaviour as they buy out the competition to maintain a monopoly. And that seems true in many cases; case in point, Facebook’s acquisition of Instagram and WhatsApp. It made Facebook the world’s biggest social media giant with transcontinental reach and access to billions of people’s data.

But in many cases, acquisition mergers are beneficial too, especially for small businesses and start-ups. When a small business gets acquired, it either gets full money for the stake or gains access to its parent companies’ vast resources while maintaining authentic leadership. There are many examples of this, like Tata Son’s multi-million stake in health tech start-up CureFit, Flipkart’s acquisition of Myntra and others. This helps the business grow and proves beneficial for both, the mega-corporate and the new company, which can now have financial stability and support to fall back on.

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Zomato is a Validation that India Can Generate Large IPOs

Anju Nambiar — Tue, 27 Jul 2021 03:35:08 +0000

Talks of Zomato’s IPO (Initial Public Offering) have been going around for quite a while. There was a lot of publicity, marketing and strategy involved in making the listing a grand affair. The Zomato IPO was strategically placed to create a significant buzz before going live. Apart from the heavy publicity, it had created quite the buzz among the investor fraternity since it was a large listing and the first of its kind.

Moreover, Zomato is a popular brand which is loved by Indian youth. Their efforts seem to have paid off as the IPO was a bumper affair and has made Zomato one of the 50 most valuable publicly traded firms in India.

Zomato went live on 23 July

Last week, Zomato put its IPO plan into action and went live with a bang. It is listed on the Indian Stock Exchanges at more than 50% premium than its issue price of INR 76. Zomato’s successful IPO listing has set a precedent for other Indian start-ups looking to follow in its wake.

Zomato kicked off their Initial Public Offering (IPO) at $1.3 B worth INR 93.75 B. While the listing was awaited with bated breath by the industry, it was also one of the biggest start-up IPOs of India this year. Zomato’s IPO received about 40 subscriptions and received bids worth 29.04 B equity shares. Evidently, it is a flagship listing among India’s tech unicorns.

Landmark achievement

The food aggregator’s IPO was celebrated with much fanfare in the history of IPOs. It was received with a healthy market demand. In just the first few hours after it went live, Zomato’s IPO was subscribed almost 100% by the retail investor segment. After this IPO concludes, Zomato is expected to be valued at $8B which will be a landmark achievement that’s relevant for the entire start-up fraternity and the food tech industry as well.

How entrepreneurs and investors watched

All eyes were on listing day as entrepreneurs and investors watched whether Zomato’s IPO would be a stellar debut or a flop. A number of brokerages had recommended subscription for Zomato’s IPO owing to long-term growth potential as well as the possibility of gains. Key stakeholders were awaiting reasonable gains. Bidders eagerly awaited the allotment date and twitter was flooded with celebratory messages from industry colleagues.

5 big Twitter celebratory messages

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Zomato’s IPO received about 40 subscriptions and received bids worth 29.04 B equity shares. Zomato’s is a flagship listing among India’s tech unicorns.

What this means to the industry

The Zomato IPO is good news for investors, VCs and start-ups since it will sharpen market demand including those coming from fellow start-ups as well as Venture Capitalists. Zomato’s IPO means more to the industry than just to the company itself. It has heralded a new era for Indian equity investors. It’s a major milestone for the private digital ecosystem. The company has now set sky high standards for the food delivery and technology industry.

Zomato IPO success – Validation that India can generate large IPOs

The success of Zomato’s IPO is concrete evidence of cross-section investor interest in internet companies. The Internet economy in India is horizontal with dynamic influence on most vertical industries right from D2C to logistics. The event will be the key to unlocking trapped value in multiple industries and entrepreneurs.

There’s a high possibility that in this decade alone, more than 100 internet/new-age unicorns will be listed. Following Zomato, more IPOs are sure to follow from a significant number of digital technology companies. This will boost entrepreneurship, give Start-up India a leg up, enable wealth creation and deepen our capital markets.

Zomato is currently growing exponentially across the country and its initial offering of $1.3 B means that they have reached the heights of success from where there’s no turning back. After the validation received from Zomato’s IPO’s massive success, 11 Indian start-ups are all set to take the IPO route by the end of 2021. Out of these 11 start-ups, 9 are unicorns including PayTM and Ola. These IPO bound start-ups have a bright future ahead, as investors are now willing to risk it up in Indian start-ups taking the cue from Zomato’s grand success. It has become a role model for Indian start-ups and has made the Indian capital markets open towards similar innovative business models.

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Its raining IPOs, What This Means for Google Cloud

DU Desk — Thu, 22 Jul 2021 08:35:12 +0000

Google is adamant on making it rain IPOs because of the billions of dollars in funding being pumped into the Indian start-up ecosystem. With big names like Zomato, PayTM, Mobikwik, PolicyBazaar, CarTrade and Nykaa headed for IPO at rapid speed, Google cannot afford to miss the chance at offering up their products and services to them.

Tech giants like Amazon, Facebook and Google have long been actively supporting start-ups in India, taking the cue from the Indian Government’s efforts to bolster the start-up community. Getting help from these tech giants is invaluable because your success rate shoots up. The technology stack and services from tech giants like Google are unparalleled. Start-ups shouldn’t miss the opportunity to apply for support programmes by these big tech firms.

Google Cloud’s interest for IPO bound start-ups

Google Cloud is interested in IPO bound start-ups and the Indian start-up ecosystem as a whole for two key reasons. One, the capital inflow into the ecosystem is set to touch a high of $19-$23 B by the end of 2021. Two, Google Cloud wants to further bolster the growth of these already-growing start-ups by empowering them with cutting-edge Cloud technology.

Google Cloud is providing specially designed programmes for start-ups across various growth stages as well as for unicorns and IPO-bound start-ups. Through these programmes, they are providing training, zero credits, mentoring sessions and giving them the opportunity to work with specialists. As start-ups grow and progress towards becoming unicorns, Google Cloud helps tackle their larger problems by making them shift from providing an engagement model to offering solutions.

How Google Cloud is empowering start-ups and unicorns

Google Cloud is empowering start-ups and unicorns in India by helping them grow the number of monthly active users on their platform. By leveraging Google’s Cloud technology, these start-ups and unicorns are being empowered to achieve key milestones along their growth trajectory.

Prominent start-ups using Google Cloud infrastructure

Well-known start-ups and unicorns in India using Google Cloud’s infrastructure include Glance (Artificial Intelligence (AI) – based software company), ShareChat (consumer tech unicorn), Rapido (automobile start-up) and Dailyhunt (consumer tech).

How Google Cloud works with start-ups

Google Cloud works with start-ups by first offering them with cloud solutions and then giving them access to ‘ALL of Google’. What this means is that the start-up will grow with Google. The start-up’s products will also be added to Google Maps. Google will also help with Google Ads integration.

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As start-ups grow and progress towards becoming unicorns, Google Cloud helps tackle their larger problems by making them shift from providing an engagement model to offering solutions.

What’s in it for me?

Google has a number of start-up programmes which are very easy to apply and get approval for. Products and services by the tech giants are all start-ups need to propel them forward since Google’s offerings are very powerful and robust. Migrating to the Google Cloud is very beneficial for start-ups in various growth stages because you not only enjoy tools and resources provided by Google, but you also get support to fix issues along your start-up journey.

Google is also offering their Startups Accelerator Program (GSFA) through which you can get nurtured for a period of three months with free mentorship and support. It is designed for growth and early-stage start-ups. The leadership training from Google experts that you can avail through this programme will prove to be invaluable in later stages. In this programme, you stand to gain equity-free support, training and credits which you can use to purchase premium Google cloud and other products.

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AI Start-up Fractal Growth Strategy Predicts Revenue Growth in 2022

Anju Nambiar — Sat, 17 Jul 2021 03:34:39 +0000

Big Data rules the world and in the initial days when it was emerging as the giant of IT (Information Technology), companies that tapped into the market grew in leaps and bounds. Fractal.ai is one such company which has achieved tremendous growth over the years. Along their journey, they’ve checked a number of boxes which has made them the market leaders of the Analytics-as-a-Service space.

Fractal.ai and its IPO listing

Fractal.ai is an AI (Artificial Intelligence) company with Fortune 100 companies across the world as its clients. They are an Analytics Solution provider and a strong player in the AI space. They are confident that an Initial Public Offering (IPO) will further add to their growth story and will soon be listing publicly. Fractal is expecting a revenue growth of 37% touching $160 M in the Financial year ending March 2022.

Fractal’s growth strategy

Fractal’s growth story has been fuelled by acquisitions and funding. They ventured into analytics at a crucial juncture when it was being prioritised by organisations for their digital transformation.

Fundraising

The company raised funds and achieved a valuation of 12 times than its global revenue back in 2016 (INR 350 Cr). They redirected this money strategically. They invested the new funds into new markets, employed data professionals and poured money into building their data platforms.

Incubation of other AI projects

Also, a part of their growth strategy are Fractal’s strategic acquisitions of other AI projects like Qure.ai, Theremin.ai, Equgenie.ai and more recently Samya.ai. The acquisition of Samya.ai will further strengthen Fractal’s offerings and expand its reach across industries and increase their global footprint.

A few years ago, they went on an acquisition spree where they acquired start-ups for the sole purpose of building their Natural Language Processing and Deep Learning capabilities. They acquired companies like Imagna Analytics and Mobius Innovations. These acquisitions strengthened Fractal’s technology offering which naturally contributed to its growth.

The Pandemic has been a turning point for Fractal

The start-up has witnessed a business expansion with the outbreak of the pandemic. The pandemic period has boosted the demand for their services. Enterprises have been forced to move their functions and operations to the cloud.

A brand-new Initiative – Crux Intelligence

Their new initiative ‘Crux Intelligence’ is also a part of their upcoming growth strategy. Crux is a solution that offers business intelligence to enterprises and even converts the data intelligence into actionable insights.

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The acquisition of Samya.ai will further strengthen Fractal’s offerings and expand its reach across industries and increase their global footprint.

What’s in it for me?

AI start-ups are continuing to raise funds. In 2020, the AI start-up community collectively raised $836.3 M in funding. Real-time AI and Deep Learning platforms have wide use cases and a variety of applications for ‘smart and intelligent’ projects across a multitude of sectors like automobile manufacturing, robotics and transportation.

Data driven SaaS solutions powered by Machine Learning and AI have immense applications in Enterprise Tech. Nascent industries like Manufacturing and Insurance need business and data intelligence AI solutions. These are the industries you can disrupt as a start-up.

While venturing into the AI space, you need to find the perfect ‘product-market’ fit. This is both crucial and a difficult step for Enterprise Tech start-ups. Irrespective of the industry you are targeting, every enterprise in the target market is unique. Your AI solution must be custom tailored to their requirements. To achieve this level of customisation, your tech team must be strong. Thus, you need to invest in hiring data scientists, engineers and technologists. Investor interest around AI and data intelligence is for start-ups that are building customised AI solutions for previously unsolvable problems.

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Pharmeasy, Targets to Be Listed in 2022-2023

Anju Nambiar — Fri, 16 Jul 2021 08:33:52 +0000

Despite India having more than eight lakh pharmacies, access to medication has been largely difficult for people. This became a challenge during the pandemic as timely availability of medicines proved to be an uphill task. As such, e-pharmacies that delivered medication to the doorstep turned out to be invaluable businesses. The biggest e-pharmacy start-up in India Pharmeasy became a unicorn in the year of the e-pharmacy industry, 2021. The company will soon be going public in an IPO listing planned for the Financial Year (2022-23).

Who is Pharmeasy?

Pharmeasy, founded by Siddharth Shah, is a subsidiary of API Holdings. An e-pharmacy firm, Pharmeasy is an Internet company headquartered in Mumbai. Their online pharmacy and medical store in India is quite popular. Pharmeasy is a diagnostics brand that gets medicines home delivered.

How did it become India’s largest pharmacy chain?

Pharmeasy became India’s largest online pharmacy chain after its acquisition of its peer, Medlife. After the acquisition, Pharmeasy covered every single pin code across the country and went on to serve over 2 million families per month. It also became the ‘largest healthcare delivery platform across the country by a distance’.

PharmEasy’s current valuation

PharmEasy is currently valued at $1.8 B and has entered the unicorn club of fast-growing start-ups. The current valuation occurred after venture capitalist ‘B Capital’ purchased a minority stake of $20 M in the firm.

How is it planning to go public?

Pharmeasy is currently IPO bound and is targeting an IPO in the coming 12-18 months. It is ready to list on the public exchanges. The firm’s parent company API Holdings is aiming for a listing worth $1-1.2 B and is also looking to achieve a valuation of $4 B from this listing. Pharmeasy is hopeful of a blockbuster IPO in Financial Year 2022 and had earlier shortlisted Investment Banks Morgan Stanley and Kotak Mahindra Capital as advisers for the listing.

Pharmeasy had also originally planned to file their DRHP (draft red herring prospectus) with SEBI (Securities and Exchange Board of India) in the August-September period this year and a possible launch in the January-March period next year. There are speculations that Pharmeasy was previously harbouring plans for a SPAC (Special Purpose Acquisition Vehicle) listing overseas but later settled for an India IPO.

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Pharmeasy had also originally planned to file their DRHP (draft red herring prospectus) with SEBI in the August-September period this year and a possible launch in the January-March period next year.

What’s in it for me?

E-Pharmacy is one of the blessed industries that grew two-fold during the pandemic. In 2022, the E Pharmacy market is expected to grow at a CAGR of 63% and will touch $3657 M in valuation. If you are venturing into this space, you need to target mobile-first consumers and set up a robust digital payments’ infrastructure.

There are two kinds of e-pharmacy business models you can consider. One is the domestic ‘Genuine Internet Drug Store’ and the second is the non-domestic ‘Genuine Internet Drug Store’. The latter is based out of India but caters to the Indian market, is authorised by the Indian government, and follows the guidelines issued for the e-pharmacy business here.

Your e-pharmacy start-up can run on all or any one of the digital channels namely web portal, mobile app and website. You can tie up with medical stores and drug retailers to deliver valid prescriptions to customers’ doorsteps. To get started with your e-pharmacy, you will need an online presence. You also need to work on your digital inventory and invest in marketing campaigns to target customers from different locations. You will also need to invest in high-quality customer service as well as customer retention strategy since these are crucial for the success of an online pharmacy start-up.

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Founders May be Able to Dilute Stakes Without Losing Control

DU Desk — Wed, 07 Jul 2021 10:35:05 +0000

Even though 2020 looked grim for several businesses, few unicorn startups like Nykaa, Delhivery, Zomato, PolicyBazaar and Paytm rose to the occasion by launching their IPOs in the stock market. A successful listing of internet-first companies will encourage other startups as well to opt for releasing IPOs to raise capital in the future.

To boost the listing of startups, market watchdog SEBI (Security and Exchange Board India) is considering easing rules on superior voting rights to solve legacy issues for startup founders to publicly list their companies.

SEBI to protect founders’ ownership powers

The proposal to ease rules is in the interest to protect a founder’s ownership powers in the firm. New technology firms typically employ an asset-light business model where the firm owns relatively fewer capital assets as compared to the value of its operations. The firms prefer equity over debt capital and while raising equity periodically they tend to lose the founders stake.

Startups, where the founders are instrumental in the success, are robbed of their decision-making skills. Therefore a structure is required which will enable them to retain decision-making powers and rights vis-à-vis other shareholders. The proposals have the potential to help founders dilute stakes without losing control, make tax structures more efficient and help in succession planning.

However top-tier startups such as Paytm, Zomato, PolicyBazaar, Nykaa and Delhivery, which are expected to launch their initial public offerings (IPOs) in 2021 will not be availing the benefits as the proposals are still at their primitive stage.

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SEBI is bringing reformations in SR clauses where founders may be able to dilute stakes without losing control.

What can this mean for the Startups listing their IPOs in the Future?

SEBI has received a suggestion from the market to bring flexibility to three key areas. Below are the areas which SEBI is currently reviewing:

Net worth requirement of the promoters
Minimum holding period of SR shares
Structures eligible for SR share issuances

About the first point, current SR (Superior Rights) shares can be issued only to founders who are not part of any promoter group and whose collective net worth is more than Rs 500 crore. While determining the collective net worth, the investment of SR shareholders in the shares of the issuer company shall not be considered.

In this clause, the family members of SR shareholders may also hold stakes and such investments as per the current guidelines can not be excluded while calculating the net worth of the SR shareholder.

SEBI has also received feedback on whether holding companies, registered family trusts, or partnerships where promoters or founders are in control or sole trustees, can also be permitted to hold SR shares so long as such promoters or founders or trustees continue to hold executive positions in the issuer company.

Regarding the minimum holding period, SEBI has reduced the period of holding of 25 percent of pre-issue capital of the issuer company by eligible investors to one year from the current requirement of two years.

The regulator is considering bringing in relaxations with the timelines for founders to issue SR shares before an IPO. Currently, founders should issue SR shares six months before going public.

For the community of entrepreneurs, SEBIs proposals are progressive and a welcome move to provide impetus to SR shareholders, especially those who want to go public and strengthen a founder’s rights.

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Raising $40 Million as Seed Fund, Thrasio Model of Start-up 10Club

Anju Nambiar — Tue, 06 Jul 2021 03:35:06 +0000

10 Club is a Bengaluru based start-up which is focused on acquisitions of fledgling e-commerce sellers. Upon acquisition, this startup works to scale these sellers. It was founded in 2020 by ‘Bhavna Suresh’ (ex-CEO of Lamudi, a Real-Estate Marketplace based in the Philippines), Joel Ayala (Co-Founder & Managing Partner at Class 5 Global), and Deepika Nair.

10 Club has raised $40 M in a seed funding round which is the highest for any seed funded start-up in India. It is backed by Fireside Ventures, Hayday, Class 5 Global, PDS International, and Secocha Venture.

What is the Thrasio model?

The ‘Thrasio model’ was fashioned after ‘Thrasio’, a US-based unicorn start-up. It’s based on the ‘e-commerce roll up space’ and is about building a house of online brands. The Thrasio model is a raging success and is quickly being emulated in India.

How the Thrasio model paves the way for success and funding?

Companies which follow the Thrasio model are pitching start-up acquisitions by offering to help them scale 10x within a span of 3 years. They propose to accelerate the growth of these firms by integrating supply chains, providing performance marketing expertise and gleaning insights from data analysis.

The secret to the success of Thrasio style start-ups is attributed to their target market, seller quality, purchase valuations, debt availability and the relationship they build with the owners of the acquirers.

Good chemistry, understanding and trust between the Thrasio start-up and the founder/owner of the company being acquired are key to success in this model. Thrasio model start-ups are also betting on sellers that can target pan Asian, and foreign markets like Europe and America to touch their growth targets.

Which Industry Sector does 10 Club belong to?

10 Club belongs to the Venture Capital and early-stage funding league of start-ups and will be investing in the Indian start-up ecosystem. It belongs to a league of new-age funding start-ups that want to build a house of e-commerce brands by identifying promising sellers on Amazon.

Learnings for aspiring Thrasio-style start-ups

Aspiring Thrasio style start-ups need to focus on acquiring up-and coming brands that are selling like hot cakes on Amazon. Also, profitable companies are your potential target. Before venturing into the Thrasio space, you need to research and study the market in-depth. Interact with potential sellers on Amazon, tune into their plans and processes. The next step would be to shortlist the most promising sellers who deserve a buyout.

Your pitching strategy can be unique depending on what works best in your relationship with the seller. There are numerous options to lay out attractive offers on the table. You can offer marketing expertise, strong media coverage, a partnership, etc.

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Companies which follow the Thrasio model are pitching start-up acquisitions by offering to help them scale 10x within a span of 3 years.

What’s in it for me?

The Thrasio style start-ups alongside Venture Capital firms are interested in funding early-stage brands in India that follow an online-first business model. They want to turbocharge these companies since they believe that these start-ups are an upcoming revolution.

E-commerce firms and founders are eligible for being acquired and to receive funding by Thrasio model companies. If selected, your start-up can assume its full potential with help from these investment firms. E-commerce sectors with the highest probability of being acquired by a Thrasio start-up include fashion, apparel, home décor, arts and crafts, bedding, yoga mats, bed sheets, premium food items and kitchenware sellers.

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Failed Agritech Startup, What Did not Go Right

Shalmoli Sarkar — Thu, 01 Jul 2021 03:35:05 +0000

The influx of Agritech start-ups in the past 4-5 years has changed the landscape of Indian agriculture that is considered to be one of the most technology-resistant and backward sectors. Farmers are removing the blindfolds of technology ignorance post understanding what these Agritech solutions have to offer, creating a viable business model improving the farmer’s income.

However, many of the Agritech enterprises, despite tasting success initially face hurdles to expand their businesses that finally end in closure. Here are some of the reasons why Agritech start-ups in India can fail:

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Many of the Agritech enterprises, despite tasting success initially face hurdles to expand their businesses that finally end up in closure.

Probable reasons for Agritech start-ups failing in India

1. Price wars with the retail giants

2020 saw conglomerates Tata and Reliance aggressively enter the retail space with an acquisition. Fresh produce and grocery are a lucrative segment where players are building their private labels of farm produce which they procure at cheaper rates and sell at predatory prices giving them good margins.

This hurts the revenues of major Agritech players with their USP as organic produce which they cannot sell at lower prices.

2. Lack of commercial guidance

The existing incubators and accelerators in India lack the expertise to guide farm-oriented start-ups, unlike IT, Health tech and e-commerce.

3. Not taking the D2C channel

In the current pandemic situation where big retail stores are operating erratically, it will not be wise for Agritech start-ups to opt for retail channels. Opting for a D2C channel will help the start-up gain complete control of the control chain.

A recent example is that Clover, a supplier of perishable fresh produce, changed its approach from B2B to B2C by adapting to the D2C approach in the pandemic. Clover could provide customers high-quality produce at competitive prices under a traceable supply chain. Clover’s sales grew 3 times in the Covid by turning to D2C.

4. Reluctant investors due to the slow turnaround of profits

Lack of funds leaves the Agritech start-ups cash strapped as it fails to lure investors since ROI in Agritech relatively takes time and does not meet market expectations. Also, add is the uncertainty in weather conditions which makes it a high-risk proposition for investors. Agritech innovations in India need patient capital and an ecosystem that has the appetite to programme these innovations for scale and success.

5. Lack of visibility

Supply chain visibility and efficiency are the keys to running a viable agriculture-based business. Given the perishable nature of the products and the sensitive timelines associated, every stage of the supply chain in agriculture comes with integration issues, security vulnerabilities, and other problems.

Therefore, the right technological intervention at the right stage of business will enable solutions that preserve product quality, reduce waste, improve traceability, transportation and storage.

6. Lack of technical know-how

Most Agritech start-ups lack the technical know-how about the health concerns of cattle or crop produce that lands them in major trouble causing low productivity levels.

Agritech players should collaborate with large technology players that can provide an innovative solution for instance MoooFarm a Gurugram based start-up collaborated with Microsoft to tackle mastitis using Machine Learning (ML) and helped farmers save US$500 million per year.

7. Low internet connectivity in rural areas

Several remote rural locations lack strong reliable internet connectivity preventing Agritech start-ups to apply smart agriculture techniques using IoT, Artificial Intelligence (AI), and ML at such places. Start-ups before serving the geographies must do in-depth research about the available internet connectivity.

8. Uncertain climate conditions

Hailstones, heavy rainfall, or drought impacts the crop produce directly affecting the revenues. Adoption of crop monitoring technologies AI and ML improves agriculture outcomes in adverse climatic conditions. With the right technology, a farmer can give each crop individualised care, utilise resources in exact quantities, and can grow more with less.

9. Logistics and last-mile delivery

Logistics and last-mile delivery is key to the operation of Agritech start-ups that do not find cold storage remote sensing and digitisation of field-level data as economically viable. Also, the backward integration of services in agriculture does not attract many investors thus leaving Agritech start-up with scarce facilities.

10. Expensive Infrastructure

Agritech start-ups end up investing money in establishing lavish offices, expensive cattle shades and other infrastructure which mounts debts. In the initial days, one should not spend money on infrastructure, only the necessities and essentials should be the building blocks.

Agritech startups are nascent in India. The idea that agriculture can be monitored using AI, ML and IoT devices is an alien concept to the farmers, therefore its gradual acceptance will lead to slower turnaround time for profits. Keeping in mind that not many investors are interested in investing in agritech, the startups should be wary of spending excessively on luxurious infrastructure. It will be imperative for startups to begin with the basic essentials of infrastructure and spend more on enhancing the tech capabilities keeping in mind the uncertain nature of climate the sector is heavily dependent on.

The post Failed Agritech Startup, What Did not Go Right appeared first on Dutch Uncles.

Start-Up Closing Down Rate in India

Anju Nambiar — Mon, 28 Jun 2021 03:35:04 +0000

Start-Up Mortality

Mortality is rampant in the start-up ecosystem as much as investments and unicorns are. Most start-up ideas take off with a bang but fail to work out in the long run. These failed start-up ideas contribute to the mortality rate and ‘infant mortality rate’ of startups.

Factors that contribute to start-up mortality

A bad set of investors can easily ruin a start-up’s growth and eventually lead to its closure.
The pandemic and subsequent lockdowns are currently the biggest contributing factor for start-up mortality in India.

Start-Up closure rate in the year of unicorns

The pandemic years of 2020-21 are bad for many businesses but surprisingly proved to be the best years for start-up unicorns. However, the fact remains that many small businesses and SMEs in India have and are continuing to shut shop.

The closure rate for Indian start-ups, micro, small,\ and medium enterprises is projected at 59% for the year 2021 as they prepare to scale down, get sold or permanently shut shop this year. This forecast is wholly attributed to the lockdown related restrictions due to the second wave outbreak.

Closures among funded start-ups

The Indian Start-Up Ecosystem has seen close to 3200 start-ups which have received funding. Out of these funded start-ups, about 385 start-ups closed down due to various factors.

How DDD Framework reduces start-up closure rate

What’s the DDD Framework?

The Discovery-Driven-Disruption (DDD) Framework is a planning technique. It’s a management process best suited for projects with high uncertainty. The DDD framework is useful for start-ups launching new products or venturing into new markets.

How to adopt the DDD Framework?

Adopt the DDD Framework by breaking your start-up plan into small stages. At every stage, you become aware of and pin-point any assumptions your start-up has which may have proved to be risky. Next, you put these assumptions to the test at the lowest possible cost and timeframe.

How the DDD Framework reduces Closure Rate

It helps reduce closure rate by de-risking the firm. It also gives start-up founders a way to exit the business at the right time when signs of a possible failure begin to show.

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The closure rate for Indian start-ups, micro, small and medium enterprises is projected at 59% for the year 2021 as they prepare to scale down, get sold, or permanently shut shop this year.

What’s in it for me?

To improve your start-up’s chance of success, go into lean mode. Lean mode is when a start-up prioritises experimentation and relies on customer feedback before diving into a large-scale launch.

Perform cost-controlled ‘disruption trials’ to protect your start-up from failure. Adopt a disciplined approach for your start-up like the DDD framework.

Even though any start-up idea almost certainly has some risk associated with it, don’t come up with an over-the-top, high cost or reckless plan. Uncertainty should not exceed its limits in business. Operate on low-risk modes like DDD and the lean mode to reduce your start-up’s ‘assumptions’ and to increase your ‘knowledge’. In turn, your business uncertainty will reduce and the possibility of closure will be minimal.

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