Disha Sanghrajka

CFO for a VC fund

1

The scourge of upfronting and its aftermath😈 If I have to pick one regulatory action which had the maximum impact on the wealth management industry, it would be the banning of the practice of upfronting. What was this practice all about? Say a wealth firm agreed to sell a certain fund which in turn agreed to pay 1.5% commission every year. Now instead of getting this income on a yearly basis, the fund would pay say 4.5% upfront. On day one. The only condition was that the investor had to remain invested. So if the firm sold 1000 crores of the fund, it netted a revenue of 45 crores in the year, as against 15 cr each year, over 3 years. 🎭 A simple business deal between wealth firm & the fund. Instead of making 1.5% every year, the wealth firm made it upfront. So what could be anybody’s problem? Two problems: First has to do with the accounting principle of revenue recognition. But that’s for the auditors to figure. Second, is what should be our concern: > When so much revenue rides on such funds, there is all round focus to sell the living daylight’s out of them. These are like god-sent opportunities for your RMs. 🤑With much less effort, they could now cover a large part of their target. Product peddling acquired a far more aggressive, almost toxic avtaar, client interest getting royally compromised along the way.😠 > This led to a vicious cycle of perverse behaviour, year after year, to the extent that upfront revenue was contributing as high as 60-70% of the wealth firms top line. Thankfully the market regulator realised what was going on and put an end to it in Feb’2023. But this meant a sudden hole in the wealth firms balance sheet🕳️. Say a firm made 500 crores of revenue in FY 2022-23, of which 200 cr was upfront. Next year, the firm found itself in a hole as they couldn no longer negotiate upfront income on other products. So what next? 🙇 Re-base revenue from 300 cr, you made hay while the sun shone, now start afresh. OR Look for ways to fill the hole. My guess is that many have continued to look for ways to plug the hole. And that’s what you need to be aware of. Since the past year, a lot of low grade secondary debt papers are being shown around. The wealth firm has no restriction on the commission they can charge (back to upfront) on such deals. 😎 Typically fintech’s raising money at very high yields. I have also seen highly complex structured debt deals. While you might want the yield, do you have the ability to understand & monitor the risks. Or does your invetsment plan even require such investments? Should you be buying one-off papers, or should you follow the principle of diversification & therefore buy into funds, managed by professionals, which invest in a basket of such papers? May I also suggest something else - do ask your wealth manager how his/her firm is navigating this issue. How are they plugging the hole🕳️? I think it will make for a very interesting and insightful conversation 😉

18

1 Comment

Early-stage venture capital firm 8i Ventures has completed a full exit from its investment in M2P Fintech, realizing an impressive 12x return on its initial capital. The firm had initially invested ₹9.7 crore in January 2020 and has now realized a total return of ₹115.9 crore. This exit comes as part of M2P Fintech’s recent $100 million capital raise, which included both primary and secondary transactions. “We saw an opportunity to return capital to our investors, and our limited partners are receiving more than they originally invested,” said Vikram Chachra, Founding Partner at 8i Ventures, highlighting the investment as a significant success for the firm. Investment in M2P Fintech Yields High Returns 8i Ventures’ decision to invest in M2P Fintech in 2020 was driven by the firm’s belief in the startup’s vision to build a global Banking-as-a-Service (BaaS) platform. At the time of the initial investment, M2P Fintech was valued at approximately $9 million. Today, the startup’s valuation has surged to around $600 million, enabling 8i Ventures to generate an Internal Rate of Return (IRR) of 131%, turning the initial investment into a substantial payout. Chachra noted the evolution of M2P Fintech from a card-issuing platform to a comprehensive BaaS provider, serving not only neo-banks but also small finance banks in India. The fintech now offers a wide range of services, including core banking, loan origination, and card issuance, all of which contributed to its enhanced valuation. Partial Exit in 2022, Full Exit in 2024 8i Ventures had previously made a partial exit from M2P Fintech in April 2022. The latest exit marks the firm’s complete withdrawal, solidifying it as one of the most successful investments in 8i Ventures’ portfolio. M2P Fintech’s CEO and Co-founder, Madhusudanan R., praised 8i Ventures for their continued support throughout the company’s growth journey, stating, “8i was the first venture capital fund to believe in M2P Fintech’s vision... They have supported us in every funding round, from seed through Series B. For us, they feel more like co-founders than investors.” Yug Shah | Vishwanath V | Sanjoy Bose | Bhargav Padh | Vaibhav Domkundwar | Sunil Sampath | Shyam Kumar | Franklin Arnold | Prabhu Rangarajan |

10

Is ARR (Annual recurring revenue) the right base to calculate revenue multiple based valuation for early-stage companies? Let’s understand: How is ARR valuation done? Let’s assume the revenue (sales) for a month is Rs. 10 Crs. ARR is annualized value of this monthly revenue =Rs. 10 Crs * 12 months = Rs. 120 Crs. A multiple, let’s say 4x in this case is then applied to this revenue and, the valuation comes to around Rs. 480 Crs. 2 Major assumptions: > This is the min. revenue that will be earned in each month > Revenue remains constant, ignores the seasonality/cyclicality in a business Inherent drawbacks: > Assumption may not hold true for all sectors/companies. > Ignores fluctuation in revenue by artificial increase in sales (closer to the fund-raise) due to increased marketing efforts, discounts etc. > Leads to incorrect valuations. This method might make sense for a software company or a company like Netflix which has a monthly fixed subscription/contract revenue coming from its users. But for consumer brands or companies, still trying to reach their product-market-fit, full year revenue should be taken. Hence, ARR multiple must be used carefully and only when realistically possible. What do you think? (On a side note - came across one interesting article which multiplied monthly revenue by 10 months instead of 12 months to calculate ARR to neutralize any abnormalities in revenues and avoid an unbelievably high ARR and valuation. Interesting no?) #startup #valuations #funding

67

6 Comments

There's an urgent need of M&A Deal Architects in India. Specializing in SMEs / Startups M&A. Well, do we not have enough 'investment bankers' ? Maybe - but traditional bankers are trained to work on large deals (min $25M+ types) - and their perspective is largely financial engineering / fitment with a lot of data available to form a basis for terms negotiation. But for (non-manufacturing) SMEs / Startups - one has to be a master of entrepreneurship - with deep understanding of the practical issues surrounding the business, from product to GTM, from team capabilities to financials. With a knack of valuing soft assets / intangibles. Plus, commercially, there may not be a big retainer, so one must have strong business acumen to be reasonably confident about closing the deal (since 99% money is success-based). Also, success of smaller deals with soft-assets will depend far more on relationship dynamics between promoters, so one must also be 'fair' to both sides, with an orientation of creating a win-win for both instead of playing hardball with the other party. There are enough deal opportunities in the system today for someone to make $100k-$500k a year. PS - If you know anyone with such skills & inclination, please ping me - would love to connect and share such opportunities.

188

18 Comments

Go Digit IPO: Key takeaways and what it means Subscription Status: As of Thursday, May 16th, 2024 (10:59 AM IST), the Go Digit IPO has received bids for 1.86 times the shares offered to retail investors (RIIs). This indicates moderate interest but not a massive oversubscription. GMP Decline: GMP (Grey Market Premium) is an unofficial indicator of investor sentiment. It seems the GMP for Go Digit IPO has fallen, suggesting a decrease in anticipation of high post-listing gains. Additional Information to Consider: Issue Size: The IPO aims to raise ₹2,614.65 crore. This includes fresh issue of shares (₹1,125 crore) by the company for growth and selling shares by existing investors (₹1,489.65 crore). Next Steps: The subscription window for the IPO might still be open. You can check with your broker for the exact deadline. Further Research: It's recommended to analyze the Go Digit IPO prospectus for details on the company's financials, future plans, and risk factors before making an investment decision. Financial news websites and investment research firms might also provide analyses of the IPO. Overall: While there's some interest from retail investors, the GMP decline suggests a cautious outlook. Carefully evaluate the IPO details and your risk tolerance before investing. #ipo #stockmarket #stoxbazar #godigitipo

1

Funding Sneek - Peek - Q-commerce & fintech took significant funding  Growth-Stage Deals  - #Zepto: $665 mn funding  - #UmmeedHousinFinance: $76mn funding from #A91PartnersLLP, #MiraeAssetVentureInvestments(India), & #AnicutCapital. Existing investor #NorwestVenturePartners also participated.  - #AyeFinance: $30 mn debt funding from #FMO, The Dutch Entrepreneurial Development Bank.  - #Bira91: $25 mn raised through External Commercial Borrowing (ECB) from #KirinHoldings, an existing investor.  - #Slice: $20 mn debt funding round from #NeoAssetManagement'sCreditOpportunities Fund.  - #WROGN: $15 mn from #TMRWHouseofBrands, an Aditya Birla Group venture.  - #ShivalikSmallFinanceBank: $12 mn co-led by global venture capital firm #Lightspeed & Sanjay Nayar-founded #SorinInvestments, with participation from existing investors #Accel & #Quona.  - #DvaraKGFS: $7 mn debt raise through ECBs from #EnablingQapital, an impact investment advisory company.  - #AviomHousingFinance: $5 mn debt from #InsuResilienceInvestmentFund.  - #Jupiter: $2.4 mn in strategic funding from existing investors for its non-banking financial (NBFC) business, #AmicaFinance.   Early-Stage Deals  - #OrbitShift: $7 mn in funding from #PeakXVPartners' accelerator program #Surge and #StellarisVenturePartners.  - #AlyveHealth: $5.5 mn Series A funding round led by #AxilorVentures, with participation from #1CrowdFund (existing investor) and #InHealthVentures. The company also raised a venture debt fund from #TrifectaCapital.  - #BalwaanKrishi: $4.8 mn in pre-Series A funding.  - #ThePantProject: $4.25 mn in its maiden funding round led by #SorinInvestments.  - #Supermoney: $3.4 mn funding round led by #Capital2B, #CapriaVentures.   Fund Launches 3 significant fund launches this week  - #VentureSoulPartners: Debut fund of Rs 600 Cr to invest in established startups through venture debt.  - #GujaratVentureFinanceLimited: First close of Rs 200 Cr “Prarambh Fund” targeting seed-stage tech startups with investments between Rs 1 Cr and Rs 3 Cr  - #8XVentures: First close of Rs 60 Cr for their second VC fund, aiming to invest in 18-20 early-stage deeptech startups, with a potential final corpus of Rs 300 Cr.   Follow me for more updates like this.  

18

Big Exits, Bigger Returns: 2024 is leading the charge for Indian VC’s appetite for exits. For years, large exits with substantial returns have been a sore subject for Indian VCs, but 2024 is shaping up to change the narrative. With an increasing number of IPOs, M&As, and secondary sales, the winds are shifting in favour of exponential returns. After a low phase in 2022 and 2023, we’re seeing startup IPOs bouncing back and profitability trends sparking a domino effect across the ecosystem. Which begs the question: When and how can investors expect exponential returns on their portfolios? Take secondary deals, for instance. As Blume’s Karthik Reddy notes, “A 1% holding can yield $750,000 to $5M in cash returns, a sweet spot for micro-VCs but often unattractive for larger funds.” Yet, large funds writing early-stage to growth-stage checks have delivered astronomical returns—sometimes in the hundreds or thousands of multiples. Such as these game-changing examples: ✦ Tiger Global: 340X return on Freshworks ✦ Info Edge: 1,000X return on Zomato’s IPO ✦ Kunal Bahl & Rohit Bansal: 101X return on Mamaearth’s IPO These are just a few examples of how VC investing can lead to a goldmine. However, the old adage of “the more, the merrier” portfolio is evolving. Investors are becoming more receptive towards companies with strong fundamentals over sheer scale. As Fireside Ventures’ Vinay Singh insightfully pointed out: “For many international LPs, India is grouped with China under the Asia pool of capital. But with China facing its own set of challenges, investors are finding comfort in Indian startups trending towards profitability.” At the heart of these pivotal discussions is #MoneyX 2024, where we’ll dive deeper into these themes shaping the future of startup investments in India. If you haven’t secured your spot yet, now’s the time. Reserve your invite today:  https://4-2.co/3X6gQ2I Vaibhav Vardhan Utkarsh Agarwal #VentureCapital #Startups #IPO

219

12 Comments

Hyderabad-based venture capital firm Pavestone VC has announced the final close of its Pavestone Technology Fund at a staggering Rs 816 crore (~$97 million)—surpassing its original target of Rs 600 crore! The fund witnessed enthusiastic participation from notable investors, including The Self Reliant India(SRI) Fund, the family office of MANKIND PHARMA LTD promoters, and Colruyt Group India. This marks a major milestone in India's VC ecosystem, highlighting growing confidence in tech innovation. What’s Next? Pavestone plans to invest in 14-15 growth-stage B2B tech startups with an average cheque size of $5-10 million, focusing on deeptech and enterprise tech. Portfolio Highlights: The fund has already backed cutting-edge companies like E42.ai, NewSpace Research and Technologies , LivNSense GreenOps Private Limited, and Bellatrix Aerospace—all shaping the future of technology in their sectors. Founded in 2021 by Sridhar Rampalli, Srikanth Tanikella, and V Laxmikanth (VLK), Pavestone VC is setting the stage for transformative growth in India’s tech landscape. Read More: https://lnkd.in/gVPm-ScB #VCNews #PavestoneVC #TechInnovation #B2BTech #DeepTech #StartupFunding #IndiaStartups #VentureCapital

25

We recently released our quarterly market update on Indian startup ecosystem. Some Key highlights from the report: ➡️ Early-stage funding witnessed 242 deals, up from Q1 which witnessed 154 early-stage deals ➡️ Growth stage funding witnessed 88 deals, remained flat QoQ ➡️ In Q22024, late-stage deals drove the market, comprising 17 deals accounting for ~50% of the total Q2 deal value Following discussions with the founders, several key themes have emerged: ❇️ Gen Z: We're seeing a notable shift in consumer behavior driven by Generation Z. This demographic cohort, known for its digital nativism and distinct preferences, is increasingly influencing market trends particularly in Food and beverages sector   ❇️ Premiumization: There's a growing trend towards premiumization in the market. Consumers are showing a willingness to invest more in products and experiences that offer higher quality, exclusivity, or enhanced features   ❇️ Personalization: The demand for personalized products and experiences continues to gain momentum. Consumers increasingly expect tailored solutions that cater to their unique needs and preferences Thank you to all the founders for their contribution:     Aditya Khanna (Co - founder Assembly); Devansh Jain Nawal (Founder and CEO - Culture Circle); Dhruv Kohli (Founder - Boba Bhai); Kartik Sheth (Founder and CEO - Foxy); Mansi Baranwal (Founder - Troovy); Poojan Shah (Co - founder ICON.in); Raksha Kothari (Co - founder GO DESi ) Shashank Saurabh (Co - founder Que Universe); Suraj Vernekar (Co - founder and CEO - Aegeus Technologies Pvt Ltd) Access the full report here: https://lnkd.in/gDhqXai3 Akshay Garg Preksha Razdan Rohit Rawat Kulmani Rana

10

2 Comments

🚨 Important for Investors: Mobikwik & LendingBox Violate RBI Guidelines on P2P Lending 🚨 It’s deeply concerning that Mobikwik and LendingBox are playing the blame game while investors are left completely in the dark about their funds. Bipin Preet Singh Ekmmeet Singh Jatin Malwal Bhuvan Rustagi, as founders, it’s your responsibility to communicate with your users, rather than leave them uncertain. We expect a clear and public explanation instead of actions that appear fraudulent. You need to provide transparency and take accountability. One of the main issues: Mobikwik and LendingBox have consolidated all existing schemes into a single ID and invested capital without informing investors—violating RBI guidelines. Investors are unaware of who the borrowers are and are being denied proper communication. RBI’s regulations state that investors must be informed about borrower mapping and any reinvestment decisions. However, this has not been followed. The guidelines also mandate that any reinvestment requires investor consent, which did not happen. Furthermore, borrower details, including identity, credit score, and interest rates, should be disclosed. Has this been happening? It doesn’t seem like it. MobiKwik's Xtra investors are struggling with withdrawals, with Lendbox making policy changes without notice. Users have even reported unauthorized transfers of their investments to other borrowers. 💡 Key Takeaways: Investors have the right to be informed, as per RBI guidelines, and should have been asked for consent before reinvestment. Lendbox and Mobikwik’s actions raise serious concerns about compliance and investor protection. ⚠️ Investors Beware: It is advised to avoid investing in Lendbox's alternate product called Per Annum where they claim that P2P Lending has become more transparent and robust post the revised RBI Guidelines. They mention that a new user journey has evolved on the platform where lenders can now select their own borrowers. Per Annum suggests a list of borrowers based on historical data, but the final decision is said to rest with the lender. However, recent actions indicate a lack of compliance with this statement. Kudos to Arti Singh for covering this issue in detail when many other digital platforms chose to ignore it. Investors deserve transparency and respect for their capital. #P2PLending #RBI #Mobikwik #Lendbox #Investing #Compliance #InvestorRights #Fintech

5

4 Comments

3Q’24 recorded PE/VC investments worth $8.8bn across 283 deals; 40% YoY decline: EY-Indian Venture and Alternate Capital Association (IVCA) Link in the comments Vivek Soni #mediabrief #EY #IVCA #business #media

Our Managing Partner, Rahul Khanna, shares insights on the evolving landscape of startup financing in his latest editorial for the Indian Venture and Alternate Capital Association (IVCA). Venture debt in India is poised for significant growth, with enormous untapped potential. This asset class offers non-dilutive financing for startups and attractive returns for investors. As pioneers in this space, Trifecta Capital has deployed over INR 6,000 crore across 180 companies through three venture debt funds and a fourth on the way! We're excited about the opportunities ahead. Read the full article to learn why the next decade could be pivotal for private credit investors in India's startup ecosystem. https://lnkd.in/gPVxJt42

37

#Update New VC firm PROMAFT Partners launches with 1,000 crore rupees. They'll focus on companies with proven product-market fit, making 10-12 strategic investments overall, with 2-3 deals annually. The founders, Raghav Bahl (ex-Alibaba.com India GGS) and Soham Avlani (ex-9Unicorns), will leverage their experience to help startups with strategy, business plans, hiring, and funding. Their focus on established businesses with strong product fit suggests a cautious, long-term approach for portfolio companies. Read the story: https://ow.ly/ayb550SFUjU #PromaftPartners #VCfirm #StartupInvesting #ProductMarketFit #BusinessStrategy #VentureCapital #StartupFunding #Entrepreneurship #BusinessDevelopment #IndianStartups

127

8 Comments

Ullu’s IPO is set to launch in March 2025, as founder Vibhu Agarwal outlines bold plans and the platform's growth trajectory. Read the full story by Kanchan Srivastava :- https://lnkd.in/gJxYXyb4 #e4m #UlluIPO #IPOUpdate #TechIPO #UlluStreaming

85

16 Comments

Disruption: The Key to Building Consumer Brands in India A founder's journey is akin to navigating uncharted waters, where every decision is a delicate balance between probabilities and possibilities. Sometimes, the founders are at the right place at the right time when disruptive waves are manifesting primarily in three formidable forms: regulatory, technological, and demographic. 1. Regulatory Disruption: Regulatory changes often appear as a vast blue ocean, promising untapped opportunities. Yet, one must tread carefully. The very nature of regulation implies that what is granted can be swiftly taken away. And many times, what is generally not specified also treads towards an eventual "No." 2. Technological Disruption: Technological advancements offer a compass for our voyage. Leveraging emerging technology platforms to create breakthroughs can unlock tremendous growth. 3. Demographic Disruption: India, a nation teeming with youth, stands at the precipice of never before seen disposable income that can be monetised digitally at scale. By meticulously segmenting markets, one can craft products and services that not only sell but seamlessly integrate into the lifestyle narratives of the emerging consuming class. At Endurance Capital, we work with early stage founders to be leaders in India's consumer revolution. As founders, the opportunity is immense. It's time to disrupt the old guard and innovate with an India-first approach. Let's craft consumer brands that aren't just loved but become a legacy for the generations to come. 🚀🇮🇳

13

1 Comment

Hello Everyone, Revisiting Zomato since my IPO valuation in May 2021. The stock got listed in July 2021 at an opening price of ₹116 per share (while my best case estimated IPO price was ₹60 per share) then witnessed a downfall hitting at bottom of ₹42 apiece in July 2022 followed by pathway to recovery exhibiting a gradual uptrend post solid FY23 performance and foray into quick commerce (Blinkit acquisition), currently trading at around ₹195 apiece. Since, a lot has happened over the course of last three years – food delivery business achieved operating break-even, Hyperpure business surprisingly gained momentum, and business expansion with Blinkit acquisition being the key events, perhaps, it is time to take a deeper look at the numbers. So, what’s ahead:   Simple framework to understand the stage of development for Zomato – explore unit economics with example of food delivery business to assess Zomato’s delayed profitability   DCF valuation from long-term investing point of view – include value per share split by businesses, value creation by Blinkit acquisition and the most talked topic – option overhang   User based valuation – A sum-of-the-parts user based valuation of Zomato; model sensitivity to key inputs and scenario analysis I hope you enjoy the read.

60

5 Comments