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Khatabook raises $25M to help businesses in India record financial transactions digitally and accept online payments
Even as tens of millions of Indians have come online for the first time in recent years, most businesses in the nation remain offline. They continue to rely on long notebooks to keep a log of their financial transactions. A nine-month old startup which is digitizing the bookkeeping and allowing merchants to accept online payments just raised a significant amount of capital.
Khatabook, a Bangalore-based startup, said on Tuesday it has raised $25 million in a new financing round. The Series A round for the startup was funded by GGV Capital, Partners of DST Global, RTP Ventures, Sequoia India, Tencent, and Y Combinator. A clutch of high-profile angel investors including Amrish Rau, Anand Chandrasekharan, Deep Nishar, Gokul Rajaram, Jitendra Gupta, Kunal Bahl, and Kunal Shah also participated in the round. The startup has raised $29 million to date.
Khatabook operates an eponymous Android app that allows small and medium businesses to keep a log of their financial transactions and accept payments online. The app, which was launched on Google Play Store in December last year, has amassed 5 million merchants from more than 3,000 cities, towns, and villages in India, Ravish Naresh, cofounder and CEO of Khatabook told TechCrunch in an interview this week.
The app, which remains free of charge, was used to process transactions worth more than $3 billion in August, said Naresh. Most merchants in developing markets are not online currently. They continue to rely on logging their financial transactions — credit, for instance — on notebooks. As you can imagine, this methodology is not structured.
Even has Reliance Jio, a telecom operator launched by India’s richest man Mukesh Ambani, upended the Indian market and brought tens of millions of Indians online for the first time in last three years, most businesses in the country are still carrying out their operations without the use of any technology, said Naresh. “Could we build an app that makes it very easy for merchants to digitize their bookkeeping?” he said.
“As soon as we launched the app, we instantly started to go viral,” he said. For several months now, the startup is seeing 20% growth each month, he said. In six months, the app has helped businesses recover $5 billion in previously unpaid credits, Naresh claimed. Without any marketing, the app has also gained a significant number of users in Nepal, Pakistan, and Bangladesh, said Naresh.
“At Khatabook, we have taken early but significant steps towards leveraging this trend to digitize India’s shopkeepers. For most of our merchants, we are the first business software they’ve used in their entire life. And we will continue to build more India-first innovations to further enable the growth of what is still a largely untapped sector,” he said.
In a statement, Hans Tung, Managing Partner of GGV Capital, said, “as a global investor, we seek out founders who understand the local market and respond to growth opportunities with speed and agility – we certainly see this with the Khatabook team.”
Naresh, a cofounder of property startup Housing, said the startup will use the capital to build new features to serve merchants. In next 12 months, Khatabook will aim to add 25 million businesses, he said.
A growing number of startups in India are attempting to help businesses. OkCredit, which raised $67 million last month, serves 5 million merchants. IndiaMART, a 23-year-old B2B firm that went public this year, led a round in a startup called Vyapar last month that is addressing similar problems.
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India’s 9-month-old CRED raises $120M to help people improve their financial behavior
Many Silicon Valley companies and fintech startups in India today share a common mission: They all want to bring their financial services to the next billion users. Dozens of fintech startups that we have spoken to in recent months have told us that they all want to address much of India, one of the last great growth markets globally, in the next few years.
So you can imagine our excitement when we learned there is at least one startup that is going after just a few million users in the immediate future. We’re talking about CRED, a nine-month-old, Bangalore-based startup that is building solutions to incentivize credit card users in India to become more responsible with money and thereby improve their credit score.
CRED has raised $120 million in a Series B financing round, Kunal Shah, founder and CEO of the startup, told TechCrunch on Monday. He declined to share more information. The startup, which has raised about $145 million to date, is now valued between $430 million to $450 million, a person familiar with the matter told TechCrunch.
According to a regulatory filing, existing investors Sequoia Capital, Ribbit Capital and DST Global’s Gemini Investments led the round, with participation from Tiger Global, Hillhouse Capital, General Catalyst, Greenoaks Capital and Dragoneer.
Hundreds of millions of Indians today don’t have a credit score because they have never taken a loan from a recognized entity nor owned a credit card. According to the government’s official figures, fewer than 50 million credit cards are in circulation in India currently, with industry reports suggesting that the actual number of unique credit card holders is about half of that.
“Nobody taught us about how to use money,” Shah told TechCrunch in a recent interview. “This has created a huge trust gap in India. If you look at developed markets, systematic trust is very high between all the entities. Members don’t have to rely on third-parties. In India, even if you wanted to rent a flat, you look for brokers, for instance.”
You can build that trust when you know how someone handles their money, and how they have handled it in recent history. “Our aim is to create a big membership community with high credit worthiness, therefore open up more opportunities for them,” Shah explained.
Shah is not going after the masses. He wants to focus on just the credit card users for now, and if he could win the trust of just half of those plastic card holders in India, he would consider it a success.
“Instead of chasing the mythological mass customers who are currently useful only on paper if you wanted to boast about your daily active user or monthly active user metric, our goal is to serve the existing users,” he said.
On CRED, users are offered a range of features, including the ability to better track their spending, get reminders and check their credit score, but more importantly, access to a range of lofty offers such as membership to a gym at a discounted price, access to good restaurants at low prices and subscription to various services at little to no charge. Users can access these features by earning points, which they can secure every time they pay their credit card bills on time.
Varun Krishnan, editor of technology news site FoneArena, told TechCrunch that he has found CRED useful in getting reminders to pay his bills and likes that he can pay them through a range of payment options, including UPI apps and debit cards. “I have several cards and it is hard to track amounts and due dates of payment for each one. They send all these alerts on WhatsApp, which is a blessing,” he said.
These are the reasons that attracted many people like Krishnan to join CRED. That, and some incentive to pay his bills — though he hopes that CRED expands the range of offers it currently provides to customers.
That wish may soon come true. In the coming months, CRED will enable these highly sought-after customers to access some financial services from banks in a single-click. Additionally, it is also exploring expansion to some international markets, the aforementioned source said.
CRED does not charge users any money for joining its platform, nor for availing any of the features it offers. But it is generating revenue from some of the partners that are supplying offers on the app.
It’s not a surprise that Shah, an industry veteran known for speaking the uncomfortable truths at conferences, has won the trust of so many investors already. He built one of the biggest payment apps in India, Freecharge, and sold it to e-commerce giant Snapdeal for a whopping $400 million in one of the increasingly rare exits that India’s fintech market has seen to date.
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A 23-year-old B2B company has shown how keen India is for tech IPOs
Away from the limelight of the press and the frenzy of fundraising, a tech startup in India has achieved a feat that few of its peers have managed: going public.
IndiaMART, the country’s largest online platform for selling products directly to businesses, raised nearly $70 million in a rare tech IPO for India this week.
The milestone for the 23-year-old firm is so uncommon for India’s otherwise burgeoning startup ecosystem that, beyond being over-subscribed 36 times, pent up demand for IndiaMART’s stock saw its share price pop 40% on its first day of trading on National Stock Exchange on Thursday — a momentum that it sustained on Friday.
The stock ended Friday at Rs 1326 ($19.3), compared to its issue price of Rs 973 ($14.2).
IndiaMART is the first business-to-business e-commerce firm to go public in India. Its IPO also marks the first listing for a firm following the May reelection of Narendra Modi as the nation’s Prime Minister and the months-long drought that led to it.
Accounting firm EY said it expects more companies from India to follow suit and file for IPO in the coming months.
“Now that national elections are over and favorable results secured, IPO activity is expected to gain momentum in H2 2019 (second half of the year). Companies that had filed their offer documents with the Indian stock markets regulator during H2 2018 and Q1 2019 may finally come to market in the months ahead,” it said in a statement (PDF).
IndiaMART’s origin
The fireworks of the IPO are just as impressive as IndiaMART’s journey.
The startup was founded in 1996 and for the first 13 years, it focused on exports to customers abroad, but it has since modernized its business following the wave of the internet.
“The thesis was, in 1996, there were no computers or internet in India. The information about India’s market to the West was very limited,” Dinesh Agarwal, co-founder and CEO of IndiaMART, told TechCrunch in an interview.
Until 2008, IndiaMART was fully bootstrapped and profitable with $10 million in revenue, Agarwal said. But things started to dramatically change in that year.
“The Indian rupee became very strong against the dollar, which dwindled the exports business. This is also when the stock market was collapsing in the West, which further hurt the exports demand,” he explained.
Dinesh Agarwal, founder and CEO of IndiaMart.com, poses for a profile shot on July 29, 2015 in Noida, India.
By this time, millions of people in India were on the internet and, with tens of millions of people owning a feature phone, the conditions of the market had begun to shift towards digital.
“This is when we decided to pursue a completely different path. We started to focus on the domestic market,” Agarwal said.
Over the last 10 years, IndiaMART has become the largest e-commerce platform for businesses with about 60% market share, according to research firm KPMG. It handles 97,000 product categories — ranging from machine parts, medical equipment and textile products to cranes — and has amassed 83 million buyers and 5.5 million suppliers from thousands of towns and cities of India.
According to the most recent data published by the Indian government, there are about 50 to 60 million small and medium-sized businesses in India, but only around 10 million of them have any presence on the web. Some 97% of the top 50 companies listed on National Stock Exchange use IndiaMART’s services, Agarwal said.
That’s not to say that the transition to the current day was a straightforward process for the company. IndiaMART tried to capitalize on its early mover advantage with a stream of new services which ultimately didn’t reap the desired rewards.
In 2002, it launched a travel portal for businesses. A year later, it launched a business verification service. It also unveiled a payments platform called ABCPayments. None of these services worked and the firm quickly moved on.
Part of IndiaMART’s success story is its firm leadership and how cautiously it has raised and spent its money, Rajesh Sawhney, a serial angel investor who sits on IndiaMART’s board, told TechCrunch in an interview.
IndiaMART, which employs about 4,000 people, is operationally profitable as of the financial year that ended in March this year. It clocked some $82 million in revenue in the year. It has raised about $32 million to date from Intel Capital, Amadeus Capital Partners and Quona Capital. (Notably, Agarwal said that he rejected offers from VCs for a very long time.)
The firm makes most of its revenue from subscriptions it sells to sellers. A subscription gives a seller a range of benefits including getting featured on storefronts.
4/4. So many Indian small businesses have so much to thank @DineshAgarwal for. And after the iconic IPO, so many Indian entreprenuers will have so much to thank him for – forever unlocking the Indian public markets to current & future generation of Indian internet companies
— Kunal Bahl (@1kunalbahl) July 4, 2019
Where the industry stands
There are only a handful of internet companies in India that have gone public in the last decade. Online travel service MakeMyTrip went public in 2010. Software firm Intellect Design Arena and e-commerce store Koovs listed in 2014, then travel portal Yatra and e-commerce firm Infibeam followed two years later.
India has consistently attracted billions of dollars in funding in recent years and produced many unicorns. Those include Flipkart, which was acquired by Walmart last year for $16 billion, Paytm, which has raised more than $2 billion to date, Swiggy, which has bagged $1.5 billion to date, Zomato, which has raised $750 million, and relatively new entrant Byju’s — but few of them are nearing profitability and most likely do not see an IPO in their immediate future.
In that context, IndiaMART may set a benchmark for others to follow.
“The fact that we have a homegrown digital commerce business, serving both the urban and smaller cities, and having struggled and been around for so long building a very difficult business and finally going public in the local exchange is a phenomenal story,” Ganesh Rengaswamy, a partner at Quona Capital, told TechCrunch in an interview. “It keeps the story of India tech, to the Western world, going.”
Congratulations @DineshAgarwal for an iconic IPO! @IndiaMART has set an example and hope for all Indian Internet companies looking to go public. Cheers! https://t.co/yJumFjfitS
— Vani Kola (@VaniKola) July 4, 2019
Generally, it is agreed that there are too few IPOs in India and the industry can benefit from momentum and encouragement of high profile and successful public listings.
“There is a firm consensus that in India, markets will prefer only the IPOs of companies that are profitable. And investors in India might not value those companies. Both of these issues are being addressed by IndiaMART,” said Sawhney.
“We need 30 to 40 more IPOs. This will also mean that the stock market here has matured and understands the tech stocks and how it is different from other consumer stocks they usually handle. More tech companies going public would also pave the way for many to explore stock exchanges outside of India.
“Indian market is ready for more tech stocks. We just need to get more companies to go out there,” Sawhney added, although he did predict that it will take a few years before the vast majority of leading startups are ready for the public market.
The Indian government, for its part, this week announced a number of incentives to uplift the “entrepreneurial spirit” in the nation.
Finance minister Nirmala Sitharaman said the government would ease foreign direct investment rules for certain sectors — including e-commerce, food delivery, grocery — and improve the digital payments ecosystem. Sitharaman, who is the first woman to hold this position in India, said the government would also launch a TV program to help startups connect with venture capitalists.
The path ahead for IndiaMART
IndiaMART has managed to build a sticky business that compels more than 55% of its customers to come back to the platform and make another transaction within 90 days, Agarwal — its CEO — said. With some 3,500 of its 4,000 employees classified as sales executives, the company is aggressive in its pursuit of new customers. Moving forward, that will remain one of its biggest focuses, according to Agarwal.
“Most of our time still goes into educating MSMEs on how to use the internet. That was a challenge 20 years ago and it remains a challenge today,” he told TechCrunch.
In recent years, IndiaMART has begun to expand its suite of offerings to its business customers in a bid to increase the value they get from its platform and thus increase their reliance on its service.
IndiaMART has built a customer relationship management (CRM) tool so that customers need not rely on spreadsheets or other third-party services.
“We will continue to explore more SaaS offerings and look into solving problems in accounting, invoice management and other areas,” said Agarwal.
The firm also recently started to offer payment facilitation between buyers and sellers through a PayPal -like escrow system.
“This will bridge the trust gap between the entities and improve an MSME’s ability to accept all kinds of payment options including the new age offerings.”
There’s an elephant in the room, however.
A bigger challenge that looms for IndiaMART is the growing interest of Amazon and Walmart in the business-to-business space. Several startups including Udaan — which has raised north of $280 million from DST Global and Lightspeed Venture Partners — have risen up in recent years and are increasingly expanding their operations. Agarwal did not seem much worried, however, telling TechCrunch that he believes that his prime competition is more focused on B2C and serving niche audiences. Besides he has $100 million in the bank himself.
Indeed, as Quona Capital’s Rengaswamy astutely noted, competition is not new for IndiaMART — the company has survived and thrived more than two decades of it.
“Alibaba came and gave up,” he noted.
An important — and unanswered question — that follows the successful IPO is how IndiaMART’s stock will fare over the coming months. A glance to the U.S. — where hyped companies like Uber, Lyft and others have seen prices taper off — shows clearly that early demand and sustained stock performance are not one and the same.
Nobody knows at this point, and the added complexity at play is that the concept of a tech IPO is so uncommon in India that there is no definitive answer to it… yet. But IndiaMART’s biggest achievement may be that it sets the pathway that many others will follow.
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Less than 1 year after launching its corporate card for startups, Brex eyes $2B valuation
Brex, the fintech business that’s taken the startup world by storm with its sought after corporate card tailored for entrepreneurs, is raising millions in Series D funding less than a year after it launched, TechCrunch has learned.
Bloomberg reports Brex is raising at a $2 billion valuation, though sources tell TechCrunch the company is still in negotiations with both new and existing investors. Brex didn’t immediately respond to requests for comment.
Kleiner Perkins is leading the round via former general partner Mood Rowghani, who left the storied venture capital fund last year to form Bond alongside Mary Meeker and Noah Knauf. As we’ve previously reported, the Bond crew is still in the process of deploying capital from Kleiner’s billion-dollar Digital Growth Fund III, the pool of capital they were responsible for before leaving the firm.
Bond, which recently closed on $1.25 billion for its debut effort and made its first investment, is not participating in the round for Brex, sources confirm to TechCrunch. Bond declined to comment.
Brex, a graduate of Y Combinator’s winter 2017 cohort, has raised $182 million in VC funding, reaching a valuation of $1.1 billion in October 2018 three months after launching its corporate card for startups and less than a year after completing YC’s accelerator program.
Most recently, Brex attracted a $125 million Series C investment led by Greenoaks Capital, DST Global and IVP. The startup is also backed by PayPal founders Peter Thiel and Max Levchin, and VC firms such as Ribbit Capital, Oneway Ventures and Mindset Ventures, according to PitchBook.
The company’s pace of growth is unheard of, even in Silicon Valley where inflated valuations and outsized rounds are the norm. Why? Brex has tapped into a market dominated by legacy players in dire need of technological innovation and, of course, startup founders always need access to credit. That, coupled with the fact that it’s capitalized on YC’s network of hundreds of startup founders — i.e. Brex customers — has accelerated its path to a multi-billion-dollar price tag.
Brex doesn’t require any kind of personal guarantee or security deposit from its customers, allowing founders near-instant access to credit. More importantly, it gives entrepreneurs a credit limit that’s as much as 10 times higher than what they would receive elsewhere.
Investors may also be enticed by the fact the company doesn’t use third-party legacy technology, boasting a software platform that is built from scratch. On top of that, Brex simplifies a lot of the frustrating parts of the corporate expense process by providing companies with a consolidated look at their spending.
“We have a very similar effect of what Stripe had in the beginning, but much faster because Silicon Valley companies are very good at spending money but making money is harder,” Brex co-founder and chief executive officer Henrique Dubugras told me late last year.
Stripe, for context, was founded in 2010. Not until 2014 did the company raise its unicorn round, landing a valuation of $1.75 billion with an $80 million financing. Today, Stripe has raised a total of roughly $1 billion at a valuation north of $20 billion.
Dubugras and Brex co-founder Pedro Franceschi, 23-year-old entrepreneurs, relocated from Brazil to Stanford in the fall of 2016 to attend the university. They dropped out upon getting accepted into YC, which they applied to with a big dreams for a virtual reality startup called Beyond. Beyond quickly became Brex, a name in which Dubugras recently told TechCrunch was chosen because it was one of few four-letter word domains available.
Brex’s funding history
March 2017: Brex graduates Y Combinator
April 2017: $6.5M Series A | $25M valuation
April 2018: $50M Series B | $220M valuation
October 2018: $125M Series C | $1.1B valuation
May 2019: undisclosed Series D | ~$2B valuation
In April, Brex secured a $100 million debt financing from Barclays Investment Bank. At the time, Dubugras told TechCrunch the business would not seek out venture investment in the near future, though he did comment that the debt capital would allow for a significant premium when Brex did indeed decide to raise capital again.
In 2019, Brex has taken steps several steps toward maturation.Recently, it launched a rewards program for customers and closed its first notable acquisition of a blockchain startup called Elph. Shortly after, Brex released its second product, a credit card made specifically for ecommerce companies.
Its upcoming infusion of capital will likely be used to develop payment services tailored to Fortune 500 business, which Dubugras has said is part of Brex’s long term plan to disrupt the entire financial technology space.
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DoorDash, now valued at $12.6B, shoots for the moon
More than five years ago, Sequoia partner Alfred Lin called Tony Xu, the founder of a small on-demand delivery startup called DoorDash, to say he was passing on the company’s seed round.
This was, of course, before venture capital funding in food delivery startups had taken off. DoorDash, launched out of Xu’s Stanford graduate school dorm room, wasn’t worth Sequoia’s capital — yet.
Today, venture capitalists are valuing the San Francisco-based company at a whopping $12.6 billion with a $600 million Series G. New investors Darsana Capital Partners and Sands Capital participated in the deal, which nearly doubles DoorDash’s previous valuation, alongside existing backers Coatue Management, Dragoneer, DST Global, Sequoia Capital, the SoftBank Vision Fund and Temasek Capital Management.
As for Sequoia’s Alfred Lin, he realized his mistake years ago and jumped in on DoorDash’s 2014 Series A, and has participated in every subsequent round since. DoorDash, a graduate of Y Combinator’s Summer 2013 cohort, is also backed by Kleiner Perkins, CRV and Khosla Ventures, among others. In total, the company has raised $2.5 billion in VC funding, making it one of the most well-capitalized private companies in the U.S.
SoftBank, via its prolific dealmaker Jeffrey Housenbold, was responsible for making DoorDash a unicorn in early 2018. The nearly $100 billion Vision Fund led DoorDash’s $535 million Series D, valuing the business at $1.4 billion. Just three months ago, the SoftBank Vision Fund, DST Global, Coatue Management, GIC, Sequoia and Y Combinator put an additional $400 million in the fast-growing business.
SAN FRANCISCO, CA – SEPTEMBER 05: DoorDash CEO Tony Xu speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California. (Photo by Kimberly White/Getty Images for TechCrunch)
Xu told TechCrunch the company’s Series F was “a reflection of superior performance over the past year.” DoorDash was currently seeing 325% growth year-over-year, he said, pointing to recent data from Second Measure showing the service had overtaken Uber Eats in the U.S., coming in second only to GrubHub.
“I think the numbers speak for themselves,” Xu said at the time. “If you just run the math on DoorDash’s course and speed, we’re on track to be number one.”
At a venture capital-focused summit hosted in April, Xu added that DoorDash was the largest delivery platform in America by “pretty wide margins,” explaining that it was, in fact, growing 4x faster than its next closest peer. In this morning’s announcement, the company added that it’s grown 60% since its late February Series F, with its annualized total sales hitting $7.5 billion in March, an increase of 280% year-over-year.
Still, one wonders what kind of growth metrics DoorDash might be sharing to attract that kind of valuation multiple. The company has yet to disclose revenues and is not yet profitable, but has seen its price tag grow astronomically in just two years. Since March 2018, DoorDash’s valuation has skyrocketed from $1.4 billion to $4 billion with a $250 million Series E to $7.1 billion with a $350 million Series F and, finally, to nearly $13 billion with its Series G.
The $12.6 billion valuation makes DoorDash one of the 10 most valuable venture-backed companies in the U.S., surpassing Coinbase, Instacart and even Slack, according to PitchBook.
DoorDash is currently active in more than 4,000 cities in the U.S. and Canada, with hundreds of partners, including both restaurants and supermarkets (Walmart is using DoorDash for grocery deliveries). The company also operates DoorDash Drive, which allows businesses to use the DoorDash network to make their own deliveries.
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A quiet London-based payments startup just raised among the biggest Series A rounds ever in Europe
You probably haven’t heard of Checkout, a digital payments processing company that was founded in 2012 in London. Apparently, however, investors have been keeping tabs on the low-flying company and like what they see. Today, Checkout announced that it has raised $230 million in Series A funding at a valuation just shy of $2 billion co-led by Insight Partners and DST Global, with participation from GIC, the Singaporean sovereign-wealth fund, Blossom Capital, Endeavor Catalyst and other, unnamed strategic investors.
It’s the first institutional round for the company; it’s also one of the biggest Series A rounds ever for a European company.
What’s so special about Checkout that investors felt compelled to write such big checks? In a sea filled with fintech startups, it’s hard to know at first glance what differentiates it — or whether investors merely spy a huge opportunity, particularly given the company’s recent revenue numbers.
Checkout helps businesses — including Samsung, Adidas, Deliveroo and Virgin, among others — to accept a range of payment types across their online stores around the world. According to the WSJ, the fees from these services are adding up, too. It says Checkout’s European business generated $46.8 million in gross revenue and $6.7 million in profit in 2017, information it dug up through Companies House, the United Kingdom’s registrar of companies.
Checkout also plays into two huge trends that seem to be lifting all boats — the ongoing boom in online shopping, and the growing number of businesses using online payments. Little wonder that investors poured into payments startups last year more than four times what they invested in them in 2017 ($22 billion, according to Dow Jones VentureSource data cited by the WSJ).
Little wonder, too, that payments startups that have gone public are faring well, including the global payments company Adyen, which IPO’d on the Euronext in June of last year and has mostly seen its shares move in one direction since. Indeed, the company, valued at $2.3 billion by investors in 2015, is now valued at nearly $21 billion.
Though Checkout’s Series A is stunning for its size, according to Dealroom data, it isn’t the largest for a European company. Among other giant rounds, the U.K.-based biotech company Immunocore closed on $320 million in Series A funding in 2015. In 2017, another U.K. fintech, OakNorth, a digital bank that focuses on loans for small and medium enterprises, raised $200 million in Series A funding. (It has gone on to raise roughly $850 million altogether.)
More recently, TradePlus24, a two-year-old, Zurich, Switzerland-based fintech company that insures against default the accounts receivables of small and mid-size businesses, also raised a healthy amount: $120 million in Series A funding. Its backers include Credit Suisse and the insurance broker Kessler.
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SoftBank makes a huge bet on Latin America
Rappi represents a new era for Latin American technology startups.
Based in Bogotá, Colombia, the on-demand delivery startup has taken the region by storm, attracting a record amount of venture capital funding in mere months. Today marks the beginning of a new round of explosive growth as SoftBank, the Japanese telecom giant and prolific Silicon Valley tech investor, has confirmed a $1 billion investment in the business.
The king-sized financing comes two months after SoftBank announced its Innovation Fund, a new pool of capital committed to spending billions on the growing tech ecosystem in Central and South America.
VC funding in Latin America catapulted to new heights in 2018. Startups located across Argentina, Brazil, Chile, Colombia and more have secured nearly $2.5 billion since the beginning of 2018, according to PitchBook, up from less than $1 billion invested in 2017.
SoftBank plans to transfer the Rappi investment to the Innovation Fund “upon the fund’s establishment,” according to a press release. For now, the SoftBank Group and affiliated Vision Fund will each invest $500 million in the company. Jeffrey Housenbold, a managing director at SoftBank responsible for investments in Brandless, Opendoor and DoorDash, will join Rappi’s board of directors.
“SoftBank’s vision of accelerating the technology revolution deeply resonated with our mission of improving how people live through digital payments and a super-app for everything consumers need,” Rappi co-founder Sebastian Mejia said in a statement. “We will continue to focus on building innovations for couriers, restaurants, retailers and start-ups that translate into new sources of growth.”
Mejia, Simón Borrero and Felipe Villamarin launched Rappi in 2015, graduating from the Y Combinator startup accelerator the following year. It didn’t take long for the business to capture the attention of American VCs, including the likes of Andreessen Horowitz, DST Global and Sequoia Capital .
The latest round, the largest ever for a Latin American tech startup, brings Rappi’s total raised to date to a whopping $1.2 billion. The company was valued at more than $1 billion last year with a $200 million financing.
Rappi is among few venture-backed “unicorns” based in Latin America. São Paulo-based Nubank, a fast-growing fintech startup, garnered a $4 billion valuation last year with a $180 million investment.
Rappi didn’t immediately respond to a request for comment.
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Startups Weekly: Flexport, Clutter and SoftBank’s blood money
The Wall Street Journal published a thought-provoking story this week, highlighting limited partners’ concerns with the SoftBank Vision Fund’s investment strategy. The fund’s “decision-making process is chaotic,” it’s over-paying for equity in top tech startups and it’s encouraging inflated valuations, sources told the WSJ.
The report emerged during a particularly busy time for the Vision Fund, which this week led two notable VC deals in Clutter and Flexport, as well as participated in DoorDash’s $400 million round; more on all those below. So given all this SoftBank news, let us remind you that given its $45 billion commitment, Saudi Arabia’s Public Investment Fund (PIF) is the Vision Fund’s largest investor. Saudi Arabia is responsible for the planned killing of dissident journalist Jamal Khashoggi.
Here’s what I’m wondering this week: Do CEOs of companies like Flexport and Clutter have a responsibility to address the source of their capital? Should they be more transparent to their customers about whose money they are spending to achieve rapid scale? Send me your thoughts. And thanks to those who wrote me last week re: At what point is a Y Combinator cohort too big? The general consensus was this: the size of the cohort is irrelevant, all that matters is the quality. We’ll have more to say on quality soon enough, as YC demo days begin on March 18.
Anyways…
Surprise! Sort of. Not really. Pinterest has joined a growing list of tech unicorns planning to go public in 2019. The visual search engine filed confidentially to go public on Thursday. Reports indicate the business will float at a $12 billion valuation by June. Pinterest’s key backers — which will make lots of money when it goes public — include Bessemer Venture Partners, Andreessen Horowitz, FirstMark Capital, Fidelity and SV Angel.
Ride-hailing company Lyft plans to go public on the Nasdaq in March, likely beating rival Uber to the milestone. Lyft’s S-1 will be made public as soon as next week; its roadshow will begin the week of March 18. The nuts and bolts: JPMorgan Chase has been hired to lead the offering; Lyft was last valued at more than $15 billion, while competitor Uber is valued north of $100 billion.
Despite scrutiny for subsidizing its drivers’ wages with customer tips, venture capitalists plowed another $400 million into food delivery platform DoorDash at a whopping $7.1 billion valuation, up considerably from a previous valuation of $3.75 billion. The round, led by Temasek and Dragoneer Investment Group, with participation from previous investors SoftBank Vision Fund, DST Global, Coatue Management, GIC, Sequoia Capital and Y Combinator, will help DoorDash compete with Uber Eats. The company is currently seeing 325 percent growth, year-over-year.
Here are some more details on those big Vision Fund Deals: Clutter, an LA-based on-demand storage startup, closed a $200 million SoftBank-led round this week at a valuation between $400 million and $500 million, according to TechCrunch’s Ingrid Lunden’s reporting. Meanwhile, Flexport, a five-year-old, San Francisco-based full-service air and ocean freight forwarder, raised $1 billion in fresh funding led by the SoftBank Vision Fund at a $3.2 billion valuation. Earlier backers of the company, including Founders Fund, DST Global, Cherubic Ventures, Susa Ventures and SF Express all participated in the round.
Here’s your weekly reminder to send me tips, suggestions and more to kate.clark@techcrunch.com or @KateClarkTweets.
Menlo Ventures has a new $500 million late-stage fund. Dubbed its “inflection” fund, it will be investing between $20 million and $40 million in companies that are seeing at least $5 million in annual recurring revenue, growth of 100 percent year-over-year, early signs of retention and are operating in areas like cloud infrastructure, fintech, marketplaces, mobility and SaaS. Plus, Allianz X, the venture capital arm attached to German insurance giant Allianz, has increased the size of its fund to $1.1 billion and London’s Entrepreneur First brought in $115 million for what is one of the largest “pre-seed” funds ever raised.
Flipkart co-founder invests $92M in Ola
Redis Labs raises a $60M Series E round
Chinese startup Panda Selected nabs $50M from Tiger Global
Image recognition startup ViSenze raises $20M Series C
Circle raises $20M Series B to help even more parents limit screen time
Showfields announces $9M seed funding for a flexible approach to brick-and-mortar retail
Podcasting startup WaitWhat raises $4.3M
Zoba raises $3M to help mobility companies predict demand
Indian delivery men working with the food delivery apps Uber Eats and Swiggy wait to pick up an order outside a restaurant in Mumbai. ( INDRANIL MUKHERJEE/AFP/Getty Images)
According to Indian media reports, Uber is in the final stages of selling its Indian food delivery business to local player Swiggy, a food delivery service that recently raised $1 billion in venture capital funding. Uber Eats plans to sell its Indian food delivery unit in exchange for a 10 percent share of Swiggy’s business. Swiggy was most recently said to be valued at $3.3 billion following that billion-dollar round, which was led by Naspers and included new backers Tencent and Uber investor Coatue.
Lalamove, a Hong Kong-based on-demand logistics startup, is the latest venture-backed business to enter the unicorn club with the close of a $300 million Series D round this week. The latest round is split into two, with Hillhouse Capital leading the “D1” tranche and Sequoia China heading up the “D2” portion. New backers Eastern Bell Venture Capital and PV Capital and returning investors ShunWei Capital, Xiang He Capital and MindWorks Ventures also participated.
Longtime investor Keith Rabois is joining Founders Fund as a general partner. Here’s more from TechCrunch’s Connie Loizos: “The move is wholly unsurprising in ways, though the timing seems to suggest that another big fund from Founders Fund is around the corner, as the firm is also bringing aboard a new principal at the same time — Delian Asparouhov — and firms tend to bulk up as they’re meeting with investors. It’s also kind of time, as these things go. Founders Fund closed its last flagship fund with $1.3 billion in 2016.”
If you enjoy this newsletter, be sure to check out TechCrunch’s venture capital-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss Pinterest’s IPO, DoorDash’s big round and SoftBank’s upset LPs.
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DoorDash poaches Uber Eats engineering boss
One way to gain ground on a competitor is to poach their best executives. We’ve seen it time and time again, from high-level Tesla employees fleeing for Lyft or Apple stealing Google’s AI talent.
DoorDash, a well-funded food delivery unicorn, is familiar with this method of staffing. The company announced this morning that it has poached its second Uber employee in the last year to join its growing business. Ryan Sokol, credited with leading and scaling Uber Eats, Uber’s food delivery arm, from its inception, has joined DoorDash as its vice president of engineering.
The news comes shortly after the San Francisco-based company hired Prabir Adarkar, Uber’s former head of strategic finance, as its chief financial officer. The company also recently hired chief people officer Sarah Wagener from Pandora, where she was VP of human resources.
Reporting to co-founder and chief executive officer Tony Xu, Sokol will lead the product, infrastructure and data science teams within DoorDash’s engineering department.
“Ryan comes to DoorDash at a critical inflection point in our business following a breakout year,” DoorDash wrote in an announcement. “In 2018 we 5xed our geographic footprint from 600 to 3,300 cities and tripled our valuation to more than $4 billion.”
“We doubled the engineering team to 200+ last year, working on a variety of problems from machine learning applications to logistics to personalizing consumer experiences,” DoorDash added. “This year, we plan to double our team again and continue on our trajectory as the fastest growing last-mile logistics company in the space.”
Six-year-old DoorDash has raised nearly $1 billion in venture capital funding, most recently at a $4 billion valuation, from SoftBank, Sequoia, Coatue Management, DST Global, Kleiner Perkins, Khosla Ventures, CRV and several others.
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Earnin raises $125M to help workers track and cash out wages in real time
Before Ram Palaniappan founded Earnin, he developed a system for employees at a payments company called UniRush, where he spent eight years as president. If you needed money before payday, he would write you a check from his checking account and when payday rolled around, employees would reimburse him.
Despite being paid what Palaniappan thought were fair wages, his workers often found themselves in a bind, needing access to wages they couldn’t expect to see in their own bank accounts for days.
“This is such a core pain point,” Palaniappan told TechCrunch. “Over three-fourths of the country live paycheck to paycheck … It’s an issue of fairness. We all have gotten used to getting paid every two weeks, but most employees would rather be paid before they work.”
Palaniappan decided to transform what he had been doing as a favor to employees into a real business with Earnin (formerly known as Activehours), a startup that helps hourly, gig and salary workers track their earnings and transfer them to their checking accounts in real time using a mobile application. Today, the company is announcing a $125 million Series C funding from top-tier investors DST Global, Andreessen Horowitz, Spark Capital, Matrix Partners, March Capital Partners, Coatue Management and Ribbit Capital. Palaniappan declined to disclose the valuation.
Earnin founder and chief executive officer Ram Palaniappan
Here’s how it works: An employee signs up on the Earnin app and connects their bank account. Earnin infers the person’s pay cycle and debits their account the amount they’ve borrowed on their payday. Earnin charges no fees or interest; instead, it operates on a pay it forward revenue model some would balk at. Earnin users have the option to “tip” the app after each transaction and that tip, in turn, is used to fund the next user’s withdrawal. If a user tips more than Earnin thinks is reasonable for the given withdrawal, it will notify the user and give them the option to dial back the tip amount.
What the company has found is that users are usually more than happy to contribute to the Earnin community of workers.
“So often, people are trying to help each other out,” Palaniappan said. “That’s the most powerful piece — how much support the community is providing to each other.”
Earnin was launched in 2014 and has previously raised $65 million in venture capital funding. With the latest investment, it will expand its engineering and product teams across its offices in Palo Alto — where it’s headquartered — as well as in Cincinnati and Vancouver.
The app, often among the App Store’s top 10 financial apps, has more than 1 million downloads, the company says, and is used by employees at more than 50,000 companies — many of which check the app every day. Palaniappan says its users are working more than 15 million hours per week. If each user works an estimated 40 hours per week, that means the app has roughly 375,000 weekly active users.
He added that the startup’s growth in the last four years has been “quite remarkable.” Given the investor support it’s received, it’s likely to step into “unicorn” territory soon. Ribbit Capital, for example, is a leading fintech investing firm with capital invested in Coinbase, Revolut, Gusto, Wealthfront, NuBank, Brex and more.
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