With South Africa’s tax season underway and SARS’ auto-assessments being sent out, the tax revenue service has warned of scams targeting eFiling users. SARS…
Observers of an emerging startup ecosystem look for exits as a sign of maturity. That is because exits in the form of mergers and acquisitions (M&As) or IPOs give VCs a return on their investment. They can then launch new funds to invest in fresh startups. It completes the cycle of venture capital.
Indian tech IPOs are rare. So the approval given in September by the Securities and Exchange Board of India (SEBI) to ecommerce firm Infibeam to raise INR 4,500 million (US$68 million) breaks new ground. Rivals Flipkart and Snapdeal will be watching what kind of reception the public listing by an ecommerce firm receives. So far in India, we’ve only seen sky-high valuations and mega funding rounds, not blockbuster IPOs.
Before Infibeam, listing and search services firm Justdial had a successful IPO in 2013 and travel firm MakeMyTrip listed on the Nasdaq in 2010. Info Edge, which runs portals like Naukri for jobs, Jeevansathi for matrimonial classifieds, and 99acres for real estate, had an IPO in 2006.
A changing ecosystem
But while an IPO may still be as rare as a comet in India, it’s been raining acquisitions. Industry body Nasscom had counted 65 acquisitions of startups by mid-October. But more than the number of deals, what’s significant is that they’re happening within the country, such as the acquisition of FreeCharge by Snapdeal and TaxiForSure by Ola. Well-funded Indian startups are thus contributing to building the ecosystem.
Most of all, VCs will be encouraged by the size of some of these exits. The FreeCharge acquisition has been pegged at US$400 million while that of TaxiForSure at US$200 million.
Amounts are rarely disclosed in mergers and acquisitions by unlisted companies, but one can get an idea from a startup’s funding and valuation. Here are 11 acquisitions that shook up the startup ecosystem in India last year. Some were made in desperation, while others were a consolidation of forces against big rivals. Either way, it kept the pot boiling and we can expect it to get frothier in 2016.
1. Snapdeal acquires FreeCharge
Ecommerce firm Snapdeal’s buyout of mobile top-up site FreeCharge for an estimated US$400 million in April is the biggest acquisition in India to date. Snapdeal has used acquisitions for what it terms a “string of pearls” strategy. FreeCharge, with its large user base, is the mobile payments pearl. In September, Snapdeal and FreeCharge launched a digital wallet to rival that of Alibaba-backed Paytm.
Snapdeal had a number of other major acquisitions last year, including loans platform RupeePower, mobile tech firm Martmobi, artisanal marketplace Shopo, mobile app designer Letsgomo, sports etailer eSportsbuy, gifts recommender Wishpicker, group-buying platform Grabbon, luxury fashion estore Exclusively, and Doozton, a niche fashion site for special occasions like weddings. Amidst this churn in Indian ecommerce was Chinese giant Alibaba picking up a stake in Snapdeal.
2. Ola acquires TaxiForSure
For a long time Ola and TaxiForSure vied to be India’s answer to Uber. Suddenly times changed. A rape case was lodged against an Uber driver in Delhi; many state governments rushed to ban on-demand taxi services; and all taxi apps landed in one hot soup. Investors got jittery, funding dried up for TaxiForSure, and it could not keep up with the discount war between Ola and Uber. It is in these circumstances that its rival Ola, which had a bigger war chest thanks to a timely funding round by SoftBank, bought out TaxiForSure for US$200 million.
Ola had raised US$210 million from SoftBank in October 2014 on top of the US$41.5 million it had raised earlier that year, taking its total funding in 2014 to over a quarter of a billion dollars.
At the time of acquisition, TaxiForSure, which got rolling a few months after Ola launched in January 2011, had 15,000 vehicles across 47 cities on its platform. Now in India it has become a straight fight between Uber and Ola, which recently entered a global tie up with Didi Kuaidi, GrabTaxi, and Lyft.
3. Twitter acquires ZipDial
A “missed call” is a hack by Indians to save on phone charges. The call is cut off before it’s picked, which acts as a signal – such as telling a friend that you’ve reached a location. Stanford University grad Valerie Wagoner, who was fascinated by this phenomenon when she visited India, made a mobile marketing business out of it.
Customers could send “missed calls” to brands which would respond and engage with the callers. Twitter found the ZipDial platform a perfect fit for its plans to grow its user base and engagement in emerging markets. ZipDial thus became Twitter’s first acquisition in India last January, reinforcing the attraction of India-specific innovations. Weeks after the acquisition, Twitter opened an R&D center in Bangalore in association with ZipDial, adding engineering teams to the sales staff it had in India until then.
4. Practo acquires Qikwell
A US$90 million series C investment round led by Tencent in August made Practo one of the best funded digital health apps in the world. The funding gave a push to Practo’s plans to broaden from a doctor discovery app to a comprehensive healthcare platform, connecting with hospitals, pharmacists, and fitness centers apart from doctors and their clinics. The Indian startup went on an acquisition spree after its big funding round to pursue this agenda quickly. Acquisitions of Fitho, Genii, and Insta Health were followed by the biggest of them, Qikwell, bringing together two ends of the spectrum of healthcare.
5. CarTrade acquires CarWale
The auto trade in India is huge and disorganized, and a number of auto portals have come up to tackle the whole spectrum from new cars to used ones. CarWale was one of the first of these. It launched in 2005 as a consumer-focused site for research, pricing, and marketplace information for car lovers and buyers.
German media conglomerate Axel Springer came in as an investor in 2008. Over the past couple of years, however, better-funded rivals like CarDekho and CarTrade surged ahead. Consolidation in this space was led by CarDekho’s acquisitions of Zigwheels and Gaadi. The acquisition of CarWale by CarTrade followed soon after, giving Axel Springer an exit.
6. PropTiger acquires Makaan
Real estate is another space where consolidation is under way. Just as CarWale got acquired by its younger rival CarTrade, property classifieds site Makaan, founded in 2007, gotswallowed up by Newscorp-backed PropTiger which is four years younger. Controversy-ridden Housing also had a string of acquisitions in the midst of firing its founder-CEO Rahul Yadav and hundreds of employees. Homebuy360, BigBHK, Indian Real Estate Forum, Plat, and Realty Business Intelligence were among the startups Housing acquired.
Late in the year, classifieds portal Quikr created a buzz by moving aggressively into the real estate vertical. Rumors flew on Indian media about Quikr’s acquisition of Housing’s main rival CommonFloor, but those have been unfounded so far. Quikr did announce an acquisition – but that was of another startup RealtyCompass. A downturn in the property market makes further consolidation likely, as weaker players find it harder to keep up.
7. Capillary acquires MartJack
Software-as-a-service (SaaS) saw a lot of action last year both in funding and acquisitions. Capillary Technologies, founded in India but now headquartered in Singapore, is among the best funded in this space with a global clientele for its cloud-based customer engagement software products. A US$45 million series C funding round led to a growth push. Its acquisition of eight-year-old Martjack was announced the same day as the funding. Freshdesk, another well-funded SaaS success story out of India in global markets, had a string of strategic acquisitions of other SaaS startups including Frilp, 1Click, and Konotor.
8. Grofers buys Spoonjoy, Townrush, and My Green Box
After Snapdeal, Ola, Housing, and Oyo Rooms, it was the turn of grocery delivery startup Grofers to pick up big bucks from Japan’s SoftBank. The US$120 million series C funding supported a string of acquisitions for inorganic growth, including Spoonjoy, Townrush, and My Green Box. Its major rival PepperTap had earlier acquired Jiffstore.
Another interesting acquisition in this space late in the year was that of MeraGrocer by the Spencer’s retail chain – interesting because most of the other acquisitions were made by other startups, whereas this one was by a large established retail chain.
9. Shadowfax acquires Pickingo
The broader logistics sector grew hot as well with the boom and spread of ecommerce. There was a ten-fold increase in funding in logistics startups compared to 2014. Inevitably, this led to consolidation as the big fish swallowed the smaller fish to grow faster. Shadowfax’s acquisition of Pickingo was a case in point. This was a distress sale by Pickingo which had been forced to shut shop as the bigger players like Delhivery and Roadrunnr cornered the market. Ecommerce leaders Flipkart and Snapdeal also made major strategic investments into BlackBuck and Gojavas respectively, without actually acquiring them.
10. MakeMyTrip buys MyGola
Last minute travel booking site MyGola, backed by investors like Helion Venture Partners, 500 Partners, and Blumberg Capital, had several pivots before its acquisition by the Nasdaq-listed MakeMyTrip – a pioneer among Indian travel booking sites. Last year, MakeMyTrip launched an “innovation fund” to invest in travel startups. The acquisition came out of this fund. Travel tech saw a three-fold increase in funding to nearly a quarter of a billion dollars in 2015.
11. Mahindra Group acquires Babyoye
Industrial conglomerate Mahindra Group bought four-year-old babycare products marketplace BabyOye, which had raised US$14.5 million in funding from Tiger Global, Accel Partners, and Helion Venture Partners. Mahindra had an offline chain of baby product stores called Mom & Me, which were merged with the online marketplace Babyoye. This acquisition, like Spencer’s retail chain buying MeraGrocer, held out possibilities of publicly listed Indian companies getting more into startup acquisitions to give a boost to their digital innovations.
While the number of acquisitions and their size are both going up in India, investors will be looking for more IPOs of startups and acquisitions by publicly listed companies in the year ahead. So far, they’ve depended mostly on acquisitions of startups by other startups. Returns have also come from late stage investors buying out the stakes of existing investors. It’s still a far cry from the startup investment scene in the US or China; but then Rome wasn’t built in a day. Investors seem gung ho on India, judging by the nearly US$8 billion they poured into Indian startups last year.
Image by Dennis Jarvis via flickr.