VCC Startups Weekly Wrap: Ola buys Foodpanda; Quikr picks up HDFC Realty

Cab aggregator Ola was the newsmaker of the week as it opened up a new battle front against global rival Uber with the acquisition of Food Panda India. The entry into the non-core business vertical was seen as a strategic move to counter UberEats in India.

Quikr, too, was not far behind, announcing the acquisitions of HDFC’s realty brokerage and online property listing businesses, while e-commerce market leader Flipkart announced its intention to launch an artificial intelligence unit AIforIndia.

In a year, which saw subdued early-stage funding and several startups shutting shop, the news of Ratan Tata-backed downing the shutters further dampened the mood of angel and venture capital investors. However, fund raising activities by 20 startups during the week lifted the spirits as the year came to a close.

2017 angel, seed deals halve
While shutdowns continued to haunt the startup ecosystem as the year draws to a close, entrepreneurs seeking funding for their new ventures faced greater difficulties in 2017, as the undoing of many well-funded tech startups in the previous years, besides a lack of exit opportunities made early-stage investors even more cautious.

Provisional data from VCCEdge, the data research platform of News Corp VCCircle, showed the number of angel and seed funding deals have, in fact, halved to 435 in 2017 from 901 in 2016.

The total disclosed values of the deals also saw a sharp decline to $245 million from $374 million in 2016. The number of venture capital deals dropped 40% to 327 in 2017 year-on-year, while the aggregate value of the transactions decreased about 10% to $3.12 billion. This is indicative of the fact that investors are betting comparatively more money on fewer startups.

Many wealthy individuals, who had discovered startup funding as a new asset class in 2014 and 2015, seemed to have burnt their fingers and withdrawn, while VC investors, who sit on millions of dollars of un-invested money, were taking a hard look at the business fundamentals of early-stage companies and spending far more time than before for writing cheques.

At least 19 venture capital-backed startups shut shop in 2017, according to a VCCircle analysis. In comparison, 32 startups had downed their shutters last year and 17 in 2015.

The actual number of shutdowns could, however, be far higher, as most entrepreneurs try to cover up their tracks so that their failures do not come out in public. They typically prefer to move on to either new ventures or join established companies. While the overall numbers are a respite compared with the previous year, it is still a worrisome trend as investment sentiments remain subdued since the days of the downward spiral that began in early 2016.

Ola to acquire Foodpanda, invest $200 mn
Homegrown cab-hailing major Ola has agreed to acquire the Indian business of food delivery platform Foodpanda from its Germany-based parent Delivery Hero in an all-stock deal. Ola has also committed to inject $200 million into Foodpanda India to expand its business.

The move, in fact, marks Ola’s re-entry into the non-core business segment such as food delivery. Food Panda India will operate as a wholly-owned subsidiary of Ola and will not be rebranded. The food delivery platform will not only help Ola open up a new war front with its competitor Uber, which had launched UberEats some time ago, but also continue to its main rivals Swiggy and Zomato in the Indian market.

Foodpanda was earlier part of German e-commerce investor Rocket Internet. In December 2016, food delivery company Delivery Hero Holding GmbH had acquired Rocket Internet’s entire global operations of Foodpanda.

Quikr to buy HDFC Realty, HDFC Developers
Online classifieds Quikr India, which made a series of acquisitions in the past, agreed to buy real estate brokerage firm HDFC Realty Ltd and HDFC Developers Ltd in all-stock transactions worth Rs 357 crore ($56 million).

The deal will result in mortgage lender HDFC Ltd picking up a stake in Quikr. However, the company refused to divulge further details on the size of the stake.

HDFC Developers operates online real estate platform HDFC RED. The classifieds site has around 7,000 project listings. It claims to generate traffic of over 80,000 unique visitors per month. The company’s revenue stood at Rs 6.23 crore in 2016-17.

HDFC’s offline brokerage business, HDFC Realty, has presence across residential and commercial properties, besides offering consulting and valuation services. It has a 300 member in-house sales team, and 7,000-strong brokers across India. It had posted revenues of Rs 35.25 crore in 2016-17.

The latest move shows Quikr’s intent to strengthen its digital real estate commerce business, which started almost two years ago with the merger of CommonFloor with QuikrHomes. The company, which raised around $350 million so far, has made a dozen acquisitions across different verticals in a bid to strengthen monetisation of the internet traffic it accrues.

Flipkart’s AI unit
After launching its data analytics-driven brand, Billion, Indian e-commerce giant Flipkart will create an artificial intelligence unit called AIforIndia to strengthen its business offerings.

The company is looking to invest millions of dollars into the venture over the next few years and has initiated a hiring process to look for AI engineers who can take care of building infrastructure and lead hardware partnerships, Flipkart cofounder and executive chairman Sachin Bansal told Mint.

Flipkart is also trying to work with top Indian education institutions, such as the IITs, for the project, he said. The firm is also looking to make acquisitions in the AI space in India and the US, he said.

In June, Flipkart had acquired Silicon Valley-based F7 Labs, which is believed to be working on an AI project named Mira. Earlier, it had tied up with Microsoft to leverage its AI and machine learning abilities to run sales. Besides, the company’s fashion arm Myntra is making use of the new technologies to sell products more efficiently. In October 2015, Myntra had introduced smart bot Artie, which collects insights about customers to help create a fashion range under the ‘ModaRapido’ brand.

AIforIndia will be headed by chief data scientist Mayur Datar, alongside Bansal and Flipkart chief executive Kalyan Krishnamurthy.

Healthian cofounder sues firm; KAARYAH shuts shop
Online diagnostics startup Healthians is embroiled in a legal dispute after one of its co-founders sued the company, besides the other founders and investors, two people aware of the matter told VCCircle.

Anuj Mittal, who had joined as the co-founder of Healthians in 2015 and quit the venture in May, has alleged mismanagement and oppression of his rights as a minority shareholder, the people said.

Mittal made the allegations in a petition filed last month with the National Company Law Tribunal under Sections 241 and 242 of the Companies Act 2013, they added.

In another development, Ratan Tata-backed online women’s fashion brand shut down its operations due to lack of funds, Nidhi Agarwal, the founder and chief executive of the firm told VCCircle. The firm has laid off all its employees, she said.

Springboard, Smaash, Wellthy raise funds
About 20 startup funding deals were announced this week. Gaming arcade operator Smaaash Entertainment Pvt. Ltd has raised Rs 90 crore ($14 million) from a group of high-net-worth individuals.

US- and India-based online education startup Springboard, which offers professional courses, has raised $9.5 million (Rs 62 crore) in a Series A funding round from US venture capital firm Costanoa Ventures, Learn Capital and Appdynamics founder Jyoti Bansal.

International Finance Corporation is set to invest up to $10 million (Rs 64 crore) in online insurance broker Coverfox, the private-sector investment arm of the World Bank Group said in a statement.

Diabetes management app Wellthy has raised an undisclosed amount of funding from GrowX Ventures, while Ratan Tata along with a few other investors have pumped in money into cannabis research firm BOHECO.

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