Also in this letter:
■ Top rung in startups faces pay freeze
■ Tamil Nadu will follow own legislation for online gaming
■ Jio to manage NIC cloud services: sources
Behind VC funding slowing down: due-diligence over deal closures
We report today on what is going on behind the scenes of falling funding numbers.
What are the numbers: During January-March 2023, aggregate funding amount fell to $2.19 billion, almost a fifth of the $11.34 billion in the same quarter last year, and from $3.17 billion in October-December 2022 period, according to data sourced from Venture Intelligence. Almost one-fourth of VC funding that took place in the first quarter of calendar year 2023 is attributed to the $500 million raise announced by eyewear retailer Lenskart.
Extra caution: In the boom year of 2021, investors were engaged in quick dealmaking to prevent losing out on good assets. This year, VCs have taken their foot off the pedal. Some funds are asking for more data and negotiations are taking much longer. Due diligence is taking precedence over deal closures.
Founders speak: Some founders are flagging changing expectations from investors, seeking pivots in business models in specific cases, when they are looking to raise more funds. A founder at a Gurugram-based health-tech startup which has only raised angel funding, but is looking to close a seed round, told ET that investors have been asking them to explore a different model given that there are big companies already present in the segment.
ETtech ln-depth: VCs fund new fashion ecommerce startups building an Indian Shein
Hi, Pranav Balakrishnan in Bengaluru. Today we have a deep dive on the emergence of a new set of ecommece startups which are aiming to replicate the success of China’s Shein and Spain’s Zara by bringing fast-fashion to GenZ shoppers. Venture capitalists are sensing an opportunity and backing a few of them.
What’s driving the news: ET has learnt that Fireside Ventures, which has invested in D2C companies like smart accessories maker Boat and beauty brand Mamaearth, held talks with fast fashion startup Newme for a potential funding round.
Replicating Shein: All these companies are looking to replicate China’s Shein, which is the most downloaded fashion ecommerce app in the world. Having been banned in India following the India-China border clash in 2020, startups smell a chance. London-based Urbanic is the biggest player to have filled the gap, but there are Indian upstarts which have received significant investor interest.
Make in India: Startups like Virgio, Newme, Includ want to manufacture apparel in India with a focus on making cotton fabric, instead of polyester, which is widely used in fast fashion. Virgo has raised $35 million from prominent investors at a valuation of $160 million.
Quote, unquote: “China has these smart mega factories with 20,000 machines… In India, we have smaller factories with 100 machines each. What we are trying to do is connect all the factories and build a mega virtual factory.. India’s fast fashion story will look vastly different from China’s as it will be technology-led, not factory-led,” said Amar Nagaram, CEO of Virgio.
Bottom line: The big action taking place in the online fast-fashion space as startups look to build an ecosystem in India from scratch. These platforms are trying to differentiate themselves as an alternative to incumbents like Flipkart-owned Myntra, Reliance’s Ajio and Tata Cliq.
Labour union condemns LTI Mindtree’s mandatory training and testing for new hires
Pune-based IT union Nascent Information Technology Employees Senate (NITES) has expressed concerns about LTIMindtree’s requirement that certain freshmen awaiting onboarding complete its IGNITE training programme and assessment tests in order to keep their current offers valid.
What’s the issue? According to the union, instead of providing an onboarding date to freshers who were given offers for employment in January 2022, LTIMindtree has now introduced a learning and training programme with a duration of 6-7 weeks. The freshers have been given two options—to undergo this assessment-based training or have their earlier offer automatically cancelled, the company said in a mail sent to these new hires.
Tamil Nadu will follow own legislation for online gaming: Justice Chandru
Retired Madras High Court judge and head of Tamil Nadu’s panel on online gaming, Justice K Chandru has called for a complete ban in the space, arguing that regulation is not a solution. The state govt is clear that a ban is the only way out and it will be implemented soon, Justice Chandru told ET.
Catch up quick: On June 9, 2022, the Tamil Nadu government established a four-member committee headed by Justice Chandru to investigate the negative effects of online gaming. After the committee’s proposal of banning online gaming in the state, the state government passed an ordinance to ban online gaming, following which October 2022, the state Assembly passed the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Bill, 2022, and sent it to the Governor’s office for his assent. However, after four months on March 8, Governor Ravi refused to give his assent to the bill.
Centre vs State? A “legal battle” could be ahead between the state and the Centre on this matter, added Justice Chandru.
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As funding winter sets in, top rung at new-age companies faces pay freeze
In a bid to step up on cost cutting measures to survive the ongoing funding winter, several startups and ecommerce companies are likely to freeze salaries for senior management during appraisals.
First blow on management: As pressure mounts to conserve cash, experts told ET that many startups will hold back raises for senior staff this year. This applies first to the senior management who are incentivised by long-term value creation in the business via ESOPs, according to Sandeep Murthy, partner at Lightbox Ventures.
Already announced pay cuts: In a cost-cutting move, Flipkart said at the end of February that it would suspend raises for its top 30% staff, including senior leadership, in order to cautiously manage resources during difficult macroeconomic times. Similarly, Edtech firm Unacademy, which has undergone four rounds of layoffs, recently revealed that its leadership team would accept pay reductions of up to 25% in its latest cost-cutting plan.
Other Top Stories By Our Reporters
How companies are fine-tuning their services even as hype around Metaverse fades | Technology companies have been saying that there has been a definite and visible impact on their metaverse investments, with clients wanting to go slow on exploring potential use cases of this relatively new technology.
Jio to manage and enhance NIC cloud services: sources | Jio Platforms has bagged a Rs 350-crore contract to manage and enhance the cloud services of the government’s National Informatics Centre (NIC), sources told ET.
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