Indian Startups Can Now Get 100% of Funds From Foreign VC Investor As Govt Includes Startups in FDI Policy

India's Commerce Ministry in its consolidated FDI policy document released today has, for the first time included startups, which can raise up to 100 per cent of funds from Foreign Venture Capital Investor (FVCI), reports TOI today.

Hereafter, startups in India can now issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, said the document which incorporates all the changes made in FDI policy over the past year.

"In addition, startups can issue convertible notes to person resident outside India (subject to certain conditions)," it said.

A person resident outside India (other than citizens/ entities of Pakistan and Bangladesh) will be permitted to purchase convertible notes issued by an Indian startup company for an amount of Rs 25 lakh or more in a single tranche.

NRIs can also acquire convertible notes on non- repatriation basis , said the document of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.

"A startup company engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with approval of the Government," it said, adding that the startup issuing convertible notes would be required to furnish reports as prescribed by the RBI.

The government is focusing on startup companies to promote job creation and innovation.

The DIPP, which deals with FDI related matters, compiles all policies related to foreign investment regime into a single document to make it simple and easy for investors to understand.

Investors would otherwise have to go through various press notes issued by the department, and the RBI regulations to understand the policy. The government updates the policy every year.

The whole exercise is aimed at providing an investor friendly climate to foreign players and, in turn, attract more FDI to boost economic growth and create jobs.

During the last one year, the government has liberalised FDI policy in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies and news broadcasting. In February, it was reported that government is considering 100% FDI in e-commerce marketplaces in India, however after six months the decision is still pending though after this new FDI policy announcement e-commerce startups in India are now allowed to raise 100% FVCI.

Foreign investments are considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.

Foreign investments will help improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.

Gaming Startup Hypernova Interactive Secures Funding From Kae Capital

Gaming startup Hypernova Interactive has secured an undisclosed amount of funding from sector agnostic fund Kae Capital, marking it its first investment in a gaming company.

Commenting on the development, Shubhankar Bhattacharya, Venture Partner, Kae Capital said, "We believe that mobile games, especially those that capitalise on multiplayer and esports, is a large and rapidly growing market. We believe the Hypernova team matches up to the standards set by top global gaming companies, both in their execution capabilities, and their overall vision."

Founded in 2015 by Mayur Bhimjiyani and Huzaifa Arab, Hypernova is one of the fast growing e-sports game development studio. The Bengaluru-based startup is currently working on a multiplayer online battle arena (MOBA) title for mobile, where they are redefining the genre with a revolutionary approach.

“We provide a fast paced environment, where we push the limits of the design language on mobile everyday through a process of constant iteration. If you love questioning and redefining standing conventions, Hypernova Interactive is the place for you,” said Company’s LinkedIn Page.

War Tanks and Space Titans are the two games which startup has launched. Startup claims that in the past eight months, War Tanks has registered 350,000 downloads globally whereas, War Tanks has received an international featuring in the US on both Google Play Store and the Apple App Store.

Kae Capital invests in companies which bring about innovative solutions for the existing gaps in the markets, backed by a great team. The companies look for entrepreneurs who envision technology as a means to disrupt sectors such as mobile, e-commerce, education, healthcare, consumer internet and so on.

Earlier in March 2017, Kae Capital has invested an undisclosed amount in Parentune, a parents network with verified parents and real time trusted advice. In January 2017, Learntron, a learning technology startup with tech operations in Chennai and sales operations in Mumbai, had raised an undisclosed Pre-Series A round from Kae Capital. Other companies that received funding from Kae Capital include Popicom, Learntorn, Azuro, WOTU, and ListUP and other.

GlamTech Startup Fabogo Secures $2.25 Mn From Dubai Based Dunamis Ventures

Aggregator of beauty аnd wellness industry, Fabogo has raised $ 2.25 million (Rs 14.5 crores) from Dubai based early-stage investors Dunamis Ventures. Prior to this, company had secured an angel funding of $500,000 in May, 2015 and $1 million in January, 2016 as angel investment from PE Investors in Dubai.

The company plans to utilize 40% of its funding to strengthen technology and another 40% to increase its user base, the remaining amount will be used for geographical expansion.

Commenting on the recent development, Pasanjeet Roy, CEO and Co-founder, Fabogo said, “Our focus this time is technology because we’re entering into the transaction game. We aim to become the market leaders in our existing cities by March next year. For that, we aim to grow at about 25,000 user downloads month-on-month.”

Co-founded in March 2015 by Prasanjeet Roy and Mohammad Ali, Fabogo took an international-first approach by debuting in Dubai in May and subsequently launched in their home turf, Pune and Mumbai in August 2015. Fabogo, formerly Mazkara quickly built itself up as the leading online platform to discover beauty and wellness services in UAE. It lists salons, spas and cosmetic centres, to gain higher

visibility and enables them to be discovered by new customers searching for beauty and wellness services. Customers use it to gain quick access to information such as prices, offers, photographs, user reviews and more.

Fabogo aims to be the world’s leading online engagement platform for the personal grooming industry, working to bring salon and spa owners and their target market segment closer to each other and providing them the tools to interactively engage with each other.
At its core, the product is aimed at helping its users stay beautiful, by enabling them to search and discover beauty services at salons and spas in their locality. Fabogo’s current business model is Pay-per-Lead based wherein they charge a small fee for every customer directed to a partnered venue.

With more than 3,50,000 users monthly on their website, Fabogo is also launching the app on android and iOS that will enable consumers to BUY-BOOK-REDEEM the beauty services around them at their convenient аnd comfort.

Startup claims that it is increasing at a solid 20 % month on month and are driving an average of 500 appointments daily.

India Quotient, Shunwei Capital Bets $1 Mn In Bengaluru Based Clip App

Bengaluru-based digital media video startup, Clip App has raised close to $1 million in a seed round led by India Quotient and Shunwei Capital, a China-based investment firm.

The company plans to utilize freshly infused funds to enhance it’s product features for the video only app. The startup which claims have an organic growth of over 100,000 users within three months, largely from tier-II and tier-III markets plans to focus on acquiring users over the next two to three years.

Commenting on the development, Anand Lunia, partner at India Quotient told ET, “Lot of social media companies have started and shut down in India, it’s not a space where companies see a high success ratio. Besides this, investors are also interested in seeing innovative social media companies come out of India for Indians, so there is potential in terms of funding for this space. However, since the space is competitive, staying relevant is a challenge.”

Lunia believes that this space remains competitive and challenging and soon Indian entrepreneurs will learn a way to build social networks specifically for non English speaking audience in India.

Founded in March 2017 by Nav Agarwal, Clip App is presently growing organically, as the company is focusing on enhancing the product and building upon its features before aggressively marketing Clip App.

According to the Agarwal, the app specifically caters to tier-II and III user's focuses on Hindi speaking users.

Nav Agarwal, Founder, Clip App said, “They spend over 20 minutes a day on the app. And a lot of videos that are currently on the app are the kind of videos one would find shared on WhatsApp or videos individuals take randomly, could be dance, drama, stunts.Basically, one time watch videos. These users technically represent 95% of India.”

Agarwal further said that they saw the future in video when the team noticed that over 80% of Facebook’s newsfeeds consisted of videos, Instagram made a shift to taking video more seriously and Snapchat as a video medium.

Moglix Raises $12 Mn In Series B funding From IFC, Rocketship, Others

B2B e-commerce startup, Moglix has announced closing of Series B round of funding at $12 million. The round saw participation from International Finance Corporation (IFC), a member of the World Bank Group and Rocketship.vc, along with Moglix’s existing investors Accel Partners, Jungle Ventures, Shailesh Rao, ex-VP Twitter and Google and Venture Highway advised by Neeraj Arora of Whatsapp.

Moglix is also backed by Tata Sons’ Chairman Emeritus Ratan Tata since its inception, as his maiden investment in B2B e-commerce domain.

The company plans to use funds to support the strong demand for Moglix’s robust technology solution in supply chain and manufacturing domain, infrastructure growth and geographical expansion plans.

Manufacturing sector in India is the least digitised industry compared to other sectors in India. Today, barely 2-3% of manufacturing units are using digital platforms in their supply chain management. With this investment, Moglix is looking to propel digital revolution of India’s manufacturing sector with its integrated digital supply chain solution and aiming to launch in 3 more cities in India apart from its current presence in Delhi NCR, Pune and Chennai.

Commenting on the development, Pravan Malhotra, Head Asia Internet Investments, IFC, said, "Moglix’s client satisfaction, innovation, strength of management and expansion are redefining the B2B e-commerce market. We are excited to partner with the company as they embark on the path of rapid growth and success.”

Founded in 2015 by Rahul Garg who was previously the Head of Advertising Exchange at Google Asia, Moglix is led by a group of young and motivated individuals passionate about shaping the manufacturing/ B2B commerce landscape in India.

Moglix that is specializes in B2B procurement of industrial products such as MRO, Fasteners, Electrical, Hardware, Pneumatics, Safety items and more, aims to be the largest technology platform where demand and supply can be matched through price discovery and product availability.

Moglix’s solutions cater to more than one lakh small and medium-sized enterprises (SMEs), and over 200+ large manufacturing houses in India. Moglix currently has more than two lakh stock keeping units (SKUs) listed on its platform and serves some of the largest auto, electrical and public sector undertakings (PSUs) in the country including Lumax, IndiaForge, Havells etc.

“The raise will accelerate our infrastructure build-up to better serve our customers, and enhance our product offerings as the manufacturing and supply chain industry heralds towards digitization.According to a recent industry report, the global B2B e-commerce market is estimated to reach $7 trillion by 2020, as it’s twice as big as B2C market. We are making strides to harness the potential of the market in India and other Asian countries,” said Rahul Garg, Founder & CEO, Moglix.

The company specializes in digital procurement of industrial MRO items and aims to utilise the funds to expand geographically across multiple industrial hubs in India. With the recent reforms of GST implementation and move towards a cashless economy, Moglix is well-poised to cater to more customers in the days to come.

Recently, Moglix also launched GreenGST, a unique solution for the manufacturing sector that will make the entire customer ecosystem GST compliant and future-ready, marking another milestone towards its commitment to the space.

Moglix had previously raised Seed and Series A funding of $6 million from venture capital firms like Accel Partners, Jungle Ventures, SeedPlus and Venture Highway. With this current round, the total amount of fund raised by Moglix stands at $18 million. The announcement is significant since the investment has been raised at a time when there is heightened uncertainty and deteriorating business confidence overshadowing the startup ecosystem.

Despite Drop in Indian Startups Funding There's A Positive Sign

According to latest data made available by financial research firm VCCEdge, the Indian startup ecosystem is not only continuing its dry funding run from last year, but it has slowed down even further.

The data from VCCEdge highlights that during the first quarter of 2017, the Indian startup ecosystem saw just 237 funding deals going through all the way. This 237 figure marks a 47 per cent decline from the number of deals that were locked in last year during the same period. Further, the data also revealed that the combined deal values have also plunged by 23 per cent to $165 million in the first quarter of 2017 when compared to the same period last year, and fell by a shocking 46 per cent from the preceding quarter. VCCEdge notes that the significant fall made the quarterly deal value the lowest in the period of over three years and it fell below the $300 million mark for the very first time in nine quarters.

Marking a not so good start of the year for the third largest ecosystem in the world, the first quarter of 2017 saw a decline in seed funding and angel funding, both in terms of value as well as volume. The number of early stage deals in the Indian startup ecosystem declined almost by 50 percent with just 120 deals going through the first quarter of 2017, when compared to the 245 deals figure in the same period the preceding year. Further, Series A funding rounds also saw a decline by 65 per cent in terms of deal value, while Series B rounds saw a 22 per cent increase in value even as the number of deals fell by 16 per cent.

There's a Positive Sign

While there is no denying the fact that the figures coming in from the first quarter are quite dismissal, but everything isn't lost. According to the VCCEdge report, even though the early stage funding deal numbers weren't so impressive, but the mid to late stage deals saw an upward trend, with Series B funding rounds growing by a good 22 per cent compared to the figures clocked in last year. In addition to this, the startups that still have their eyes set on profits and are working hard to achieve their targets continue being the favourites among investors.

According to Gaurav Roy, business head, VCCEdge, “A rise in Series-B funding even as seed and Series-A funding trends show a decline reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding. The relief however is that M&A deals have picked up momentum post-2015 coinciding with the drop in funding activity in the startup space, turning into an exit route for some promoters and a major source of funding for others. Enterprises which can work on a combination of strong revenue models and continuously updated technological knowhow which ensures a great consumer experience will continue to attract investors."

Referring to a whopping 75 per cent growth in merger and acquisition (M&A) activity in the first quarter compared to last year in terms of number of deals, experts predict that after years and years of aggressive funding, the Indian startup sector is now exhibiting early signs of maturing. Some of the top deals that made headlines were: $130 million acquisition of Citrus Payments Solutions; the $41 million purchase of One Mobikwik, and the $31 million acquisition of ZipDial Mobile Solutions; and the $16 million acquisition of Local Cube Commerce.

However, according to industry experts, this significant growth in M&A activity could lead to more investor interest as it has been observed that late stage venture capitalists often see good value in bringing players together, increasing the economies of scale of the businesses, and then eventually floating possible public offerings.

What's Still Hot

According to the VCCEDge report, Bengaluru was the most active Indian city for startup activity in Q1 2017 and clocked in 40 deals worth $96 million. It was followed by Delhi NCR at second place which saw 38 deals going through worth $44 million.

Coming to sectors within the ecosystem, investors still seem to prefer money over food and travel. According to the report, Fintech continues to be the hottest sector for the Indian startup fundraising. The sector which covers financial technology services successfully netted 11 deals worth $18.5 million in the first quarter, and was followed by food tech at second position with 8 deals worth $11.1 million, and real estate tech coming in at third position with 2 deals worth $10 million.

Despite Drop in Indian Startups Funding There's A Positive Sign

According to latest data made available by financial research firm VCCEdge, the Indian startup ecosystem is not only continuing its dry funding run from last year, but it has slowed down even further.

The data from VCCEdge highlights that during the first quarter of 2017, the Indian startup ecosystem saw just 237 funding deals going through all the way. This 237 figure marks a 47 per cent decline from the number of deals that were locked in last year during the same period. Further, the data also revealed that the combined deal values have also plunged by 23 per cent to $165 million in the first quarter of 2017 when compared to the same period last year, and fell by a shocking 46 per cent from the preceding quarter. VCCEdge notes that the significant fall made the quarterly deal value the lowest in the period of over three years and it fell below the $300 million mark for the very first time in nine quarters.

Marking a not so good start of the year for the third largest ecosystem in the world, the first quarter of 2017 saw a decline in seed funding and angel funding, both in terms of value as well as volume. The number of early stage deals in the Indian startup ecosystem declined almost by 50 percent with just 120 deals going through the first quarter of 2017, when compared to the 245 deals figure in the same period the preceding year. Further, Series A funding rounds also saw a decline by 65 per cent in terms of deal value, while Series B rounds saw a 22 per cent increase in value even as the number of deals fell by 16 per cent.

There's a Positive Sign

While there is no denying the fact that the figures coming in from the first quarter are quite dismissal, but everything isn't lost. According to the VCCEdge report, even though the early stage funding deal numbers weren't so impressive, but the mid to late stage deals saw an upward trend, with Series B funding rounds growing by a good 22 per cent compared to the figures clocked in last year. In addition to this, the startups that still have their eyes set on profits and are working hard to achieve their targets continue being the favourites among investors.

According to Gaurav Roy, business head, VCCEdge, “A rise in Series-B funding even as seed and Series-A funding trends show a decline reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding. The relief however is that M&A deals have picked up momentum post-2015 coinciding with the drop in funding activity in the startup space, turning into an exit route for some promoters and a major source of funding for others. Enterprises which can work on a combination of strong revenue models and continuously updated technological knowhow which ensures a great consumer experience will continue to attract investors."

Referring to a whopping 75 per cent growth in merger and acquisition (M&A) activity in the first quarter compared to last year in terms of number of deals, experts predict that after years and years of aggressive funding, the Indian startup sector is now exhibiting early signs of maturing. Some of the top deals that made headlines were: $130 million acquisition of Citrus Payments Solutions; the $41 million purchase of One Mobikwik, and the $31 million acquisition of ZipDial Mobile Solutions; and the $16 million acquisition of Local Cube Commerce.

However, according to industry experts, this significant growth in M&A activity could lead to more investor interest as it has been observed that late stage venture capitalists often see good value in bringing players together, increasing the economies of scale of the businesses, and then eventually floating possible public offerings.

What's Still Hot

According to the VCCEDge report, Bengaluru was the most active Indian city for startup activity in Q1 2017 and clocked in 40 deals worth $96 million. It was followed by Delhi NCR at second place which saw 38 deals going through worth $44 million.

Coming to sectors within the ecosystem, investors still seem to prefer money over food and travel. According to the report, Fintech continues to be the hottest sector for the Indian startup fundraising. The sector which covers financial technology services successfully netted 11 deals worth $18.5 million in the first quarter, and was followed by food tech at second position with 8 deals worth $11.1 million, and real estate tech coming in at third position with 2 deals worth $10 million.

Michael & Susan Dell Foundation Sets up $50M Fund for Indian Startups

Michael and Susan Dell Foundation has set up a $50 million fund for investing in Indian startups over the next three years. This will be in addition to its already active impact investment fund called India Educational Investment Fund, will be primarily used towards making direct investments in early-stage ventures.

The firm has also backed two early-stage funds in the country as a Limited Partner - Unitus Seed Fund and social business incubator Villgro-launched Menterra Venture Advisors. The foundation is planning to increase its offerings to ventures, which currently include grants, equity financing, debt and non-convertible debt offerings.

Currently, the firm has over over 25 portfolio companies in India, making it one of the most active investors in the country. It typically focuses on areas related to education, skill development, and financial inclusion and already backed ed tech ventures such as Report Bee, iSTAR Skill development, Guru G Learning Labs with the most recent investment being in online test preparation startup Oliveboard.

MSDF was founded by Dell founder and billionaire Michael Dell and his wife, Susan in 1999, opened its India office in 2006.

Last month, Bengaluru-based investment firm Unitus Seed Fund has announced its plans to launch a second fund of $50 million to invest in around 50 startups with each company receiving between Rs 1 crore and Rs 3 crore. Also in the same month, vyCap Ventures which is known for investing in early and growth stage companies, raised around $45 million for the first close of its second fund of $90 million and US-based venture capital firm, Entrepreneurship and Venture Capital (EVC) launched an India-focused $50 million early-stage investment fund.

White Unicorn Ventures is also in talks with investors in Germany and Silicon Valley to raise a $20-million fund to invest in early-stage companies.

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