Blume Ventures’ Karthik Reddy on Indian startup ecosystem, geo-political tension with China and coronavirus

Despite the coronavirus outbreak, which has slowed down deal-making across the world, dozens of startups in India have raised considerable amounts in recent months. Unacademy, which raised $110 million in February, closed a new round of $150 million this month.

These large check sizes, and the frequency at which they are being bandied out, were almost unheard of in India just 10 years ago. The list of problems these local startups were solving then was also quite smaller back in the day.

Karthik Reddy has seen this change very closely.

He co-founded venture capital firm Blume Ventures, where he also serves as a partner, 10 years ago. Blume Ventures is the largest Indian venture capital firm. In a wide-ranging interview at Disrupt 2020, Reddy talked about the state of the startup ecosystem in India, some of the challenges it is confronting today and what lies ahead for the market.

“Fifteen years is what you should consider the active VC build-out in India. For the first five to seven years, we were kind of faking it till we make it. We sold the idea that we can replicate what the U.S. and China have done,” he said.

The breakout moment in India happened when low-cost Android smartphones flooded the market. A handful of startups with consumer-facing services such as Flipkart, Paytm and Zomato emerged to serve the first tens of millions of smartphone users in the country.

“The Hail Mary moment there was Reliance Jio’s arrival in the market,” he said. India’s richest man, Mukesh Ambani, entered the telecommunications market in the second half of 2016 with the world’s cheapest mobile tariff.

Moreover, for several months, Ambani simply did not charge Jio subscribers anything for access to 4G data. So India at large, once conscious about each megabyte it spent on the internet, suddenly started consuming gigabytes of content everyday. “It democratized data and smartphones at a scale that we have not seen in countries other than China,” said Reddy.

Karthik Reddy is the co-founder of Blume Ventures, the largest Indian venture capital firm

As hundreds of millions of users in India arrived on the internet, scores of startups in the country started to solve more complex problems: Bangalore-based startup Meesho today is helping millions of women sell products digitally; Classplus, a Blume Ventures-backed startup, has built a Shopify-like platform for teachers and coaching centres to serve students directly.

As India grew into the world’s second largest internet consumer, it has also attracted American and Chinese technology groups, all of which are looking for their next billion users. Several major investment firms, including Silver Lake, Alibaba Group, Tencent, GGV Capital, Tiger Global, General Atlantic, KKR, Vista, and Owl Ventures have also arrived and become aggressive in their investments in recent years.

But the geo-political tension between India and China have slightly complicated matters. In April this year, India amended its foreign direct investment policy to China to seek approval from New Delhi for their future deals in the country. Chinese investors have ploughed billions of dollars into the Indian startup ecosystem in recent years.

It’s a sensitive topic, given the involvement of the government, that most VCs in India are not comfortable addressing it even off the record. But Reddy weighed in.

“If not an arm or limb, it cuts off a finger or two for your choices. You are a little handicapped,” he said. “But there’s a caveat to that. It’s limited to certain segments of the market. I don’t think China and Hong Kong investors, even though they were very familiar with Chinese VC success story, were really interested in India’s deep tech and cross-border tech,” he said.

Today those areas account for more than a third of the robust ecosystem in India, Reddy argued. “If you look at the entire ecosystem collectively, there’s a single-digit influence of Chinese capital. […] If you ask me personally, 40% of my portfolio is not even remotely affected by it,” he said.

But several large consumer-facing Indian startups, such as Paytm, Zomato and Udaan, do have Chinese investors on their cap tables. Reddy said they would be impacted as uncertainty looms over when — and if — India would offer any relaxation to its current stand.

He said he is hopeful that the government would provide some distinction to VC-managed fund money that is not necessarily Chinese just because it’s run by someone who originated there.

Reddy also spoke about why he thinks early-stage startups, despite the proliferation of VC firms in India focusing on young firms, continue to receive less attention. We also spoke about how the coronavirus is impacting his portfolio startups and the industry at large and what advice he has for startup founders to navigate the turbulence times. You can watch this and much more in the interview below.

#alibaba-group, #asia, #blume-ventures, #china, #disrupt, #disrupt-2020, #india, #karthik-reddy, #startups, #techcrunch-disrupt, #unacademy, #venture-capital, #zomato

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Facebook addresses political controversy in India, monetization opportunities, startup investments

At the beginning of the previous decade, Facebook had a tiny presence in India. It had just started to slowly expand its team in the country and was inking deals with telecom operators to make access to its service free to users and even offer incentives such as free voice credit.

India’s internet population, now the second largest with more than 500 million connected users, itself was very small. In early 2011, the country had fewer than 100 million internet users.

But Facebook ended up playing a crucial role in the last decade. So much so that by the end of it, the social juggernaut was reaching nearly every internet user in the country. WhatsApp alone reaches more than 400 million internet users in India, more than any other app in the country, according to mobile insight firm App Annie.

This reach of Facebook in India didn’t go unnoticed. Politicians in the country today heavily rely on Facebook services, including WhatsApp, to get their message out. But it has also complicated things.

Rumors have spread on WhatsApp that cost lives, and politicians from both the large political parties in India in recent weeks have accused the company of showing favoritism to the other side.

To address these issues, and the role Facebook wishes to play in India, Ajit Mohan, the head of the company’s business in the country, joined us at Disrupt 2020. Following are some of the highlights.

On controversy

A recent report in WSJ claimed that Ankhi Das, one of Facebook’s top executives in India, decided against taking down a post from a politician from the ruling party. She did so, the report claimed, because she feared it could hurt the company’s business prospects in India.

In Mohan’s first interview since the controversy broke, he refuted the claims that any executive in the country holds power to influence how Facebook enforces its content policy.

“We believe that it’s important for us to be open and neutral and non-partisan,” he said. “We have deep belief and conviction that our enabling role is as a neutral party that allows speech of all kinds, that allows expression of all kinds, including political expression, and a lot of the guidelines that we have developed are to make sure that we really enable our diversity of expression and opinion so long as we’re able to make sure that the safety and security of people are protected.”

Mohan said the internal processes and systems inside Facebook are designed to ensure that any opinion and preference of an employee or a group of employees is “quite separate from the company and the company’s objective enforcement of its own policies.”

He said individuals can offer input on decisions, but nobody — including Ankhi Das — can unilaterally influence the decision Facebook takes on content enforcement.

“We do allow free expression inside the company as well. We don’t have any constraints on people expressing their point of view, but we see that separate from the enforcement of our content policy. […] The content policy itself, in the context of India, is a team that stands separate from the public policy team that is led by Ankhi,” he added.

This photo illustration shows an Indian newspaper vendor reading a newspaper with a full back page advertisement from WhatsApp intended to counter fake information, in New Delhi on July 10, 2018. (Photo by Prakash SINGH / AFP)

On India and monetization

Even as Facebook has amassed hundreds of millions of users in India, the world’s second largest market contributes little to its bottom line. So why does Facebook care so much about the country?

“India is in the middle of a very exciting economic and social transformation where digital has a massive role to play. In just the last four years, more than 500 million users have come online. The pace of this transformation probably has no parallel in either human history or even in the digital transformation happening in countries around the world,” he said.

“For a company like ours, if you look at the family of apps across WhatsApp and Instagram, we believe we have a useful role to play in fueling this transformation,” he said.

Even as Facebook does not generate a lot of revenue from India, Mohan said the company has established itself as one of the most trusted platforms for marketers. “They look to us as a material partner in their marketing agenda,” he said.

He said the company is hopeful that advertising as a GDP will go up in India. “Therefore ad-revenue will become substantial over time,” he said.

For Facebook, India is also crucial because it allows the company to build some unique products that solve issues for India but could be replicated in other markets. The company is currently testing an integration of WhatsApp, which currently does not have a business model despite having over 2 billion users, with new Indian e-commerce JioMart, to allow users to easily track their orders.

“We think there is opportunity to build India-first models, experiment at scale, and in a world where we succeed, we see huge opportunity in taking some of these models global,” he said.

Facebook as a VC

Facebook does not usually invest in startups. But in India, the company has invested in social-commerce firm Meesho, online learning platform Unacademy — it even participated in its follow-up round — and it wrote a $5.7 billion check to Jio Platforms earlier this year. So why is Facebook taking this investment route in India?

“We wanted to create a program for taking minority investments in early-stage startups to figure out how we could be helpful to startup founders and the ecosystem as a whole. The starting point was backing teams that were building models that in some ways were unique to India and could go global. Since we made an investment in Meesho, they have made a strong thrust in Indonesia. These are the kind of companies where we feel we can add value as well as we can learn from these startups,” he said.

The partnership with Jio Platforms follows a different rationale. “The transformation we talked about in India in the last few years, Jio triggered it,” he said. Other than that, Facebook is exploring ways to work with Jio, such as with its partnership with Jio’s venture JioMart. “It can really fuel the small and medium business that is good for the Indian economy,” he said.

Mohan said the company continues to explore more opportunities in Indian startups, especially with those where the teams think Facebook can add value, but he said there is no mandate of any kind that Facebook has to invest in, say dozens of startups in three to four years. “It’s not a volume play,” he said.

But would these firms, including Reliance Industries, which operates Jio Platforms and Reliance Retail, will receive any special access on Facebook’s services. What if Amazon, BigBasket, Grofers, or Flipkart want to integrate with WhatsApp, too? Mohan said Facebook platform is open for every firm and everyone will receive the same level of access and opportunities.

In the interview, Mohan, who ran the Disney-run Hotstar on-demand streaming service in India, also talked about the growing usage of video in India, the state of WhatsApp Pay’s rollout in the country, what Facebook thinks of India’s ban on Chinese apps, and much more. You can watch the full interview below.

#ajit-mohan, #apps, #asia, #disrupt, #disrupt-2020, #facebook, #facebook-india, #hotstar, #meesho, #social, #techcrunch-disrupt, #unacademy, #venture-capital, #whatsapp, #whatsapp-pay

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India’s online learning platform Unacademy raises $150 million at $1.45 billion valuation

India has a new unicorn startup. On Wednesday, Bangalore-based online learning startup announced it has raised $150 million in a new financing round that valued the Facebook-backed firm at $1.45 billion (post-money).

SoftBank Group — through its Vision Fund 2 — led Unacademy’s Series F financing round while existing investors Facebook, Blume Ventures, Nexus Partners, General Atlantic and Sequoia Capital participated in it. The new deal pushes four-and-a-half-year old Unacademy’s to-date raise to about $350 million.

Unacademy helps students prepare for competitive exams to get into a college and also those who are pursuing graduation-level courses. On its app, students watch live classes from educators and later engage in sessions to review topics in more detail. In recent months, the startup has held several online interviews of high-profile individuals such as Indian politician Shashi Tharoor on a range of topics, which has expanded its appeal beyond its student-base.

Last year, the startup launched a subscription service that offers students access to all live classes. The platform, which has 30 million registered users, has amassed over 350,000 paying subscribers.

“Our goal always has been to democratise knowledge and make it more affordable and accessible by getting the best experts of the world help everyone achieve their goals. We are just getting started,” said Gaurav Munjal, co-founder and chief executive of Unacademy, in a tweet.

The growing valuation of Unacademy — which was valued at over $400 million in February this year when it closed its Series E financing round — comes as education startups report massive growth in their usage.

Unacademy’s rival, Byju’s — also backed by Sequoia Capital India — was valued at $10.5 billion in its recent financing round from Mary Meeker’s Bond, TechCrunch reported earlier. Byju is now the most valued edtech startup in the world.

As coronavirus outbreak began to spread in India earlier this year, New Delhi enforced a nationwide lockdown that saw schools close across the nation. This has led many parents to explore digital learning services alternatives for their kids.

Even as most Indians tend not to pay for online services — just ask Facebook, which has amassed over 400 million users in India and makes little in the country — the education category has become an outlier. Indian families continue to spend heavily on their children’s education in hopes of paving way for a better future.

Online learning platforms have dominated the deal flows in recent months. Earlier this week, Chan Zuckerberg Initiative backed Mumbai-headquartered Eruditus in a $113 million fundraise. Toppr, which offers four products and services that are aimed at K-12 students, raised $46 million; while Bangalore-based Vedantu raised $100 million.

There has also been some consolidation. Unacademy acquired PrepLadder, which offers courses aimed at medical students, for $50 million in July. It also led an investment round of $5 million to acquire a majority stake in Mastree. Byju’s acquired 18-month-old WhiteHat Jr. that teaches coding to kids for $300 million.

#apps, #asia, #byjus, #education, #facebook, #funding, #india, #softbank, #softbank-group, #unacademy

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Toppr raises $46 million to scale its online learning platform in India

Toppr, one of the largest online learning startups in India, has secured $46 million in a new financing round as it looks to scale its platform including a new product.

Dubai-headquartered investment firm Foundation Holdings led the Mumbai-based seven-year-old startup’s Series D round. Kaizen Private Equity, an existing investor, also participated in the new round, which brings Toppr’s to-date raise to over $92 million.

Toppr operates four products and services that are aimed at K-12 students. Learning app, Toppr’s marquee service, offers students live classes and sessions to clear doubts, pre-recorded lessons and tests. Toppr’s catalog covers 17 subjects and prepares students for five dozen competitive exams, explained Toppr founder and chief executive Zishaan Hayath in an interview with TechCrunch.

A portion of Toppr’s library is available to students at no charge on Learning app, but full access requires a membership. The subscription starts at 1,000 Indian rupee ($13.35) and goes as high as 3,000 Indian rupee ($40).

The startup launched Codr, a product aimed at helping all school-age children learn computer programming, last month. A Codr session costs about $9.35. Toppr also maintains a free problem solving app that enables a student to take a picture of a question and get its solution instantly, explained Hayath.

Toppr’s Learning app has amassed over 13 million users, more than 150,000 of whom are paying subscribers, he said. In recent months, the startup has also worked on a new product called School OS, which enables a school to digitize their learning experience. Through School OS, a teacher can assign and collect homework digitally, and students can attend live classes.

Zishaan Hayath, the founder and chief executive of Toppr, a Mumbai-headquartered edtech startup (Photo: Toppr)

“They can also attend classes from previous years, or of grades ahead of them. Our schooling system is built in a way that keeps you locked in the current year’s curriculum. On digital, one of the benefits is that you don’t have to follow such rules. So for instance, if a student in tenth grade needs to brush up some concept from grade nine, they can do so at any moment,” said Hayath.

More than 40 schools have deployed School OS for their 60,000 students, he said. The startup plans to have 300,000 students enrolled to School OS in the next few months.

 

More to follow…

#apps, #asia, #byjus, #education, #funding, #india, #online-learning, #toppr, #unacademy, #vedantu

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Indian online tutoring platform Vedantu raises $100 million

Investors are becoming more bullish on online education platforms in India as startups demonstrate growth at the height of a global pandemic that has severely impacted other industries.

Bangalore-based startup Vedantu said on Thursday it has raised $100 million in its Series D financing round, just five months after it closed its Series C funding.

U.S. based private equity firm Coatue led the six-year-old Vedantu’s new financing round, with participation from some existing investors. The new funds valued Vedantu at $600 million, up from $275 million in February this year, when the startup closed its extended Series C round.

Vedantu offers live and interactive courses for students in grades 6 though 12 — and in recent months it has expanded its catalog to serve students in grade one to five as well, said Vamsi Krishna, co-founder and CEO of the startup, in an interview with TechCrunch.

Students who have enrolled for the interactive sessions are required to answer questions every few minutes by tapping on their smartphone screen or on the desktop. They also can raise their doubts at the end of the session. Some of these sessions are free for students, but a selection of it requires a subscription, said Krishna.

More to follow…

#apps, #asia, #byjus, #education, #funding, #india, #unacademy, #vedantu

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Facebook-backed Unacademy acquires PrepLadder for $50 million

Indian online learning platform Unacademy said on Tuesday it has acquired Chandigarh-based startup PrepLadder for $50 million as the Facebook-backed edtech giant scouts for deals to expand its presence in the country.

PrepLadder, which employs about 150 people, offers courses aimed at medical students. The two-year-old startup, which never raised any capital from external investors, has more than 80,000 subscribers, said PrepLadder co-founder Deepanshu Goyal.

“Unacademy and PrepLadder are working towards the common goal of making quality education accessible to all. We believe that the synergies between both products will truly create a mark in the industry,” he said.

The acquisition of PrepLadder comes as both Unacademy and Byju’s — the two edtech leaders in India — have engaged with several startups in recent months to further their dominance in the nation. In a call with reporters today, Gaurav Munjal, co-founder and chief executive of Unacademy, said he was open to talking with more startups to see opportunities to work together.

TechCrunch reported last month that Byju’s was in talks to acquire Doubtnut, another edtech startup, for as much as $150 million. The nine-year-old firm, which was valued at $10.5 billion last month, is also in talks with Whitehat Jr, an online platform that teaches kids how to code, Indian daily the Economic Times reported last week.

Unacademy, which was already growing at an impressive pace, has accelerated its growth in recent months as schools across the country were closed in a bid to prevent the spread of Covid-19. The startup, which began as a YouTube channel in 2015, has amassed over 30 million learners on the platform. More than 700,000 users access its app and website each day.

The startup, which offers dozens of courses for school-going students at no charge, last year launched a paid subscription service. Munjal said today that Unacademy has amassed over 200,000 subscribers.

More to follow…

#apps, #asia, #education, #fundings-exits, #india, #unacademy

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Indian edtech giant Byju’s in talks to acquire Doubtnut for more than $125M

Byju’s is in advanced stages of talks to acquire Doubtnut, a two-year-old education learning app, as the Indian edtech giant looks to expand its reach in smaller cities and towns in the world’s second-largest internet market.

Three sources familiar with the matter told TechCrunch that the acquisition offer from nine-year-old Byju’s values the younger startup between $125 million to $150 million. The talks haven’t finalized yet and its terms could change or the deal could fall apart, the sources said.

A separate source familiar with the matter told TechCrunch that Facebook-backed Unacademy also held preliminary talks with Doubtnut but they are no longer engaging while some investors have suggested the startup should remain independent.

Byju’s and Unacademy declined to comment. One of Doubtnut’s founders did not respond to a text message sent to them Friday afternoon. Sequoia Capital India, one of the investors in Doubutnut, also declined to comment.

The sudden interest in Doubtnut comes as the two-year-old New Delhi-based startup’s app has attracted millions of new users in recent months, most of whom live in smaller cities and towns across India.

Byju’s, which has over 55 million registered users, has a better hold on urban Indian cities. The startup sees Doubtnut as a way to expand its reach in tier 2 and tier 3 Indian markets and tackle the online learning opportunities in a more comprehensive way.

Image Credits: Doubtnut

Doubtnut, which has raised $18.5 million to date including $15 million in its Series A financing round earlier this year, allows students from sixth grade to high school solve and understand math and science problems in local languages. The Doubtnut app enables students to take a picture of the problem and uses machine learning and image recognition to deliver the answers through short videos.

In late January, Doubtnut said it had amassed over 13 million monthly active users across its website, app, YouTube and WhatsApp channels. More than 85% of its users at the time came from outside of the top 10 cities in India, the startup said in a statement then.

Byju’s currently leads the online edtech market in India. The startup announced on Friday that it had raised fresh capital from Mary Meeker’s Bond. The new deal valued Byju’s at $10.5 billion, TechCrunch reported earlier today. Byju’s and Doubtnut share Tencent as a common investor.

#apps, #asia, #byju, #byjus, #edtech, #education, #funding, #fundings-exits, #india, #unacademy

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Indian education startup Byju’s is fundraising at a $10B valuation

Byju’s, an education learning startup in India that has seen a surge in its popularity in recent weeks amid the coronavirus outbreak, is in talks to raise as much as $400 million in fresh capital at a $10 billion valuation, said three people familiar with the matter.

The additional capital would be part of the Bangalore-based startup’s ongoing financing round that has already seen Tiger Global and General Atlantic invest between $300 million to $350 million into the nine-year-old startup.

That investment by the two firms, though, was at an $8 billion valuation, said people familiar with the matter. Byju’s was valued at $5.75 billion in July last year, when it raised $150 million from Qatar Investment Authority and Owl Ventures.

If the deal goes through at this new term, Byju’s would become the second most valuable startup in India, joining budget lodging startup Oyo, which is also valued at $10 billion, and follow financial services firm Paytm that raised $1 billion at $16 billion valuation late last year.

The talks haven’t finalized yet and terms could change, said one of the aforementioned people. This person, along with the other two, requested anonymity as the matter is private.

A spokesperson of Byju’s and Prosus Ventures, the largest investor in the startup, declined to comment. A spokesperson for Tiger Global did not respond to a request for comment.

Byju’s has seen a sharp surge in both its free users and paying customers in recent weeks as it looks to court students who are stuck at home because of the nationwide lockdown New Delhi ordered in late March.

The startup told TechCrunch last month that traffic on its app and website was up 150% in March and it added six million students to the platform during the month.

Other edtech startups, including Unacademy, which was recently backed by Facebook, and early-stage startups such as Sequoia Capital India-backed Classplus, and Chennai-based SKILL-LYNC, have also seen growth in recent weeks, they told TechCrunch last month.

Through its app, tutors on Byju’s help all school-going children understand complex subjects using real-life objects such as pizza and cake. The app also prepares students who are pursuing undergraduate and graduate-level courses.

Over the years, Byju’s has invested in tweaking the English accents in its app and adapted to different education systems. It had amassed more than 35 million registered users, about 2.4 million of which are paid customers as of late last year.

#asia, #byjus, #education, #facebook, #funding, #general-atlantic, #india, #owl-ventures, #prosus-ventures, #qatar-investment-authority, #recent-funding, #sequoia-capital, #startups, #tiger-global, #unacademy

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Google employee in Bangalore tests positive for coronavirus

Google said on Thursday that an employee at its office in Bangalore, India has tested positive for the COVID-19 coronavirus and the firm has asked all the other employees in that office to work from home on Friday out of abundance of caution.

“We can confirm that an employee from our Bangalore office has been diagnosed with COVID-19. They were in one of our Bangalore offices for a few hours before developing any symptoms,” a company spokesperson said in a statement, adding that those who were in close contact with the employee have been asked to quarantine themselves.

In an internal email, accessed by TechCrunch, Anand Rangarajan, director of engineering at Google, said the infected “Googler contracted the virus after traveling overseas.”

In recent days, Google has moved to ask all its employees in North America, Europe, and several other regions to work from home. But the company has yet to extend such measure to its employees and contractor workers in Asian markets.

Several startups in India have taken a more proactive approach. Bangalore-based Zerodha, which is the largest stock broker, made it mandatory for all its employees on Thursday to work from home.

Bangalore-based Instamojo, which helps small merchants, education startup Unacademy, mobility firm Bounce, recruiting startup Springworks, and social commerce startup Meesho have all enforced a similar policy.

To date, 74 cases of COVID-19 have been detected in India, up from some 40 late last week. To raise awareness about the infectious disease, telecom operators in the country have started to warn users ahead of each call. On Wednesday, India suspended a vast majority of visas to the country to contain the virus.

The Indian stock markets plunged into bear territory on Thursday, heightening worries for the immediate future prospects of the nation’s already slowing economy. The Nifty plunged 8.3% to 9,590.15, its lowest close in two-and-a-half years, while the Sensex slid about 8% to a near two-year low of 32,778.14.

The last time Indian stock indexes dropped as much was at the height of the global financial crisis in 2008.

#asia, #coronavirus, #google, #health, #meesho, #unacademy

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