How fintech and serial founders drove African pre-seed investing to new heights in 2020

When Stripe-subsidiary Paystack raised its seed round of $1.3 million in 2016, it was one of the largest disclosed rounds at that stage in Nigeria. 

At the time, seven-figure seed investments in African startups were a rarity. But over the years, those same seed-stage rounds have become more common, with some very early-stage startups even raising eight-figure sums. Nigerian fintech startup, Kuda, which bagged $10 million last year, comes to mind, for example.

Also notable amidst the growth in seven and eight-figure African seed deals have been gains in pre-seed fundraising. Typically, pre-seed rounds are raised when the startup is still in the product development phase, yet to make revenue or discover product-market fit. These investments are usually made by third-party investors (friends and family), and range between $25,000-$150,000.

But the narrative as to how much an early-stage African startup can raise as pre-seed has changed. 

Last year, African VCs who usually fund seed and Series A rounds began partaking in pre-seed rounds, and they don’t seem to be slowing down. Just a month into 2021,  Egyptian fintech startup Cassbana raised a $1 million pre-seed investment led by VC firm Disruptech in a bid to drive expansion within the country.

So why the sudden change in appetite from investors?

Andreata Muforo is a partner at TLcom Capital, a pan-African early-stage VC firm. She told TechCrunch that last year’s run of 23 pre-seed rounds (10 of which were $150,000+ deals) per Briter Bridges data, was due to the confidence investors had in the market, especially fintech.

Startups building financial infrastructure got noticed

While most African pre-seed investments in 2020 went to fintech, there were exceptions, including Egyptian edtech startup Zedny, which raised $1.2 million; Nigerian automotive tech startup Autochek Africa, which raised $3.4 million; and Nigerian talent startup TalentQL, which raised $300,000. 

Just as Paystack and Flutterwave built payment infrastructure for thousands of African businesses, these fintech startups are trying to make their mark in the sweet spots of credit and banking. 

“Fintech is compelling. But while most fintech startups play around the commodities side of fintech, it’s the companies building infrastructure around the market that got most of the pre-seed validation last year,” Muforo said. Her firm, TLcom, led the $1 million pre-seed investment in Okra.

Okra is an API fintech startup. So are Mono, OnePipe and Pngme. They are building Africa’s API infrastructure that connects bank accounts with financial institutions and third-party companies for different purposes. Within the past 18 months, Mono and Pngme raised $500,000, while OnePipe raised $950,000 in pre-seed.

It is noteworthy that while these startups are clamoring to solve Africa’s open API banking issues, three of the four deals came after Visa’s $5.3 billion acquisition of Plaid last year in January.

Although the Visa-Plaid acquisition has now been called off, it is safe to say some African investors developed FOMO, handing out sizable checks to fund “Africa’s Plaid” in the process.

Digital lenders remain one of their most important customers for fintech API startups. They can access customers’ financial accounts to understand their spending patterns and know who to loan to.

Egypt’s Shahry and Nigeria’s Evolve Credit are fintech startups building credit infrastructure for their markets. Evolve Credit connects digital lenders to those who need loan services in Nigeria via its online loan marketplace. Shahry, on the other hand, employs an AI-based credit scoring engine so users in Egypt can apply for credit. The pair also secured impressive pre-seed funding — Evolve Credit, $325,000, and Shahry, $650,000.

A recurring theme: Serial founders

Muforo points out that aside from startups building fintech infrastructure, the caliber of founders was another reason pre-seed funding peaked last year.

Adewale Yusuf, co-founder and CEO of TalentQL, a startup that hires, manages and outsources talent for Nigerian and global companies, seemed to agree. He told TechCrunch that trust between the VCs and founders involved played a major role in most pre-seed rounds last year. 

“It wasn’t surprising that a lot of investors put money in pre-seed rounds. I say this because we also saw existing founders and serial entrepreneurs coming back to the market. To me, these founders’ credibility was a major part of why those rounds were large,” he said.

A second-time founder himself, Yusuf is the co-founder of Nigerian tech media publication Techpoint Africa. His partner at TalentQL, Opeyemi Awoyemi, is also a serial entrepreneur. He co-founded Ringier One Africa Media-owned Jobberman, one of Africa’s most popular recruitment platforms.

According to Adedayo Amzat, founder of Zedcrest Capital, which is the lead investor in TalentQL’s round, the founders’ experience proved vital in closing the deal. 

He says investors are more comfortable backing experienced founders in pre-seed rounds because they have a more mature understanding of the problems they’re trying to solve. So, in essence, they tend to raise more capital.

“If you look at pre-seed sizes, experienced founders can demand a significant premium over first-time founders,” Amzat said. “Pre-seed valuation cap for first-time founders will typically be between 400K to $1 million while we frequently see up to $5 million for experienced founders.” 

It was a recurring theme last year. Yele Bademosi, who runs Microtraction, a West African early-stage VC firm, is the CEO of Bundle Africa, a Nigerian-based crypto-exchange startup that raised $450,000 in April 2020. 

Shahry co-founders Sherif ElRakabawy and Mohamed Ewis also run Egypt’s largest shopping engine and price comparison website, Yaoota.

Mono co-founder and CEO Abdulhamid Hassan was the co-founder of Nigerian fintech startup OyaPay and data science startup Voyance. Also, Etop Ikpe, the co-founder and CEO of Autochek Africa, was CEO of DealDey and Cars45.

That said, Fara Ashiru Jituboh of Okra and Akan Nelson of Evolve Credit as first-time founders got investments that most of their counterparts would only dream of. For Jituboh, her solid tech background spoke for her — boasting a senior software engineering job at Pexels and engineering consultant role at Canva before founding Okra.

“We backed Fara because she’s a strong tech founder. When you look at the core of what Okra does as a tech-heavy company, you see how important it was to make the decision,” Muforo said about backing Okra’s CEO and CTO.

Nelson also told TechCrunch that his finance background helped Evolve Credit raise its six-figure sum. The team’s bullishness on finding product-market fit and the potential of Africa’s loan marketplace was also enough to bring foreign and local VCs like Samurai Incubate, Future Africa, Ingressive Capital and Microtraction on board.

While early-stage investments in African startups haven’t reached full speed, the explosion in the number of angel investors has lowered entry barriers into early-stage investing. 

Now investors are beginning to show readiness toward African startups that have promise as they continue to search for the next Paystack. 

“More people are willing to take risks now in the market, especially angel investors. They can easily let go of $10K-$50K because of success stories like Paystack,” Yusuf said about the $200 million acquisition by U.S. payments startup Stripe

For all of its significance to the African tech ecosystem, what particularly stands out about Paystack’s exit is the return on investment made for early investors.

By the time it exited in October 2020, some angel investors had an ROI of more than 1,400% according to Jason Njoku in his blog post. Njoku, who took part in the round as an angel investor, is the CEO of IROKO, a Nigerian VOD internet company.

For Muforo, witnessing more early-stage investments is a big deal, one the African tech ecosystem should savor regardless of the round in question.

“Pre-seed or seed are just names investors and founders give. They can basically mean the same thing, in my opinion,” she said. “What I think is most important is the fact that we’re getting more early-stage capital into Africa, and startups are getting more attention from investors, which is fantastic.”

Soci raises $80M for its localized marketing platform

Soci, a startup focused on what it calls “localized marketing,” is announcing that it has raised $80 million in Series D funding.

National and global companies like Ace Hardware, Anytime Fitness, The Hertz Corporation and Nekter Juice Bar use Soci (pronounced soh-shee) to coordinate individual stores as they promote themselves through search, social media, review platforms and ad campaigns. Soci said that in 2020, it brought on more than 100 new customers, representing nearly 30,000 new locations.

Co-founder and CEO Afif Khoury told me that the pandemic was a crucial moment for the platform, with so many businesses “scrambling to find a real solution to connect with local audiences.”

One of the key advantages to Soci’s approach, Khoury said, is to allow the national marketing team to share content and assets so that each location stays true to the “national corporate personality,” while also allowing each location to express  a “local personality.” During the pandemic, businesses could share basic information about “who’s open, who’s not” while also “commiserating and expressing the humanity that’s often missing element from marketing nationally.”

“The result there was businesses that had to close, when they had their grand reopenings, people wanted to support that business,” he said. “It created a sort of bond that hopefully lasts forever.”

Khoury also emphasized that Soci has built a comprehensive platform that businesses can use to manage all their localized marketing, because “nobody wants to have seven different logins to seven different systems, especially at the local level.”

The new funding, he said, will allow Soci to make the platform even more comprehensive, both through acquisitions and integrations: “We want to connect into the CRM, the point-of-sale, the rewards program and take all that data and marry that to our search, social, reviews data to start to build a profile on a customer.”

Soci has now raised a total of $110 million. The Series D was led by JMI Equity, with participation from Ankona Capital, Seismic CEO Doug Winter and Khoury himself.

“All signs point to an equally difficult first few months of this year for restaurants and other businesses dependent on their communities,” said JMI’s Suken Vakil in a statement. “This means there will be a continued need for localized marketing campaigns that align with national brand values but also provide for community-specific messaging. SOCi’s multi-location functionality positions it as a market leader that currently stands far beyond its competitors as the must-have platform solution for multi-location franchises/brands.”

Porsche and Axel Springer increase investment into their APX accelerator to €55M

Berlin-based early-stage fund APX today announced that its two investors, European publisher Axel Springer and sports car maker Porsche, have increased their investment in the fund to a total of €55 million.

With this, APX, which launched in 2018, is now able to deploy up to €500,000 in pre-Series A seed funding per company. That’s up from up to €100,000 when the fund launched. So far, the group has invested in more than 70 companies and plans to increase this number to close to 200 by 2022.

When APX launched, the fund didn’t disclose the total investment from Porsche and Axel Springer. Today, the team said that the new investment “more than doubles APX’s total amount for investing in new and current companies.” APX also stressed that the total volume of the fund is now “at least” €55 million, in part because the investors can always allocate additional funding for outliers.

In addition to the new funding, APX also today announced that it is doing away with its 100-day accelerator program and instead opting for a long-term commitment to its companies, including participation in future rounds.

“We will try and invest into 50 or more companies this year — and we were at 35 last year. So this is quite some growth,” APX founding managing director (and folk music aficionado) Henric Hungerhoff told me. “We think that our deal flow systems and our entire operations are settled in well enough that we can have quality founders in our portfolio. That’s our goal — and that might even increase to 70 the year after. […] We see really nice synergies or network effects within our portfolio, with founders helping other founders and learning from each other.”

Image Credits: APX

Hungerhoff tells me that the team is quite confident in its ability now to identify quality deal flows. The team is using a data-driven approach. And while it leverages its own network and that of its founders, it has also set up a scout program at leading European universities to identify potential founders, for example.

As APX founding managing director, and the former CEO of Axel Springer’s Plug and Play accelerator, Jörg Rheinboldt noted, APX never asks its founders to pitch. Instead, the team has multiple conversations with them about the product they want to build, how they came up with the idea — and how it changed over time.

“And then, we do multiple things simultaneously,” Rheinboldt said. “One is, we look at team dynamics. How do the founders interact? We also stress them a little bit — in a friendly way — where someone asks very fast questions, or we focus a little bit on one person and see how the others rescue them. We want to know about the team dynamics and then we want to understand the strategy, how we can help them best?”

The idea here is to be able to invest quickly. In addition, though, with the new funding, the team isn’t just able to invest into more companies but also invest more into the individual companies.

Image Credits: APX

“We want to invest deeper per startup at a very early stage,” Hungerhoff said. “So far, […] our typical approach was a non-dilution, pro-rata follow-on strategy with most of our portfolio companies. And this is something we want to pledge in the future. Looking at the past, 100% of the times in equity rounds, we do the pro-rata follow-on or more, but now, we have developed a strategy that we will, for the fastest-moving of fastest-growing companies, we want to deploy significantly more cash in a very early phase, which means an amount of up to €500,000.”

What the team saw was that the companies in its portfolio would raise a small pre-seed round from APX and other investors, with APX typically taking a 5% stake in the startup. Most founders would then go on and raise extended pre-seed or seed rounds soon thereafter.

“We more felt like we missed out when we saw these companies raising really nice financing rounds and we did our investment,” Rheinbolt said. “We felt very good that we can do a pro-rata investment. but we looked at each other and said: we knew this, we knew that they would do this 12 weeks ago. We could have given them a check and maybe the round would have been done in eight weeks and maybe [our stake] wouldn’t be 5% but 7%.”

Given this new focus on supporting startups throughout their lifecycle, it’s no surprise that APX did away with the 100-day program as well. But the team still expects to be quite hands-on. With a growing network, though, the partners also expect that founders will be able to learn from each other, too. “We now see the value that is coming from this,” Hungerhoff said. For example, a team that we’ve invested in two months ago, they’re now thinking about the angel round. They can actually get the best advice on this — or just experienced sharing — from another team, rather than talking to Jörg who did this maybe 30 years ago — no offense.”

The team also spends a lot of time thinking about its community, which now includes founders from 20 countries. The COVID pandemic has obviously moved most of the interactions online. Before COVID, APX often hosted events in its offices, which helped create the kind of serendipity that often leads to new ideas and connections. Looking ahead, the team still believes that there is a lot of value in having face-to-face meetings, but at the same time, maybe not every company needs to move to Berlin and instead visit for a few days every now and then.

Bonus: Here is Hungerhoff’s latest album with St. Beaufort.

Curtsy, a clothing resale app aimed at Gen Z women, raises $11 million Series A

Curtsy, a clothing resale app and competitor to recently IPO’d Poshmark, announced today it has raised $11 million in Series A funding for its startup focused on the Gen Z market. The app, which evolved out of an earlier effort for renting dresses, now allows women to list their clothes, shoes and accessories for resale, while also reducing many of the frictions involved with the typical resale process.

The new round was led by Index Ventures, and included participation from Y Combinator, prior investors FJ Labs and 1984 Ventures, and angel investor Josh Breinlinger (who left Jackson Square Ventures to start his own fund).

To date, Curtsy has raised $14.5 million, including over two prior rounds which also included investors CRV, SV Angel, Kevin Durant, Priscilla Scala, and other angels.

Like other online clothing resale businesses, Curtsy aims to address the needs of a younger generation of consumers who are looking for a more sustainable alternative when shopping for clothing. Instead of constantly buying new, many Gen Z consumers will rotate their wardrobes over time, often by leveraging resale apps.

Image Credits: Curtsy

However, the current process for listing your own clothes on resale apps can be time consuming. A recent report by Wired, for example, detailed how many women were spinning their wheels engaging with Poshmark in the hopes of making money from their closets, to little avail. The Poshmark sellers complained they had to do more than just list, sell, package and ship their items — they also had participate in the community in order to have their items discovered.

Curtsy has an entirely different take. It wants to make it easier and faster for casual sellers to list items by reducing the amount of work involved to sell. It also doesn’t matter how many followers a seller has, which makes its marketplace more welcoming to first-time sellers.

“The big gap in the market is really for casual sellers — people who are not interested in selling professionally,” explains Curtsy CEO David Oates. “In pretty much every other app that you’ve heard about, pro sellers really crowd out everyday women. Part of that is the friction of the whole process,” he says.

On Curtsy, the listing process is far more streamlined.

The app uses a combination of machine learning and human review to help the sellers merchandise their items, which increase their chances of selling. When sellers first list their item in the app, Curtsy will recommend a price then fill in details like the brand, category, subcategory, shipping weight and the suggested selling price, using machine learning systems training on the previous items sold on its marketplace. Human review fixes any errors in that process.

Also before items are posted, Curtsy improves and crops the images, as well as fixes any other issues with the listing, and moderates listings for spam. This process helps to standardize the listings on the app across all sellers, giving everyone a fair shot at having their items discovered and purchased.

Another unique feature is how Curtsy caters to the Gen Z to young Millennial user base (ages 15-30), who are often without shipping supplies or even a printer for producing a shipping label.

Image Credit: Curtsy / Photo credit: Brooke Ray

First-time sellers receive a free starter kit with Curtsy-branded supplies for packaging their items at home, like poly mailers in multiple sizes. As they need more supplies, the cost of those is built into the selling flow, so you don’t have to explicitly pay for it — it’s just deducted from your earnings. Curtsy also helps sellers to schedule a free USPS pickup to save a trip to the post office, and it will even send sellers a shipping label, if need be.

“One of the things we realized quickly is Gen Z does not really have printers. So we actually have a label service and we’ll send you the label in the mail for free from centers across the country,” says Oates.

Later, when a buyer of an item purchased from Curtsy is ready to resell it, they can do so with one tap — they don’t have to photograph it and describe it again. This also speeds up the selling process.

Overall, the use of technology, outsourced teams who improve listings, and extra features like supplies and labels can be expensive. But Curtsy believes the end result is that they can bring more casual sellers to the resale market.

“Whatever costs we have, they should be in service of increased liquidity, so we can grow faster and add more people,” Oates says. “In case of the label service, those are people who otherwise wouldn’t be able to participate in selling online. There’s no other app that would allow them to sell without a printer.”

Image Credits: Curtsy

This system, so far, appears to be working. Curtsy now has several hundred thousand people who buy and sell on its iOS-only app, with an average transaction rates of 3 items bought or sold per month. When the new round closed late in 2020, the company was reporting a $25 million GMV revenue run rate, and average monthly growth of around 30%. Today, Curtsy generates revenue by taking a 20% commission on sales (or $3 for items under $15.)

The team, until recently, was only five people — including co-founders David Oates, William Ault, Clara Agnes Ault, and Eli Allen, plus a contract workforce. With the Series A, Curtsy will be expanding, specifically by investing in new roles within product and marketing to help it scale. It will also be focused on developing an Android version of its app in the first quarter of 2021 and further building out its web presence.

“Never before have we seen such a strong overlap between buyers and sellers on a consumer-to-consumer marketplace,” said Damir Becirovic of Index Ventures, about the firm’s investment. “We believe the incredible love for Curtsy is indicative of a large marketplace in the making,” he added.

Podchaser raises $4M to build a comprehensive podcast database

Podchaser, a startup building what it calls “IMDB for podcasts,” recently announced that it has raised $4 million in a funding round led by Greycroft.

In other words, it’s a site where — similar to the Amazon-owned Internet Movie Database — users can look up who’s appeared in which podcasts, rate and review those podcasts and add them to lists. In fact, CEO Bradley Davis told me that the startup’s “vibrant, exciting community of podcast nerds” have already created 8.5 million podcast credits in the database.

Davis said this is something he simply wanted to exist and was, in fact, convinced that it had to exist already. When he realized that it didn’t, he posted on Reddit asking whether anyone was willing to build the company with him — which is how he connected with his eventual co-founder and CTO Ben Slinger in Australia. (Podchaser is a fully distributed company, with Davis currently based in Oklahoma City.)

To be clear, Davis doesn’t think podcast nerds are the only ones taking advantage of the listings. Instead, he suggested that it’s useful for anyone looking to learn more about podcasts and discover new ones, with Podchaser’s monthly active users quintupling over the past year.

For example, he said that one of the most popular pages is politician Pete Buttigieg’s profile, where visitors don’t just learn about Buttigieg’s own podcast but see others on which he’s appeared. (You can also use Podchaser to learn more about TechCrunch’s Equity, Mixtape and Original Content podcasts, though those profiles could stand to be filled out a bit more.)

There has been endless discussion about how to fix podcast discovery, and while Davis isn’t claiming that Podchaser will solve it wholesale, he thinks it can be part of the solution — not just through its own database, but through the broader Podcast Taxonomy project that it’s organizing.

“I think if we are successful at standardizing a lot of the terminology, and if we do an analysis of all podcasts, of how popular they are, that [will help many listeners] to cull and find the good stuff,” he said.

Podchaser plans to add new features that will further encourage user contributions, like a gamification system and a discussion system.

While the consumer site is free, the startup recently launched a paid product called Podchaser Pro, which provides reach and demographic data across 1.8 million podcasts. It also monetizes by providing podcast players with access to its credits through an API.

Davis said the startup was “lucky” that it decided to build a database that’s “agnostic” from any specific podcast player.

“So we had a lot of latitude to work with those platforms, we integrate with many of those platforms and you’re going to see a lot of our credits showing up [in podcast players],” he said.

In addition to Greycroft, Advancit Capital, LightShed Ventures, Powerhouse Capital, High Alpha, Hyde Park Venture Partners and Poplar Ventures also participated in the round, as did TrendKite founder A.J. Bruno, Ad Results Media CEO Marshall Williams and Shamrock Capital Partner Mike LaSalle.

“Even in the face of a pandemic, the podcast market continues to grow at a breakneck pace,” said Greycroft co-founder and chairman Alan Patricof in a statement. “The demand from consumers and brands is insatiable. Podchaser’s data and discovery tools are crucial to taking podcasting to new heights.”

Drone-focused construction startup TraceAir raises $3.5M

Bay Area-based construction startup TraceAir today announced a $3.5 million Series A. Led by London-based XTX Ventures, this round brings the company’s total funding up to $7 million. The raise includes existing investor Metropolis VC, along with new additions Liquid 2 Ventures, GEM Capital, GPS Ventures and Andrew Filev.

We first noted the company back in 2016, when it pitched a method for using drones to spot construction errors before they become too expense. It’s a pretty massive field that various technology companies are attempting to solve through a variety of different means, ranging from quadrupedal robots to site-scanning hard hats.

Last February, TraceAir announced a new drone management tool. “Haul Router provides the best mathematically objective hauls for each given drone scan,” the company noted at the time. “Any employee can use the tool to design a haul road and export the results to feed into grading equipment.”

The pandemic has thrown the construction industry for a loop (along with countless others). But unlike other sectors, demand still remains high in many places. TraceAir is hoping its solution will prove beneficial as many outfits seek a way to continue the process in spite of uncertainty.

“The Covid-19 pandemic created new challenges for the U.S. and worldwide construction industries, resulting in delayed projects and growing unemployment rates,” CEO Dmitry Korolev said in a release tied to the news. “Our platform allows industry leaders to manage projects more efficiently and collaborate with their teams remotely, minimizing the need for a physical presence on-site.”

TraceAir says the additional funding will go toward its sales and marketing, along with future product developments, including an unnamed product set for release this quarter.

Google backs India’s Dunzo in $40 million funding round

Google is writing check to another startup in India. The Android-maker, which last year unveiled a $10 billion fund to invest in the world’s second largest internet market, said on Tuesday that it is participating in a $40 million investment round of hyperlocal delivery startup Dunzo, a Bangalore-based firm that it has also previously backed.

Five-year-old Dunzo said Google, Lightbox, Evolvence, Hana Financial Investment, LGT Lightstone Aspada, and Alteria among others participated in its Series E financing round, which brings its to-date raise to $121 million.

Dunzo operates an eponymous hyper-local delivery service in nearly a dozen cities in India including Bangalore, Delhi, Noida, Pune, Gurgaon, Powai, Hyderabad and Chennai. Users get access to a wide-range of items across several categories, from grocery, perishables, pet supplies and medicines to dinner from their neighborhood stores and restaurants.

E-commerce accounts for less than 3% of all retail sales in India, according to industry estimates. Mom and pop stores and other neighborhood outlets that dot tens of thousands of cities, towns, villages and slums across the country drive most of the sales in the nation. The way Dunzo has grown, it poses a challenge to e-commerce firms such as Amazon and Walmart-owned Flipkart, as well as local food and grocery delivery startups such as Swiggy, Zomato, BigBasket, and Grofers. Several people also use Dunzo to pick up and move random items such as a laptop charger or wallet or a lunch box from one point in the city to another.

“As merchants go digital, Dunzo is helping small businesses in their digital transformation journey in support of business recovery,” said Caesar Sengupta, VP, Google, in a statement. “Through our India Digitization Fund, we’re committed to partnering with India’s innovative startups to build a truly inclusive digital economy that will benefit everyone.”

Kabeer Biswas, chief executive and co-founder of Dunzo the startup has grown its annual gross merchandise value business to about $100 million. (GMV used to a popular metric that several e-commerce firms relied on to demonstrate their growth, however, it’s one of the meaningless ways to gauge a startup’s growth. Most firms have stopped using GMV. Additionally, when a startup speaks GMV language, traditionally it has meant they are anything but close to profitability, which happens to be true in the case of Dunzo.)

“Dunzo’s mission resonated stronger than ever in 2020. We have been amazed by everything merchants and users have started to depend on the platform for. We truly believe we are writing a playbook for how hyperlocal businesses can be built with sustainable unit economics and capital responsibility. As a team, we are more focused than ever to enable local Merchants to get closer to their Users and build one of the most loved consumer brands in the country,” Biswas said in a statement.

Google, which invested $4.5 billion in Jio Platforms last year, recently backed social news app Dailyhunt and Glance, a part of ad giant InMobi Group that is aggressively expanding ways to populate content on Android users’ lockscreen. Google is also in talks with local social media ShareChat and may alone invest more than $100 million in the Indian startup, TechCrunch reported earlier this month. Talks about Google’s interest in ShareChat has previously also been reported by local media houses Economic Times and ET Now.

Prosus Ventures leads $30 million investment in Indian agritech startup DeHaat

Once overlooked, agritech startups are beginning to have a moment in India.

On Tuesday, DeHaat, an online platform that offers full-stack agricultural services to farmers, said it has raised $30 million in a new financing round as the Indian firm looks to maintain its accelerated growth despite the pandemic.

Prosus Ventures, formerly known as Naspers Ventures, led Patna and Gurgaon-based startup’s Series C financing round. RTP Global and existing investors Sequoia Capital India, FMO, Omnivore and AgFunder also participated in it, bringing the startup’s to-date raise to over $46 million. (Dexter Capital was the advisor for this funding round.)

One of the biggest challenges farmers in India face is securing agri-input items such as seeds and fertilizers and then finding buyers after producing the yields.

DeHaat, which is Hindi for village, is solving this by bringing brands, institutional financers and buyers to one platform, which is accessible through a helpline and an app in local languages.

Only about a third of the yields Indian farmers produce reaches the big markets, according to industry estimates. It’s traditionally proven immensely difficult for farmers to find buyers for their produce.

Once the season is over, DeHaat helps farmers sell their yields to bulk buyers such as business-to-business marketplace Udaan, Reliance Fresh, and food delivery firm Zomato.

The 10-year-old startup has also developed a database of crop tests and uses artificial intelligence to provide farmers with free-of-cost personalized advisory on what they should sow in a season. DeHaat also helps farmers secure working capital through partnership with hundreds of institutional firms.

We wrote about DeHaat last year, when it had raised a $12 million financing round. The past nine months has been the story of its accelerated growth despite the coronavirus pandemic, which prompted lockdowns across the nation for several months.

The startup, which today has presence in eastern part of India — states such as Bihar, Uttar Pradesh, Jharkhand, Odisha and West Bengal — serves close to 400,000 farmers, up from about 210,000 in April last year, Shashank Kumar, co-founder and chief executive of the startup, told TechCrunch in an interview.

How the startup is tackling these challenges is equally impressive. It works with nearly 1,400 micro-entrepreneurs, up from about 400 last year, in rural areas who distribute over 4,000 types of agri-input goods to farmers from their regional hubs and then bring back the output to the same hub. “They are the ones responsible for last-mile delivery and aggregation,” he said.

DeHaat has grown on every front, including the revenue it clocks, which is up 3X to 3.5X since last year, he said.

“At the end of March, our daily volume out was around 200 metric tonne. Now it’s over 600 metric tonne. Everyday we aggregate this much from farmers and supply to FMCG players and modern retails. Similarly on the agri-input side — seed, fertilizers, and pesticide — we are processing close to 10,000 orders everyday, compared to about 2,600 in March of last year,” he said.

“Prosus Ventures invests in industries around the world where innovation can significantly address big societal needs,” said Ashutosh Sharma, Head of India Investments at Prosus Ventures, in a statement.

“DeHaat is catering to a massive market in India with the agriculture sector worth more than $350 billion to the country’s economy and consisting of an estimated 140 million+ farmers. Through its end-to-end agricultural services offerings, DeHaat will have a major societal impact in India, improving the earning potential for Indian farmers and overall yield for the sector while also enabling microentrepreneurs all over the country, including in rural areas where there is often less income opportunity,” he added.

The startup plans to deploy the fresh capital to expand to more states in India including Rajasthan, Madhya Pradesh, and Maharashtra and eventually serve 10 million farmers.

And another area where it intends to focus is hiring top tech talent. The startup has doubled its workforce since the past year, with many high-profile hires from major firms. The startup, which recently made its second acquisition, is also open to exploring more M&A opportunities, said DeHaat’s Kumar.

Once ignored, scores of agritech startups have cropped up in India in recent years — and many old startups are beginning to receive large-sized checks from investors.

Further reading: Omnivore and Accel recently co-authored a report on India’s agritech landscape.

Salesforce leads $15M investment round in Indian HR tech platform Darwinbox

Darwinbox, which operates a cloud-based human resource management platform, has raised $15 million in a new financing round as the Indian startup looks to expand beyond the country and Southeast Asian markets.

The new round, a Series C, for the Hyderabad-based startup was led by Salesforce Ventures, the venture arm of the American software giant. This is Salesforce Ventures’ one of rare investments in India. Existing investors including Lightspeed India and Sequoia Capital India also participated in the round, which brings the five-year old startup’s total raise to date to $35 million.

Over 500 firms including — Tokopedia, Indorama, JG Summit Group, Zilingo, Zalora, Fave, Adani, Mahindra, Kotak, TVS, NSE, Ujjivan Small Finance Bank, Dr.Reddy’s, Nivea, Puma, Swiggy, Bigbasket — use Darwinbox’s HR platform to provide more than a million employees of theirs with a range of features including insurance and early salary as loans in 60 nations, up from about 200 firms across 50 nations in 2019, said Chaitanya Peddi, co-founder of Darwinbox, in an interview with TechCrunch.

Peddi said the startup has always looked up to Salesforce, and investment from the enterprise giant is “nothing sort of a child receiving validation from their father,” he said.

The fundraise caps the most successful year for the startup that started with uncertainty as the coronavirus spread across Asian nations. The startup took a hit as its customers scrambled to navigate through the global pandemic, but the last two quarters have been its best to date, said Peddi. Overall, the startup’s revenue has ballooned by 300% since September 2019, when it last raised money, he said. “In HR tech and SaaS space, we are now only behind SAP and Oracle in India in terms of revenue,” he said.

Dev Khare, a partner at Lightspeed India, said that Darwinbox has become the preferred human capital management solution for Asian conglomerates, governments, and high-growth businesses and multi-national corporations operating in Asia as they witness digital transformation.

Image Credits: Darwinbox

Darwinbox’s platform is built to take care of the entire “hiring to retiring” cycle needs for employees. It handles onboarding of new hires, keeps a tap on their performance, monitors attrition rate, and provides an ongoing feedback loop.

It also provides its customers with a social network for their employees to remain connected with one another and an AI assistant to apply for a leave or set up meetings with quick voice commands from their phones.

Peddi said the startup will deploy the fresh capital to expand to several more countries, especially in more emerging markets in the Middle East Asia and Africa, and broaden its offerings. “We will be leveraging the power of our platform to do a lot more. We are a product-led firm and our focus will remain on innovation in that space,” he said. The startup is also open to exploring opportunities to acquire smaller firms for inorganic growth, he said.

“India is home to one of the world’s youngest population, and by 2050, it is expected to account for over 18% of the global working age population,” said Arundhati Bhattacharya, Chairperson and CEO, Salesforce India, in a statement. “This makes technology platforms like Darwinbox, that focuses on workforces, incredibly important. I’m proud that Salesforce is supporting Darwinbox on their journey as they continue to grow and innovate in this space.”

Alex Kayyal, partner and head of international at Salesforce Ventures, told TechCrunch in an interview that the firm helps its partners in a number of ways, including exposing them to the firm’s customers, executives and their networks, and helping startups scale their business. “We have one of the most innovative and disruptive customer bases that are looking for cloud solutions and digital transformation. So the opportunity to expose companies like Darwinbox to our customer base is something we get really excited about,” said Kayyal, adding that the firm is exploring several more deals in India.

Personio raises $125M on a $1.7B valuation for an HR platform targeting SMEs

With the last year changing how (and where) many of us work, organizations have started to rethink how well they manage their employees, and what tools they use to do that. Today, one of the startups that is building technology to address this challenge is announcing a major round of funding that underscores its traction to date.

Personio — the German startup that targets small and medium-sized businesses (10-2,000 employees) with an all-in-one HR platform covering recruiting and onboarding, payroll, absence tracking and other major HR functions — has picked up $125 million in funding at a $1.7 billion post-money valuation.

The Series D is being co-led by Index Ventures and Meritech, with previous backers Accel, Lightspeed Venture Partners, Northzone, Global Founders Capital and Picus all participating.

The $1.7 billion valuation is a big jump on the company’s $500 million valuation a year ago, and it comes after a year where the startup has doubled its revenues, and was not on the hunt to raise, with much of its previous fundraising still in the bank.

Personio currently counts some 3,000 SMEs in Europe as customers.

In an interview, Hanno Renner, the co-founder and CEO of Personio, said that the startup would be using the funding to continue building out the product — which operates a little like Workday, but built for much smaller organizations — as well as expanding its presence in Europe.

Although SMEs can be a notoriously challenging customer segment, Renner said that a new opportunity has emerged: a new wave of people in the SME sector have started to realise the value of having a modern and integrated HR platform.

“We started Personio in 2016 wanting to become the leading HR platform for mid-market companies, and we knew it could be a great company, but we realize it can be hard to grasp what HR really means,” he said. “But I think what has driven our business in the past year has been the realization that HR is not just an important part, but maybe the most important part, of any business.”

It may take one magic turn to convert users, he said, by providing (as one example) tools to recruit, sign contracts and onboard new employees remotely. Still, he acknowledges that the mid-market — especially those companies not built around technology — has been “lagging for years,” with many still working off Excel spreadsheets, or even more surprisingly, pen and paper. “Supporting them by helping them to digitize in a more efficient way has been driving our business.”

Personio is not the only startup hopeful that the shift in how we work will bring a new appreciation (and appetite) for purchasing HR tools. Others like Hibob have also seen a big boost in their business, and have also been raising money to tap into the opportunity more aggressively.

Hibob is looking to build in more training tools, underscoring the feature race that Personio will also have to run to keep up.

But given the sheer numbers of SMBs in the European market — more than 25 million, and accounting for more than 99% of all enterprises, according to research from the European Union — the fact that many of them have yet to adopt any kind of HR platform at all, there remains a lot of growth for a number of players.

“SMEs are the backbone of the European economy, employing 100 million people across the continent, but it is also a sector that has been neglected by software companies focused predominantly on large enterprises,” Martin Mingot, a partner at Index who sits on Personio’s board, said in a statement. “Personio changes that, having created a set of powerful tools tailored to address the needs of small businesses.”

“We have had the pleasure of working with some of the most successful SaaS companies in the world, and given Personio’s success over the past five years and the immense market potential, we strongly believe in Personio’s ability to build an equally successful and impactful business,” added Alex Clayton, general partner at Meritech Capital, in his own statement. “After many great discussions with Hanno over recent years, we are now excited to be joining the journey.” Clayton is also joining the board with this round.