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Five new sectors that shined in India in 2019 | KrASIA Year in Review

Social commerce, gaming, local language-based businesses are a few spaces that investors can’t miss in 2020.

credit: DFIC

The year 2019 has been an action-packed one, crammed with a bevy of ups and downs for the Indian startup ecosystem. From policy changes for consumer internet firms to investors pouring in over USD 12 billion in Indian startups—the year 2019 witnessed a sea of changes.

One of the few interesting trends that emerged out of all this is new businesses, which, with their unique target audience, customer acquisition, and uni-focused business model ensured investors not only take note of them but show their confidence by putting in their money.

KrASIA looked at five new sectors that gained traction this year and have the potential of becoming much bigger in 2020.

1. When social media craze meets shopping: Social commerce 

Just when everyone thought e-commerce space was done and dusted with two clear leaders in the country: Amazon India and Flipkart, Indian entrepreneurs took a leaf out of the Chinese social selling model and began experimenting on a version catered to the Indian market.

A handful of startups are leveraging social media channels to help users tap into their friends and family group for bulk sales. VCs have seen this model work in China where Pinduoduo within its three years of existence not only went public, it surpassed online retailer JD.com in valuation. The prospect of this space and the twist Indian social e-commerce models have made to suit the local market have intrigued investors. According to research firm Venture Intelligence, till mid-October, social e-commerce platforms raised USD 157 million in seven deals, as against USD 82 million in 2018.

In June, Meesho, a four-year-old marketplace that connects sellers with customers on social media platforms, became the first Indian startup that got American social media giant Facebook’s backing. While the two companies did not disclose the amount, local media Economic Times reported the deal to range between USD 20 to 25 million. Two months later, Meesho raised USD 125 million in a Series D round from South African tech conglomerate Naspers, Facebook, SAIF Partners, and Sequoia Capital India among others.

A fledgling e-commerce entity EkAnek secured about USD 10 million seed round from Sequoia Capital, Lightspeed Ventures, and Matrix Partners in March 2019. Sequoia Capital India’s much-talked-about accelerator program Surge picked up Bulbul—a live-streaming e-commerce platform—in April as one of its cohorts. Bulbul has managed to raise USD 14.7 so far since its launch in March 2019.

Another social e-commerce venture, HappyShappy raised an undisclosed amount of seed funding in October. Last month, video e-commerce app SimSim that uses video content in vernacular language to target users to sell products on its platform received a USD 6-million Series A cheque from Accel and China-based venture capital firm Shunwei Capital.

2. The new way of banking: Neobanks

At a time when the Indian government expects its fintech market—third-largest globally—to reach USD 31 billion in 2020, neobanks have emerged as the sweet spot for investors this year.

Neobanks are essentially digital banks, with no physical branches. These fintech companies partner with conventional banks to run an internet-only platform for users’ all banking needs. At least five Indian neo banking startups have raised money this year.

Bengaluru-based, two-year-old Open raised USD 5 million Series A round from Beenext, Recruit Strategic Partners, and Unicorn India Ventures in February, followed by USD 30 million Series B funding led by Tiger Global. “It’s really going to get a boost in the near future. We see enough space for at least five or six neobanks to coexist because there’s a large market opportunity in India,” Mabel Chacko, co-founder, Open, told KrASIA.

Another Bengaluru-based digital banking company NiYO, in July, raised USD 35 million in Series B round led from Horizons Ventures, Tencent, and existing investor, JS Capital LLC.

In September, neobanking startup Yelo raised an undisclosed amount from Matrix Partners India, Omidyar Network India, Flourish VC, and Better Capital. A month later, another neobank Juno raised USD 3 million seed fund from Polychain Capital and Sequoia Capital India’s accelerator program Surge, among others. Earlier this month, Chennai-based neobank startup for the informal sector customer, Kaleidofin raised about USD 5.06 million in a Series A round led by Netherlands-based cooperative and social investor Oikocredit.

Photo:Shutterstock.com

3. Vernacular play beyond social media: Podcasts and audiobooks

It’s been a few years since urban Indians, primarily professionals, got hooked on to podcasts and audiobooks with global platforms such as Storytel, Amazon’s Audible, podcast service from Google, and Stitcher.

However this year, a handful of Indian startups that offer audio content in vernacular language caught global investors’ attention who are scouting for companies that can target the next 500 million internet users from tier 3 and 4 cities.

Earlier in July, a two-year-old social audio platform Headfone got USD 750,000 in seed money from Fosun RZ Capital. Meanwhile, Khabri, a digital audio platform for content in vernacular, was chosen for Y Combinator’s summer batch this year.

In November, Mumbai-based Kuku FM raised undisclosed funding from China’s Shunwei Capital, India Quotient, and 3One4 Capital. It claims to have over 1,000 content creators who have uploaded over 2,100 podcasts in a year. Anurag Radasan, principal at 3One4 Capital, said that they’ve been “tracking the rise of vernacular audio consumption as it becomes more deeply embedded in our daily routines.”

Seeing the market for podcasts and audiobooks increasingly becoming big, local language-based self-publishing platform Pratilipi said it would soon enter this space. It raised USD 14 million led by Chinese VC fund Qiming Ventures in June this year. Not wanting to miss the digital podcast market, US-based Lightspeed India and Times Internet, the venture arm of Indian conglomerate Times Group, also put in an undisclosed amount of money in vernacular social audio platform Pocket FM.

4. Playing well: Indian gaming startups 

Over the past few years, barring a handful of companies, gaming startups have largely grown in shadows. However, the soaring popularity of social games and real money games (RMG) riding on the back of the deluge of cheaper smartphones and internet data has brought them in the sunshine.

Apart from the decade-old fantasy sports firm Dream11, that had received USD 100 million from Tencent and Kalaari Capital in 2018, and entered the unicorn club with a billion-dollar valuation in April (after a USD 60 million secondary investment from Steadview Capital), this year saw a range of gaming startups that piqued the interest of investors who have traditionally stayed away from this sector.

In March, online gaming and e-sports platform GamingMonk raised USD 100,000 from the Japanese gaming media company GameWith. Bengaluru-based MPL, which operates real money games, raised USD 35.5 million led by Sequoia India, Times Internet, and GoVentures in April this year. Even the homegrown payments company Paytm launched a gaming platform Paytm First Games. In October, it raised USD 20 million from AGTech and Paytm’s parent company One97 Communications. And just last month, SuperGaming, a social gaming platform for casual gamers got USD 1.3 million in seed funding from Japanese giant Dream Incubator, AET Fund, and early-stage investor Better Capital.

 5. Digitizing SMEs: Mobile-based digital ledgers and accounting solutions

India’s millions of small and medium enterprises remained untouched by the digital wave that swept through India since the beginning of this decade. Primarily the technology startups, large corporates, and institutions worked on mobility, cloud, analytics, and artificial intelligence, but not much has happened to digitize small retailers.

Over the last couple of years, a few Indian entrepreneurs took the mandate in their hands to digitize small businesses and along the way created scalable companies to tap into this vast opportunity.

This year, global investors became increasingly interested in some of these new startups. A Bengaluru-based two-year-old startup OkCredit that digitizes sales records of local mom-and-pop stores raised USD 83 million this year in two rounds. It managed to rope in investors such as Lightspeed Venture Partners, Tiger Global, Morningside Venture Capital, Venture Highway, and Y Combinator.

The interest in this model became more evident as its competitor Khatabook, also received a USD 25 million-cheque from GGV Capital, Partners of DST Global, RTP Global, Sequoia India, Tencent, and Y Combinator in September. This took the total funding of Khatabook to USD 29 million so far, almost all of which came through this year. Khatabook is also a part of Sequoia’s Surge accelerator program.

The same month, Vyapar, a mobile-based business accounting software for small businesses, raised USD 5.4 million from B2B e-commerce firm IndiaMART and existing investors including India Quotient and Axilor Ventures.