Bengaluru-based digital ledger startup Khatabook that digitizes accounting books of small and medium businesses, Wednesday said it has raised about USD 60 million in the Series B round led by American investment firm B Capital Group.
The latest round also saw participation from new investors joining its board including Unilever Ventures and Rocketship.VC.
Existing investors who were a part of this round include Sequoia Capital India, Partners of DST Global, Tencent, GGV Capital, RTP Global, Hummingbird Ventures, and Falcon Edge Capital. Angel investors including Kevin Weil, Alexander Will, Kunal Shah, Kunal Bahl, and Rohit Bansal also wrote cheques to the company.
With the fresh funds, the one-and-a-half-year-old startup plans to ramp up its products and services offerings. It said it is now building technology solutions around “financial services and a large merchant-focused distribution platform.” Prior to this round, the company had raised USD 25 million in its Series A round in October last year.
Started by Ravish Naresh, Jaideep Poonia, Dhanesh Kumar, and Ashish Sonone, Khatabook works with millions of small and medium businesses (SMBs) to digitize their accounting books. Almost all SMBs in India keep physical ledger books in which they everyday note down their creditor’s name and the amount they owe. Khatabook’s mobile app allows them to digitize this process and claims to make it more streamlined and accessible. It also enables them to send periodic reminders to creditors and collect payments through the app.
Y Combinator-backed Khatabook was a part of Sequoia’s early-stage accelerator program Surge. Within a year of rolling out its app in December 2018, it amassed five million merchants from more than 3000 cities. At present, Khatabook claims to have eight million active merchants on its app which supports 11 local languages.
“Khatabook is playing an important role in the digitization of MSMEs – a sector that forms the backbone of our economy – helping to increase their incomes and making them more efficient and competitive,” said Ravish Naresh, co-founder and CEO of Khatabook. “We are looking to work closely with the government and financial institutions to strengthen Indian MSMEs.”
Tech solution for SMEs
The company said more than one million merchants upload data and engage with the app daily for transactions worth USD 200 million every day.
“High engagement and utilization of the platform has resulted in more than 25% of the total active merchants joining the platform through word-of-mouth and referrals,” the company said.
According to Kabir Narang, B Capital Group General Partner & Co-Head of Asia, small and medium-sized businesses will drive the Indian economy in the era of COVID-19 and they need digital tools to make their businesses efficient and to grow.
“B Capital is excited to partner with Khatabook, which is enabling the 60 million merchants to go digital,” Narang said in a statement. “We have been tracking the company and are impressed by its product suite as it is addressing the critical pain points of merchants across credit tracking, revenue leakage, and collections.”
Rajan Anandan, Managing Director, Sequoia Capital India, in a recent email interview said Sequoia is excited about the prospects of the companies in SME tech space.
“SMEs are the backbone of the economy in both India and Southeast Asia, and we believe the time has come to drive innovation for this segment,” he said. “Products and services which help to digitize SMEs have massive potential. Many of our Surge companies across all three cohorts – such as Khatabook in India and BukuKas in Indonesia – are building for SMEs.”
Sensing the largely untapped market, a host of SME-focused online accounting and payment solution companies have cropped up across India over the last two years. VCs are keenly looking to invest in tech-based solutions aimed at India’s millions of small merchants. Khatabook competes with the likes of Morningside and Tiger Global-backed OkCredit, and Vyapar, a mobile-based business accounting software for small businesses.