India’s social commerce firms, which tap local influencers to sell products to their friends, families and neighbours, are set for a landmark year, having raised more than half a billion dollars from investors in the first seven months.
Also in this letter:
- RBI: Digital rupee will be introduced in phases
- Trucking platform BlackBuck becomes a unicorn
- Zomato shares to be listed on exchanges today
India’s social commerce startups have already raised $554 million in funding this year (as of July 16), according to data sourced from Venture Intelligence. That’s seven times what they raised in all of 2020 and two-and-a-half times the 2019 total.
“I think this is really the year in which you will see social commerce reaching some sort of an escape velocity to start scaling rapidly,” said Ankur Pahwa of Ernst & Young.
The key to small-town India: Experts and investors told us that social commerce will unlock markets in India’s tier 2 and tier 3 cities and towns in a way that large ecommerce platforms haven’t been able to.
“Social commerce is expanding India’s e-commerce sector beyond the customers of current marketplaces, which are able to solve for structured categories,” said Amit Aggarwal, vice president, Elevation Capital, which has backed social commerce unicorn Meesho and CityMall.
Behind the boom: Apart from a general increase in digital adoption, social commerce is booming because such companies have become more structured in recent years, experts said. They have also benefited from a range of tools around discovery and logistics efficiency, which has made servicing low-margin categories possible.
State of play: The reseller model, in which community influencers curate and sell products to people in their networks has found the most success in India. Startups are incentivising and training these micro-influencers to drive sales.
Looking ahead: Messaging and social media apps are currently crucial to the success of social commerce platforms, which use them to drive sales. But experts said the future could look slightly different as social commerce platforms continue to scale.
“Most social commerce is still conducted by individual sellers and buyers through Facebook and WhatsApp. This ecosystem will, however, evolve and become more standardised. It will begin to resemble organised ecommerce platforms in India,” said Radhika Sridharan, a partner in Bain & Company India.
RBI says digital rupee will be introduced in phases
The Reserve Bank of India (RBI) is working towards a “phased introduction” of India’s Central Bank Digital Currency (CBDC) and a pilot to test a general-purpose digital currency is a possibility in the near future, RBI deputy governor T Rabi Shankar said on Thursday.
What’s a CBDC? CBDC is a form of digital currency that is issued by a central bank as an alternative to physical currency. Unlike cryptocurrencies such as Bitcoin and Ethereum, CBDCs are backed by the sovereign reserves of nation states and are thus not subject to the same volatility.
Read our explainer on CBDCs and why central banks around the world are interested in them.
Changes to laws: To launch India’s CBDC, RBI is examining several enabling legal frameworks, including amendments to several sections of the RBI Act, the Coinage Act of 2011, the Foreign Exchange Management Act and Information and Technology Act.
What are the benefits? Shankar said a digital rupee would reduce dependency on cash, lower the costs of printing cash, and offer a more robust settlement mechanism. Another key advantage is the elimination of "time zone difference” in foreign exchange transactions that could pave the way for a cheaper and smoother international settlement system.
Tweet of the day
BlackBuck drives into unicorn club
Venture is a constant balance between speed and depth. Too fast and you are only ever on the surface. Too deep and you miss the action on the surface.— Amanda Herson (@Amanda_Herson) July 21, 2021
Online trucking platform BlackBuck has bagged $67 million in funding, catapulting the startup into India's unicorn club.
- The round was led by Silicon Valley-based venture fund Tribe Capital, IFC Emerging Asia Fund and VEF.
The company was previously valued at around $850 million when it last raised funds in 2019.
BlackBuck has raised nearly $300 million since inception through a mix of equity and debt funding. It also counts Accel, Apoletto Asia, B Capital, Flipkart, and Goldman Sachs as investors.
What’s the plan? The firm will use the money to expand its customer base and launch new services. BlackBuck’s cofounder and CEO Rajesh Yabaji said it will invest heavily in product and data science capabilities to strike better efficiency in freight matching for the Indian trucking ecosystem. The startup said it will also scale its financial services and insurance offerings through partnerships.
This fundraising comes at a time when the company is seeing a shift in demand, with most of it no longer coming from major enterprises but from small businesses, brokers and large-scale outfits.
Quote: “Over the past two years, digital adoption has grown wider… We have seen 20X growth on the supply side while there has been 10X growth in demand,” Yabaji said.
Indian startups raised $12.1 billion from venture capitalists and private equity firms in the first six months this year, beating the last calendar year’s overall funding by $1 billion, we reported earlier this month. The continued flow of funds at steep valuations has also helped catapult a record number of startups into the unicorn club.
Zomato to be listed on stock exchanges today
Food delivery platform Zomato will make its stock market debut today. The Gurugram-based firm was initially planning to list on July 27.
Investors dig in: Last week, Zomato had launched the first domestic initial public offering by an Indian startup unicorn. The issue was subscribed 40.38 times and generated demand worth Rs 2.13 lakh crore, the most for a domestic IPO in 11 years and the third-highest in Indian capital market history.
The IPO, which opened on July 14 and closed on July 16, also set a record for anchor investors and drew the second-highest number of applications ever. The allotment of IPO share allotment to investors took place yesterday (June 22).
IPO offering: The issue comprised fresh equity worth Rs 9,000 crore and an offer for sale (OFS) worth Rs 375 crore by existing investor Info Edge (India). At the upper end of the price band, the company will command a market capitalisation of nearly Rs 64,500 crore. Zomato had raised Rs 4,197 crore from 186 anchor investors ahead of the IPO by allocating 552.2 million shares at Rs 76 apiece.
India's startup ecosystem has been watching Zomato's IPO performance keenly as it could set the tone for a clutch of other companies to follow, including Paytm, Policybazaar, and Mobikwik.
Read our deep dive on Zomato's IPO, what it means for other startups, and the company’s journey so far.
The year 2020 saw greater adoption of cross-border shopping, led by India, Brazil and Mexico, with 91% of online shopping being carried out via smartphones in India, according to the Paypal 2021 Borderless Commerce Report.
India unit separate from US entity: Twitter
Twitter Inc, an entity registered in the US that controls the microblogging platform, does not own a single share in Twitter Communications India Pvt Ltd, lawyers representing the Indian company’s managing director Manish Maheshwari told the Karnataka High Court.
Backstory: The court was hearing a petition filed by Maheshwari challenging the jurisdiction of the Uttar Pradesh Police in issuing a notice to appear in person before an investigating officer in Ghaziabad.
The court had granted interim relief to Maheshwari on June 24 by directing the Uttar Pradesh Police not to take any coercive action against him in the case relating to a viral video of an attack on an elderly person, which went viral on Twitter.
What’s next? The court said it would continue dictating the order on Friday at 12:45 pm.
Websites, apps down in widespread outage
Many popular Indian apps and websites including food delivery platform Zomato and payments app Paytm were affected in a global Internet outage on Thursday evening.
- The outage was due to a technical issue at Akamai, which provides domain name system services.
What happened? As per reports, many services, including Amazon, Fidelity, AirBNB, Delta Airlines, and others were affected. In India, users and companies such as Paytm, Zomato, SonyLiv and others said their services were down temporarily. The services were restored within 30 minutes.
Our app is down, due to a widespread Akamai outage. Our teams are working to ensure all orders placed are delivered in time. https://t.co/4btwIvjTZn— Deepinder Goyal (@deepigoyal) July 22, 2021
A cause for concern: This is the third such incident in two months. In June, multiple outages hit social media, government and news websites across the globe due to a glitch at US-based cloud computing services provider Fastly. Experts called it "the consequences of consolidation and centralisation in the Internet infrastructure," and called for decentralisation.
Other Top Stories We Are Covering
Infosys memo says staff can return to offices: IT services provider Infosys has told employees that they can return to offices since the Covid-19 situation had improved with increased vaccine coverage, Reuters reported, citing an internal memo sent to staff last week.
IPO-bound Gupshup expands its top deck: Gupshup, a business messaging company that in April turned into a unicorn, has added seven new vice-presidents (VPs) to its executive team. Gupshup raised $100 million in funding from Tiger Global Management at a $1.4 billion valuation in April this year.
Cab, auto drivers hold protest rally against bike taxis in Bengaluru: Drivers of cabs and auto rickshaws in Karnataka, upset over a recent order by the state government permitting electric bikes to operate as taxis, held a protest rally in Bengaluru on Thursday and demanded that the directive be withdrawn.
Global Picks We Are Reading