Startup
Deal or no deal: Venture capital and its prospects in India
The venture capital in India has come of age in the last decade. India has emerged as the third-largest startup ecosystem—both in terms of volume of transactions and number of investments—with 114 unicorns. While the last two years have been very tough for startups, the overall investment climate in India has remained vibrant and promising despite a chilling funding winter.
The funding winter has had a profound impact on the way the deals are being closed in India. It changed everything in the life cycle of a transaction, be it the deal flow, deal structures, complexity, and timelines.
In the aftermath of the crash in valuations, investors have become very cautious, which has impacted each stage of a VC transaction—from valuations to diligence, management rights for supervision of the business, and post-closing oversight of operations. All these factors led to the transactions becoming more complex and closure more time-consuming.
With the drop in valuations, there was a huge gap in the expectations of the founders regarding valuation and the VC’s assessments of the valuations of the startups.
A deal cannot be made unless the gap in valuations is bridged. Accordingly, the parties started to negotiate complex methods to determine the valuations and such methods will sometimes mean that the transaction will be closed without fixing the exact valuation and will depend on conditions to be fulfilled in the future. Investors used innovative methods to fix valuations with a significant focus on actual performance and achievement of projected revenues or earnings. Sometimes, the valuations are not only linked to earnings but also to the diversification of markets or customers or the development/registration of intellectual property rights to secure future growth.
It is not easy in India to fill the valuation gaps just by issuing convertible instruments to investors and may involve the issuance of additional ESOPs/MSOPs to founders with complex vesting schedules and conditions.
Sometimes, even if the valuations are low, startups may raise funding as a matter of survival in tough times. A down-round financing (ie, raising funding at a lower valuation than the previous round) may trigger anti-dilution rights of the existing investors. The anti-dilution provisions provide existing investors an adjustment to their entry price so that they are not impacted by the down-round financing. This requires the shareholding of the existing investors to be realigned before the new funding round. Accordingly, a transaction would not only involve heavy commercial negotiations with new investors, but a commercial agreement with the existing investors as well to align their effective shareholding.
In an uncertain environment, it is not uncommon for investors to push creative and innovative liquidation preference terms. Instead of the conventional provisions, which usually guarantee a return equivalent to their investment or a pro-rata share of liquidation proceeds based on ownership stakes, the investors are now suggesting more complex formulae and conditions for the distribution of liquidation proceeds.
Further, investors are seeking investor protection matters or veto matters that will necessarily require their consent, especially around the protection of the value of the company at the time of exit by the investors. In critical times, investors have been very careful with the information and inspection rights. They are also more focused on compliance and data privacy, and paying closer attention to the fulfillment of conditions that have come to light during diligence. The due diligence process and approach have also become more stringent.
Despite the funding winter, the financial markets in India have done significantly better than their peers the world over, with Nifty and Sensex soaring to unprecedented heights. This has led to some large and successful IPOs that have provided exit to investors.
The scramble to list in India is so immense that some of the startups that had been held from abroad are trying to reverse their holding structures in India to get listed. While reverse flip involves heavy costs and tax leakages, the Indian markets are offering significant valuation premiums and brand recalls in comparison to other jurisdictions and startups are willing to pay the price. Apart from the costs and taxes, the reverse flip may involve navigating stringent regulatory restrictions. For example, for participation in an offer for sale as part of an IPO, the offering shareholder must hold the shares for a minimum period of one year before the IPO. Any reverse merger through a court with its offshore holding company is a time-consuming process that will require the approval of the Reserve Bank of India.
Nevertheless, India is expected to continue to provide an excellent ground to the VC ecosystem. India, with its demographic advantage of a young population, provides a vast market that no one can afford to ignore. Also, India is expected to grow rapidly with a stable government and consistent policies. India also hasn’t suffered significantly from the post-pandemic economic and monetary instability and even from the ongoing geo-political tensions. While these issues have impacted economies across the globe, India is expected to benefit from supply-chain disruptions.
Accordingly, investors are cautiously optimistic, focusing on identifying and backing startups that have the potential to navigate the challenging environment and emerge as market leaders. As we look ahead, the venture capital landscape in India is likely to reach even greater heights.
(Manvinder Singh is Partner at JSA Advocates & Solicitors.)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
Apparel marketplace Myntra has started pilots for its quick delivery services under the name ‘M-Now’ in select pincodes of Bengaluru.
The feature promises product delivery within 30 minutes to 2 hours.
“At Myntra, we are always looking for ways to sharpen our customer proposition. We launched M-Express earlier, towards enhancing the customer experience with regard to speed and have been experimenting with a pilot for faster delivery in a select few pincodes. We will look at expanding it further based on the insights gained, before launching it formally,” a Myntra spokesperson said.
The development was first reported by Inc42.
Ecommerce marketplaces and vertical marketplaces have been looking to expedite their delivery timelines beyond same-day and next-day delivery as quick commerce platforms are venturing into categories beyond groceries and daily essentials.
As consumers club their apparel, accessories, and personal care purchases with grocery orders, marketplaces are trying to defend their turf.
Flipkart-owned Myntra already has an Express feature which offers 24-48 hours delivery for select categories.
The M-Now feature currently features brands like Mochi, Wrangler, Metro, Being Human, and Lavie.
Myntra is not the only one innovating to reach consumers faster. Nykaa, with its Nykaa Now service, is also looking to set up a dark store network to service customers faster.
NTPC Green Energy Ltd has signed an agreement with NREDCAP to set up renewable energy projects worth Rs 2 lakh crore, Andhra Pradesh Chief Minister N Chandrababu Naidu said.
NTPC Green Energy Ltd (NGEL), the renewable energy arm of power giant NTPC, has recently launched its Rs 10,000 crore initial public offering (IPO) with a price band of Rs 102-108 per share.
NGEL has signed a joint venture with NREDCAP (New & Renewable Energy Development Corporation of Andhra Pradesh) to set up renewable energy (RE) projects worth Rs 2,00,000 crore in Andhra Pradesh, Naidu said in a post on X on Thursday.
The collaboration will focus on developing 25 GW solar/wind, 10 GW pumped storage projects (PSPs), and 0.5 MMTPA green hydrogen, the chief minister added.
“This historic project will create over one lakh jobs and position our state as a renewable energy leader at the forefront of India’s green energy revolution,” Naidu said.
Glasafe’s journey began in September 2023 with a simple yet powerful vision from its co-founders: to craft a lifestyle, not just launch another product in the market. This guiding principle shaped every decision, defining the brand’s journey.
As Kushal Choukhany says: “We’re not in the business of selling just glass bottles or tiffins; we’re here to sell you a lifestyle.” This ethos sets Bengaluru-based Glasafe apart, focusing on elevating everyday experiences through glassware that merges elegance with function. The co-founders, Kushal Choukhany, Anshul Choukhany, and Yash Agarwal, did not rush the process. Every product was meticulously crafted, with months spent perfecting each design before entering the market.
From the minute the first prototype was created, they realised they were on a mission to transform everyday essentials into symbols of elegance, consciousness, and elevated living. “We wanted Glasafe products to make you feel different, to elevate your lifestyle above the ordinary. When you use a Glasafe bottle, it’s not just about the functionality; it’s about the experience.”
The brand identity and driving forces
The name ‘Glasafe’ blends of ‘glass’ and ‘safety,’ capturing the brand’s core essence. Glasafe aims to make every product an experience, with glassware that is stylish and safe for everyday use. For instance, glass water bottles are built with an ergonomic grip that fit right in your hand, making them usable and stylish.
From the highly durable borosilicate glass to leak-proof lids, and the non-slip silicone sleeve, each detail is designed with the user in mind.
“We’re obsessed with one thing: quality, quality, and quality,” Choukhany says. “This obsession has been our driving force, ensuring that every product we release sets a new standard.”
Glasafe is a 100% designed-in-India brand that collaborates with talent from across the country. The co-founders feel that true workmanship cannot be rushed, which shows in their thorough approach. “Every curve, lid and sleeve is refined with the highest level of detailing. Your experience is what defines us,” Agarwal says.
The company has “elevated over 1,00,000 unique lives, with a staggering 30% repeat order rate”. Within just six months of launch, Glasafe achieved an ARR of Rs 250 million, a testament to its commitment and the market’s response. Their vision isn’t tied to numbers. “Our home run isn’t a sales figure; it’s about how many lifestyles we’ve elevated,” Choukhany says.
Glasafe aims to go beyond building a brand; it wants to become an integral part of an elevated lifestyle. “We’re not just offering glassware; we’re becoming a part of your story—whether it’s a conversation starter at gatherings, a choice for healthier living with the shift from single-use plastic to glass, or a step in upgrading from the ordinary to the extraordinary. Every Glasafe product is crafted with this intention, to not just meet but enhance everyday moments, reflecting a life lived with grace, intention, and a desire for something better,” Anshul says.
From the beginning, the company understood the significance of being where its customers were. Leading ecommerce platforms such as Amazon, Flipkart, Ajio, Myntra, Tata Cliq, Pepperfry, Blinkit, Zepto, Nykaa Fashion, and others provide an assortment of Glasafe’s range. This extensive online presence has ensured that customers across India can easily access Glasafe products.
A vision for the long run
The founders are focused on long-term impact that endures for years. “We are here for the long game, and we are here to win,” Anshul says. The brand’s focus remains unwavering: providing unrivalled quality while elevating lifestyles, one glass at a time.
The global glassware industry is valued at Rs 48,000 crore, and Glasafe aims to be a significant contributor by 2027-28. The brand’s next big move? Opening experience centres across India and beyond.
“We envision a world inside our bottle,” Choukhany says. “At these experience centres, customers can see, touch, and feel the essence of the brand. These will provide an immersive experience into the lifestyle we have crafted.”
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