Khatabook, a startup that’s said on Tuesday it’s raised $100 million during a new financing round because it prepares to launch financial services.
The startup’s new financing round — a Series C — was led by Tribe Capital and Moore Strategic Ventures and valued the two-and-a-half-year-old Bangalore-headquartered startup at “close to $600 million,” its co-founder and chief executive Ravish Naresh told TechCrunch in an interview.
As a part of the new round — which was oversubscribed and also saw participation of Balaji Srinivasan and Alkeon Capital also as many other existing investors including Sriram Krishnan, B Capital Group, Sequoia Capital, Tencent, RTP Ventures, Unilever Ventures and Better Capital — Khatabook said it’s also buying back shares worth $10 million to reward its current and former employees and early investors. The startup said it’s also expanding its stock options pool for workers to $50 million
Even as many many Indians came online within the past decade, most merchants within the South Asian country are still offline. These merchants, who run neighborhood stores, believe traditional ways for bookkeeping — maintaining ledgers on paper — that are both time-consuming and susceptible to errors.
is attempting to vary that by providing these merchants with a set of products to digitize their bookkeeping and manage their expenses and staff. The startup, which employs over 200 people, said it’s amassed over 10 million monthly active users who are spread across nearly every postcode within the country.
Scores of firms from young startups like Khatabook and Dukaan to Facebook, Amazon and India’s largest chain Reliance Retail are aggressively attempting to tap into neighborhood stores within the South Asian market.
There are about 60 million small and medium-sized businesses in India, a fraction of which are neighborhood stores — also popularly referred to as kirana in South Asia — that dot tens of thousands of Indian cities, towns and villages. These mom-and-pop stores offer all types of things , pay low wages and tiny to no rent. And on top of that, their economics is usually better than most.
“At Tribe, we believe strongly within the power of the network effect and the way it can create moats for businesses. Khatabook has successfully built such a network by empowering this seismic shift among MSME businesses to maneuver from paper to digital, literally,” said Arjun Sethi, co-founder and partner at Tribe Capital, during a statement. “Despite its large early success and fast adoption so far , the corporate is early in its path to power the segment. We’re thrilled to be a neighborhood of its growth because it leverages its network to create additional scale.”
Khatabook, which also counts Emphasis Ventures (EMVC) among its backers, has expanded its product offerings in recent years to lure more businesses. Later this year, Naresh said, the startup will provide lending to merchants. “We are currently testing the merchandise with both retailers and distributors,” he said.
Online lending has boomed in India in recent years, but only a few companies are today attempting to cater to small and medium-sized businesses. “The unaddressed SME credit demand in India is ~$300 billion-$350 billion, with quite 90% of current demand being met by banks. A typical digital SME lender focusses on 1 million-5 million Indian rupees ($13,575 to $67,875) ticket size with no collateral, average tenure ~12-18 months, and with some ecosystem anchor,” analysts at Bank of America wrote during a report.
As with many other firms, the pandemic wasn’t excellent news for Khatabook, which lost a big portion of the business last year after Indian states enforced lockdown to limit mobility. But the startup has since bounced back. The month of July, said Naresh, was its all-time high. “MSMEs have come very strongly and businesses weren’t as impacted by the second wave this year as they were by last year’s,” he said.