Khatabook, a startup helping merchants in India digitize their bookkeeping and accept online payments, announced Tuesday that it has raised $ 100 million in a new round of funding to prepare for financial services rollout .
The startup’s new round of funding – a Series C – was led by Tribe Capital and Moore Strategic Ventures and valued the two-and-a-half-year-old Bangalore-based startup at “nearly $ 600 million,” its co-founder and CEO Ravish Naresh told TechCrunch in one Interview.
As part of the new round – which was oversubscribed and which also included Balaji Srinivasan and Alkeon Capital, as well as many other existing investors such as Sriram Krishnan, B Capital Group, Sequoia Capital, Tencent, RTP Ventures, Unilever Ventures and Better Capital – Khatabook said, that it is also buying back $ 10 million worth of shares to reward its current and former employees and early investors. The startup said it is also expanding its employee stock option pool to $ 50 million
Even though hundreds of millions of Indians have gone online over the past decade, most traders in the South Asian nation are still offline. These vendors who run businesses in the neighborhood rely on traditional methods of bookkeeping – keeping ledgers on paper – which are both time consuming and error prone.
Khatabook is trying to change that by providing these merchants with a range of products to digitize their bookkeeping and manage their expenses and staff. The startup, which employs over 200 people, claims to have accumulated over 10 million monthly active users who are spread across almost every zip code in the country.
Numerous companies from young start-ups like Khatabook and Dukaan to Facebook, Amazon and India’s largest retail chain Reliance Retail are aggressively trying to open up convenience stores in the South Asian market.
India has around 60 million small and medium-sized businesses, a fraction of which are convenience stores – also popularly known as kirana in South Asia – located in tens of thousands of Indian towns and villages. These mom and pop shops sell all sorts of items, pay low wages and little to no rent. And on top of that, their profitability is often better than that of most of the others.
“At Tribe, we strongly believe in the power of the network effect and how it can create rifts for businesses. Khatabook has successfully built such a network by enabling this seismic shift among MSME companies to literally move from paper to digital, ”Tribe Capital co-founder and partner Arjun Sethi said in a statement. “Despite its great early success and rapid roll-out to this day, the company is still early on the path to advancing the segment. We are very excited to be part of its growth as it uses its network to build additional size. “
A slide from a current deck by Khatabook (Image: TechCrunch)
Khatabook, which also has Emphasis Ventures (EMVC) among its supporters, has expanded its product range in recent years to attract more companies. Later that year, Naresh said the startup will offer credit to traders. “We are currently testing the product at both retailers and distributors,” he said.
Online lending has seen a boom in India in recent years, but very few companies are trying to serve small and medium-sized businesses today. “The unmet credit demand of SMEs in India is around $ 300-350 billion, with more than 90% of current demand coming from banks. A typical SMB digital lender focuses on Indian rupees 1-5 million ($ 13,575- $ 67,875) with no collateral, an average maturity of ~ 12-18 months, and with some ecosystem anchor, ”wrote Bank of America analysts in a report.
As with numerous other companies, the pandemic was bad news for Khatabook, which lost a significant portion of its business last year after Indian states forced a lockdown to restrict mobility. But the startup has since recovered. The month of July, Naresh said, was its all-time high. “MSMEs have come back very strongly and companies weren’t as hard hit by the second wave this year as they were last year,” he said.