Private equity fund TPG Growth pulled out of Good Glamm’s fundraising just months ago, several people familiar with the deal talks told ET. The financing would have valued the company at more than $1.5 billion had the transaction gone through, they added.
Other highly regarded startups such as new-age insurance company Acko, e-commerce platform Meesho and B2B e-commerce company Udaan have also struggled to raise capital as investor sentiment wanes. shifted from exuberant to extremely cautious, emphasizing profitability. pure growth once again, amid persistent macroeconomic headwinds.
“The market has changed so much that late-stage deals that started about six months ago will have only two outcomes – fail or settle at valuations far below initial conversations,” said Abhay Pandey, partner. director at A91 Partners, a Mumbai-based investment firm that has backed companies like Digit Insurance, Sugar Cosmetics and Paper Boat, among others. “All the drivers for rapid ‘rollout’ – FOMO (fear of running out), very low cost of capital and seemingly unlimited capital – have disappeared and as a result investors have chosen to walk or trade better. .”, did he declare.
The decline in funding rounds of $100 million and above was notable this year, having fallen to 18 in the second quarter of the current calendar year, from 29 in the prior quarter. In value, funding rounds in the June quarter racked up $3.6 billion, compared to $6.7 billion in the quarter ended March, according to data from Venture Intelligence.
A report from startup data tracking platform Tracxn released on Monday said total funding raised by companies in August was $885 million, down 20% from July.
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Good Glamm, which runs brands like The Moms Co, ScoopWhoop, PopXo and Baby Chakra, among others, wanted to use the $150-200 million in cash to acquire Raymond Group’s consumer brands, including Park Avenue and Kamasutra, and repurchase the men’s skincare brand. Ustraa. Not all of these deals were done because the funding was not secured, the people quoted above said.
The company, however, said, “As the acquisitions did not materialize due to valuation differences, the fundraising was cancelled.” The group “does not plan to raise funds, whether from internal or external investors,” he said in a statement. Its organic growth, investments in international expansions and other acquisitions are proceeding according to plan, he said.
Bengaluru-based Acko had signed a term sheet with Prosus-owned PayU, but the South African conglomerate decided not to pursue funding. Acko wanted the funds to enter the life insurance business. Its shareholders include General Atlantic, Multiples Private Equity, Amazon, Flipkart co-founder Binny Bansal, among others.
People familiar with the matter said the $1.1 billion insurtech startup is now likely to close an internal round led by General Atlantic at a slightly higher valuation than it was assigned last year. .
Acko and TPG did not comment on the ET issue while a PayU spokesperson said, “It is Company policy not to acknowledge or deny its involvement in any merger activity, acquisition or sale, nor to comment on market rumours.”
What happened at Good Glamm?
With a valuation exceeding $1 billion, acquiring small startups unable to raise capital independently is an oft-used strategy that Good Glamm has embraced, as many other big tech companies have in the past. Most of the acquisitions were stock exchange deals with minimal cash payments.
Financing, acquisitions and main shareholders of Good Glamm
“They (Good Glamm Group) were in talks for a new round of funding even as they closed some of the previous brand acquisitions, but the talks didn’t lead to the valuation the company was looking for,” said one. person aware of the case.
Industry executives said Good Glamm paid a higher premium for its brand acquisitions. “Several brands they bought last year came to us and we accepted them all because they didn’t justify the price they were looking for,” said a senior executive at a Thrasio style platform. “Furthermore, the content-to-commerce model has yet to reflect the potential it has been associated with,” said one of the senior executives mentioned above.
Content-to-commerce basically means using content through blogs and social media to be able to sell to users. A founder of a brand deployment firm says the current year will be a key differentiator for aggregator platforms as they need to scale the brands they have acquired amid the crisis. of financing.
In February, ET wrote a deep dive into The Good Glamm Group and what was fueling its buying spree. At the time, the company said it had $15 million in annual revenue before the pandemic and was expected to hit $250 million by March 31, 2022.
(Left to right) Darpan Sanghvi, Group Founder and CEO, and co-founders Priyanka Gill and Naiyya Saggi.
For the financial year ending March 2021, the parent company of the group recorded consolidated operating income of more than Rs 49 crore as well as a net loss of Rs 43.6 crore, according to regulatory filings from the Registrar of companies (RoC). Its audited financial statements for the 2022 financial year are not yet available from the RoC.
U-turn of PayU on Acko
This is not the first time that online payment service provider PayU, owned by Prosus, has engaged with Acko, people in the know said. He also had talks to fund the insurance start-up last year. Acko expected a $2 billion valuation and with the tech world seeing the public market valuation plummet, PayU didn’t make the deal, a person briefed on the matter said. “There’s a thinking in the group about valuations, especially bearing in mind how things played out in the Billdesk deal…” the person said.
According to another person quoted above, PayU’s year-long wait for its $4.7 billion Billdesk deal to be approved by India’s antitrust regulator has added to the uncertainty of backing regulated companies here. . PayU finally received clearance from the Competition Commission of India (ICC) for the BillDesk deal on Monday. Netherlands-based PayU made acquisitions in India after buying Citrus Pay, PaySense and Wibmo to bolster its payments ecosystem.
Many unicorns (startups valued at $1 billion or more) have enough cash they raised in 2021 so they don’t need to go to market immediately, says a venture capitalist who did not want to be named. “They want to avoid lowering their valuation and prefer to reduce their cash burn,” he said. “The big question, however, is: if spending drops significantly, will growth also be affected? This is a situation that many large, high-valuation companies will face over the next 6-8 months as they try to expand their cash trail…” he added.