Also in this letter:
■ Let’s target 75 startup unicorns this year: Piyush Goyal
■ Five rules for building a winning direct-to-consumer brand
■ No sign of headwinds abating for Paytm, says Macquarie
Take-Two to buy Zynga for $12.7 billion in mobile gaming push
Take-Two Interactive, is buying Zynga, the creator of ‘Farmville’ for $12.7 billion ($11.04 billion excluding debt).
If it goes through, it will be the largest acquisition ever in the video game industry. The move is part of the company’s plan to tap into a surge in on-the-go gaming on smartphones.
Take-Two, also known for “Red Dead Redemption”, offered $9.86 a share, or a 64% premium over Zynga’s last closing price. Zynga’s shares rose about 50% in trading before the bell, while those of Take-Two fell nearly 9%.
Funding: Take-Two has received financing of $2.7 billion from JP Morgan and plans to fund the rest with cash from its balance sheet and by issuing new debt.
Mobile push: The deal follows Electronic Arts’ $2.4 billion acquisition of Glu Mobile last year as game studios look to build their mobile portfolios.
Many consumers, who were glued to their consoles during the peak of the pandemic, have now shifted to mobile gaming as they prefer to play on the go.
Pine Labs to seek $500 million in US IPO: Meanwhile, digital payments provider Pine Labs has filed confidentially with the US Securities and Exchange Commission for an initial public offering in New York as early as in the first half of this year, sources told us.
The company is seeking to raise about $500 million (Rs 3,703 crore) from the offering, which would give it a valuation of $6-7 billion. Considerations are ongoing and details such as the size and timing could still change, the sources said.
Funding spree: India’s largest commercial bank, the State Bank of India, invested $20 million in Pine Labs earlier this month, we reported previously.
In July, it raised about $600 million from investors including Fidelity and BlackRock, at a valuation of $3 billion. The company said at the time that it was targeting an IPO within 18 months and that it had been operationally profitable for several years — a rarity among the new crop of Indian fintech firms.
This was followed by an additional $100 million infusion from Invesco Developing Markets Fund. Other investors include Temasek, PayPal and Actis Capital.
ETtech Done Deals
■ SaaS management platform Zluri said it has raised $10 millionin a Series A funding round led by MassMutual Ventures with participation from existing investors, Endiya Partners and Kalaari Capital. The company will use the funding to further strengthen its product’s capabilities and beef up its teams in core markets in Asia and North America.
■ The ePlane Company on Monday said it has raised $5 million (about Rs 37 crore) in funding led by deep-tech venture capitalist Speciale Invest and EV/climate-focused fund Micelio.
■ Power Gummies, a direct to consumer (D2C) nutraceutical products maker said it has raised $6 million in Series A funding round led by 9Unicorns, with participation from Vcats, DSG Consumer Partners, Wipro Consumers, Sharpp Ventures (Marico Family office) and NB Ventures.
■ The Michael & Susan Dell Foundation has led a $2.5 million equity investment in Mumbai-based fintech startup Arthan Finance, which offers loans to tiny entrepreneurs. The Dell Foundation has put in $1.5 million, while the balance came from existing angel investors including economist Ajit Ranade and veteran finance professional Sunil Gulati.
■ Lahori, a direct-to-consumer beverage maker, has raised $15 million from Verlinvest as part of its Series A funding round. The Belgium-based, consumer-focused investor has picked an undisclosed minority stake in the company.
Let’s target 75 startup unicorns this year, says Piyush Goyal
Piyush Goyal, the Union commerce and industry minister, said on Monday that after a record-breaking 2021, in which 40-odd startups became unicorns, India’s startup ecosystem should look to create another 75 billion-dollar companies in 2022.
Govt schemes: Addressing the virtual inaugural session of the Startup India Innovation Week, Goyal said the government has started a fund of funds for startups and also launched a seed fund scheme to boost the ecosystem.
He also said the government was “working actively” on the open network for digital commerce (ONDC), which he said would be a game-changer as it would help entrepreneurs save costs and build trust.
What’s that? The ONDC is envisaged as a neutral platform on which buyers and sellers of goods online can transact regardless of the platforms on which they operate. Under ONDC, for example, a buyer on Amazon could purchase goods from a seller who operates on Flipkart. The project, announced last July, is aimed at curbing the dominance of the two ecommerce giants.
“This new initiative will provide huge opportunities for startups and bridge the gap between [them and] large ecommerce companies,” he said. The open network would transform online commerce the way UPI transformed digital payments, he added.
Crisis to opportunity: Goyal also lauded Indian startups for turning Covid “from a crisis into an opportunity” and said that 2021 would always be remembered as the year of unicorns. “The country has the third largest number of unicorns in the world – 82 by the most recent count. Probably more than half became unicorns in the past 12 months,” he said.
Five rules for building a winning direct-to-consumer brand
Baby- and mother-care brand Mamaearth’s latest fundraise of $52 million has catapulted it into the coveted ‘unicorn club’. With unicorns emerging in the country at a rapid pace over the past few months, one feels compelled to step back and ask: what is so special about this? In my humble view: nothing.
For Mamaearth, it is business as usual, as they are possibly focussing their attention and energies on achieving their next milestone. For us as investors, this is the time to reflect on our initial investment thesis and unpack the factors that led to the company’s success.
What contributed to Mamaearth’s exponential growth in a mere five years? Read on as I put forth some of the key takeaways that make for a model that’s sustainable from day one.
Walk the talk: There is no doubt that personal-care and beauty products typically perform well, given their inherently high-frequency usage. However, in a crowded marketplace, brands that keep a keen eye on the smallest changes in consumer interest – and leverage that early on – tend to outperform their competitors. Developing bold and strong messaging along with strategic influencer partnerships helps brands establish a deep emotional connect with customers, enabling them to acquire and retain a critical customer base, which results in ‘brand stickiness’ and impressive margins.
Furthermore, we live in times where customers, especially millennials, are deeply invested in brands that espouse values that align with theirs. They are even willing to pay a premium for sustainable, cruelty-free, eco-friendly brands – so long as they walk the talk! Setting the tone for a brand on these aspects right off the bat can go a long way towards developing loyalty, turning happy customers into brand evangelists.
No sign of headwinds abating for Paytm, says Macquarie
Brokerage firm Macquarie has slashed its target on One97 Communications (Paytm’s parent company) from Rs 1,200 to Rs 900, a 58% downside from the issue price of Rs 2,150. One97 Communications’ shares were trading at an all-time low of Rs 1,169.50 at 2.21 pm on the National Stock Exchange on Monday, down 5.04% on the day.
Tell me more: The brokerage has cut Paytm’s FY21-26 revenue growth rate estimates from 26% to 23% compounded annually and has increased its losses per share estimate by 16-27% due to lower revenues and higher employee and software/cloud expenses.
The brokerage firm said Paytm’s payments business accounts for 70% of overall gross revenues and hence any regulations capping charges for digital payments could affect this. Paytm’s foray into insurance was recently rejected by the Insurance Regulatory and Development Authority, it added. This could also impact its prospects of getting a banking licence, Macquarie added.
On attrition: It also pointed to recent high-level resignations. “Senior executives have been resigning from Paytm, which is a cause of concern and could impact business in our view if the current rate of attrition continues,” it said.
Quote: “Since November 18, Paytm’s stock price has fallen 40% against Sensex’s flat performance. Post the various business updates and results, we believe our revenue projection, particularly on the distribution side, is at risk and hence we pare down our revenue CAGR from 26% to 23% for FY21-26. We are roughly cutting revenue estimates for FY21-26E on an average by 10% every year due to lower distribution and commerce/cloud revenues offset partially by higher payment revenues,” the brokerage said.
Tweet of the day
Foxconn set to reopen its iPhone plant in Chennai on Wednesday
Foxconn will reopen its plant in Sriperumbudur on the outskirts of Chennai after it assured Apple and the Tamil Nadu government that it has taken corrective actions in its hostels. The Taiwanese company will see around 400 workers and 2,000 technical staff begin work from January 12 and is set to resume production in phases, people familiar with the development said.
What happened: On January 8, we reported that Foxconn was set to resume production but was only granted permission to house workers in two of the 17 hostels it operates. Foxconn confirmed that they were waiting for approvals for their offsite hostels.
The plant, which makes Apple iPhones, was shut down last month after a food poisoning incident affected 156 women workers. Apple had placed the plant on probation and Foxconn apologised for the incident. Apple issued a statement on Monday saying ‘corrective actions’ were being implemented at the site.
Quote: “For the past several weeks teams from Apple, along with independent auditors, have been working with Foxconn to ensure a comprehensive set of corrective actions are implemented in the offsite accommodations and dining rooms at Sriperumbudur. Workers will start to return gradually as soon as we are certain our standards are being met in every dormitory and dining area,” an Apple spokesperson said.
The spokesperson also said that the plant remains on probation. Foxconn on their part said that they have been working to improve conditions at the plant.