Khatabook, a startup that helps merchants in India digitize their accounting and accept payments online, said on Tuesday it had raised $ 100 million in a new round of funding as it prepares to launch financial services.
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 a CEO Ravish Naresh told TechCrunch in an interview.
As part of the new round – which was oversubscribed and also saw participation from Balaji Srinivasan and Alkeon Capital as well as many other existing investors including Sriram Krishnan, B Capital Group, Sequoia Capital, Tencent, RTP Global, Unilever Ventures and Better Capital – Khatabook said it is also repurchasing shares worth $ 10 million to reward its current and former employees and early investors. The startup said it is also expanding its stock option pool for employees to $ 50 million.
Even though hundreds of millions of Indians have gone online over the past decade, most of the South Asian nation’s traders are still offline. These merchants, who run neighborhood stores, rely on traditional bookkeeping methods – keeping ledgers on paper – which are both time consuming and prone to error.
Khatabook is trying to change that by providing these merchants with a suite of products to digitize their accounting and manage their expenses and staff. The startup, which employs more than 200 people, said it has amassed more than 10 million monthly active users, spread across nearly all zip codes across the country.
Dozens of companies, from young startups such as Khatabook and Dukaan to Facebook, Amazon and India’s largest retail chain, Reliance Retail, are aggressively trying to tap into neighborhood stores in the South Asian market.
There are around 60 million small and medium-sized businesses in India, a fraction of which are neighborhood stores – also known as kirana in Southeast Asia – that dot tens of thousands of Indian towns and villages. These mom-and-pop stores carry all kinds of items, pay low wages and little to no rent. And on top of that, their economy is often better than most.
“At Tribe, we strongly believe in the power of the network effect and how it can create moats for businesses. Khatabook has successfully built such a network by enabling this seismic shift among MSME companies to go from paper to digital, literally, ”said Arjun Sethi, co-founder and partner of Tribe Capital, in a statement. “Despite its great early success and rapid adoption to date, the company is on track to propel the segment. We are excited to be a part of his growth as he leverages his network to build additional scale. “
Khatabook, which also counts Emphasis Ventures (EMVC) among its funders, has broadened its product offering in recent years to attract more businesses. Later this year, Naresh said, the startup will provide loans to traders. “We are currently testing the product with retailers and distributors,” he said.
Online loans have exploded in India in recent years, but very few businesses today are trying to meet the needs of small and medium-sized businesses. “The unmet demand for credit from SMEs in India is around $ 300-350 billion, with over 90% of current demand being met by banks. A typical digital SME lender focuses on 1 million to 5 million Indian rupees ($ 13,575 to $ 67,875) of unsecured note size, average duration of ~ 12 to 18 months and with some anchoring in the ecosystem Bank of America analysts wrote in a report.
As with many other businesses, the pandemic was not good news for Khatabook, which lost a significant portion of its business last year after Indian states imposed the lockdown to restrict mobility. But the startup has since rebounded. July, Naresh said, was his all-time high. “MSMEs have come back very strongly and businesses have not been as affected by the second wave this year as they were last year,” he said.