6 �THE ECONOMIC TIMES | BENGALURU | FRIDAY | 30 DECEMBER 2016Disruption: Startups & Tech

Supraja.Srinivasan@timesgroup.com

Mumbai: Digital payments and fi-nancial services company instant-Pay has raised funding in the rangeof $3-5 million (`̀20-34 crore) fromSingapore-based investors RB In-vestments and Kaleden Holdings.

The funding, which is part of a pre-series A round, will be used for thedevelopment of new products andgeographical expansion across thecountry. A part of the funding will beused to build the brand and for mar-keting. The Delhi-based aggregatorhas over 100 products and servicesand facilitates digital payments at ki-rana stores in tier-2 and 3 cities. It of-fers services that include electronicmobile recharges, utility bill pay-ments, insurance premium pay-ments, travel bookings, domestic re-mittance, etc.

These products and services aredistributed through over 400 corpo-rate strategic alliances and througha nationwide network of micro mer-chants. The platform currently hasover 62,000 merchants and targets tocross 1,20,000 merchants by March2017. “While we build this massivenetwork, we are also enabling otherproducts and services to be deliveredvia this distribution directly and ef-ficiently,” said Sankalp Shangari, co-founder of instantPay.

Profitability and the ability to inno-vate for smaller geographies are lu-ring investors to throw their weightbehind the company. “It is rare tofind a small company that has remai-ned cash positive in this industry,”said Gurinder Singh, managing di-rector at Kaleden Holdings.

instantPay processes around 10million transactions per month cur-rently and is looking to touch the 50-million mark by FY18. The companyclaims to be profitable having closedFY16 “net positive in a few lakh”. in-stantPay is targeting a 20% growthfor FY17 with a four-fold jump in re-venue for FY18.

Investors believe that the key chal-lenge for companies in this space in2017 would be to mitigate cyber secu-rity risks following a surge in busi-ness due to demonetisation.

“Companies should target to makeunit economics sustainable beforetaking long bets in the market andaggressively aiming for market sha-re,” said Rajesh Bothra, MD at RB In-vestments.

Investors instantPay.̀ 34 cr to this Firm inPre-Series A Round

Quicker Payments

62,000

100 Products and services that instantPay has

Merchants on the platform currently

10 millionTransac-tions pro-cessed by instantPay per month

WHAT WILL THE FUNDING BE USED FOR?

The development of new products and expansion

To build the brand and for marketing

RB Investments, Kaleden Holdings bet on firm

GURINDER SINGHMD, Kaleden Holdings

It is rare to find a smallcompany that has remai-ned cash positive in thisindustry

Facebook's Oculus has

acquired Danish com-

pany The Eye Tribe.

The Eye Tribe develops eye-

tracking software that enables

eye movements to control con-

sumer devices. It began shipping

its "Eye Tracking Software Devel-

opment Kit" to developers in

2014. — Business Insider

Oculus Brings Eye Tribe Aboard

After un-veiling a slewof ‘incentives’for digital

payment, the government may rollout certain ‘disincentives’ for cashpayments as well in the coming year,said Law and IT minister Ravi Shan-kar Prasad in an exclusive interviewto ET’s Surabhi Agarwal. Prasadspoke about measures that the go-vernment is taking to push cashlesstransactions, the need for an overar-ching privacy law and why the IT Actneeds to be strengthened. EditedExcerpts:

How would you rate the success of

the cashless drive started in

November?

There are 105 crore mobile phones,109 crore Aadhaar numbers, 50 croreinternet users, there is a boomingstartup culture in India. This creates aprofoundecosystemfor

digital payments. We have two lakhplus common service centres, twentydays ago we asked them to do digitaltraining of around 80 lakh people forwhich they will be given incentives,they have already crossed 1crore 17lakh people and over 3 crore mer-chants. And I had thought that it willtake at least two to three months toreach the target. India is changing onthe ground, we sitting in Delhi are notwilling to acknowledge it.

People accept that India needed to

reduce its parallel cash economy

but there is also a great deal of

suffering. Why did the government

not create some basic

infrastructure before announcing

demonetisation?

It was done with so much of secrecyand confidentiality yet the systembrokers broke it. They are beingcaught on a daily basis – from bankofficials to lawyers to hawala opera-tors. Had we started doing thesethings early, clever people wouldhave sensed that something isgoing to change. Past initiatives

such as evisa or eticketing orescholarship were going on butdigital payment as a consequenceof putting .̀ 500 and .̀ 1,000 out oflegal tender has to be done as apart of the package. And the PM

was honest enough to share withthe people ki aapko kuch pain hoga(There will be some pain). The veryfact that Indians have chosen to bear

that pain, it is because of their trust inthis government and Narendra

Modi.

Is the government also considering

some disincentives for cash

payments apart from incentives for

digital payments?

That idea is also open – incentive fordigital payment, disincentive for cashpayment. Let’s await the financeminister’s observation on that. Likewe have come up with so many ideasfor incentivising digital payments,there will be certain ideas for disin-centivising cash payments also. I thinkit’s a good idea. We have been toldthat post November 8, number of airtravels have risen in India, touristnumber has risen, even seeding ofcrops has shown big growth.

What are the other initiatives for

furthering digital payments on the

anvil?

We are in talks with the ministry offood and civil supplies, there arealmost 5.8 lakh ration shops in thecountry, we are finalising the ar-chitecture to make them Aadhaarenabled. All banks have acceptedAadhaar-enabled payments and theyare going to educate 100 shopkeepers

in their vicinity. I am going towrite letters soon to all the chiefjustices of high courts to ensure

digital payments in all the sub-ordinate courts under their charge. I

have heard that about 1,100 MotherDaily and Safal outlets in Delhi aregoing to accept Aadhaar-enabledpayments very soon.

Do you feel the need for a privacy

law since there is so much sensitive

citizen data being generated due to

the cashless drive?

There is already a law on Aadhaarwhere privacy issue is very seriouslyaddressed. We have set up a digitalpayments division in CERT-In. Allbanks have been directed to reportany unusual movement to CERT-In.Cyber security drills are going on in abig way with all the organisations.Then cyber security auditors arebeing appointed by CERT-In. We havecome with a new technology centreBotnet, where anyone’s systemhaving a malware will get removedautomatically. A cyber coordinationcentre is coming up. I have also toldthe Secretary IT to revisit the IT law,and if it requires some reinforcementin the wake of digital payment, then itshould be done.

But, don’t you think we need a

separate overarching privacy law

given so many new payment firms

have sprouted?

Iam open to that. But we are veryparticular from the IT ministry toinsist upon sacredness of data, anyo-ne trying to flout data (privacy), the ITprovisions, are strong enough to takecare of that. We will have to work withsome government departments (onthis) because privacy is a larger issue,which is not only digital transactioncentric.

The government is placing big bets

on Aadhaar, what is the plan?

Aadhaar-enabled payment is going tobecome a gamechanger. The customerneed not have a mobile phone. Onlyone (biometric) smartphone with theshopkeeper, enter your Aadhaarnumber and press your thumb, andthe payment is done. We are justfinalising it, the entire architecture,the ownership etc, (after which) wewill launch it. Almost 30 crore Indiansdon’t have mobile phones, this is atransformative measure which willmake everything transparent.

Businesses Can Soon Cash inon Aadhaar-enabled Payments

Q&A

ON DEMONETISATION

The very fact that Indians have chosen to bear that pain,it is because of their trust in

this government and Narendra Modi

ADDING IT UP

We have come up withso many ideas for in-centivising digital pay-ments, there will be cer-tain ideas for disincenti-vising cash payments

2016: The Year the Party Ended

Rise of Nationalism 2016 was the year digital entrepreneurs embraced the need for acuity in dealing with policy makers. If the year began with the central gov-ernment wooing startups it drew to a close with startups wooing the government. Founders of the country’s two most-valued internet com-panies—Flipkart and Ola—have spoken out on the need for policy that helps homegrown companies compete on even terms with overseas ri-vals, which they claim seek to dominate local markets with the power of money alone.Digital entrepreneurs also gained from policy interventions, most of all digital payment companies that have posted spectacular growth in the push towards a cashless economy. Mobile wallet Paytm has added over 20 million registered users since November 8, when old currency notes of ̀ 500 and ̀ 1,000 ceased to be legal tender. On the other hand, changes to foreign investment policy in online marketplaces, like limiting a seller to only 25% of the total sales, worsened the situation for online retailers grappling with a slowing market. Ride-hailing apps like Uber and Ola continue to fight legal battles in several major states, as they await clarity on regulation. And as startups dive deeper into regulated markets like finan-cial services and pharmaceu-ticals, their ability to deal with government will be fur-ther tested.

The Offline Push Online retailers also strove to sell more to customers who buy from physical stores. The offline push is being led by single product companies like babycare products retailer FirstCry, which has a network of about 300 physical stores and closed a suc-cessful buyout of BabyOye, the retail chain of auto conglomerate Mahindra. Eyewear brand Lenskart, furniture etailer Pepperfry, online jewellery players BlueStone and CaratLane are also setting up offline stores. Each of these companies (except CaratLane, which was ac-quired) have been able to raise fresh capital at a higher valuation, indicating that investors see merit in this strategy.Those adopting a similar model include Myntra, India’s largest fashion retailer and furniture brand Urban Ladder. Amazon, which has started offline book stores and grocery stores in US, has been experimenting with offline in India.

Hyperlocal MeltdownThe worst hit by the funding slowdown were hyperlocal delivery companies, be it food and grocery delivery, services like plumbing or even third-party logistics players. Hyperlocal was set to disrupt ecommerce in 2015, after all why wait for a day when you can get items delivered in a few hours? Just like they do in China and the US. Hordes of startups, which raised investor money, have since shutdown or changed their business models. For example, grocery deliv-ery startup Peppertap exited the market earlier this year while Grofers is now making a majority of its deliveries the next day.

Money CrunchThe funding slowdown of 2016 has taught fundamental lessons to the Indian startup space. 2016 was the year of cost cuts, even when it meant sacrificing growth in the search of a faint vision of profits. For many startups this meant not just cutting variable costs like marketing, but also trimming fixed costs by firing employees.

Not all were able to survive, as over 212 startups shut down in 2016, a 50% increase as compared to the previous year, according to data from Tracxn. The year also saw several big overseas conglomerates, like Germany’s Rocket Internet and Malaysia’s Astro Group, shut or exit business in India losing millions of dollars.

Jargon Which Defined 2016

For Indian startups – amongst the most high-profile sectors in the country’s business landscape—the money crunch began much before demonetisation. After two consecutive years of breakneck growth, the online retail market hit a pause and discounts on hyperlocal deliveries disappeared, both a result of easy funding disappearing. ET takes a look at four major trends that defined the digital economy in 2016, and what the takeaways are for the New Year

TAKEAWAY: 2016 has taught entre-preneurs that running a lean startup is the way to go, and building a fundamental business is the only way to survive. Also there is growing understanding that to fail is OK, the stigma of failure is fading out. Rising cases of poor corporate governance, however, indicate that all is not perfect in startup land.

TAKEAWAY: The move shows that despite online retail outpacing offline retail in growth, touch and feel will be crucial. Indian ecommerce will need to build its own model to grow, with an omni-channel approach.

TAKEAWAY: While India’s top entre-preneurs have cited China’s example of protectionism, they could have done well to learn from their Chinese peers on how to engage with government early on. The internet industry needs to collaborate on common issues, rather than bickering on Twitter.

TAKEAWAY: Global mod-els don’t always work in India, entre-preneurs and inves-tors must think about offering solutions to local problems.

Hing and Churan: The ethnic spices were the symbols of the fight for market share between online marketplaces—Flipkart and Ama-zon—during the festive season. The Indian company was dismissive of such low-cost sales while its Ameri-can rival claimed selling daily es-sentials online marked a new trend

Net Promoter Score: For ecom-merce companies struggling for growth, this term came as a saviour. Gross sales, they argued was not the real metric, while NPS—a measure of customer loyalty and service quali-ty—is what they were now after

Capital Dumping: A catch-all phrase adopted by internet entre-preneurs to describe their travails while competing with a better-funded rival

Chatbot: From tech giants to up-start ventures, chatbot–computer programs that can conduct a ‘chat’ (both through text or voice)—is now the must-have application

India Stack: Denoting local solu-tions to local problems, this refers to technology that powers finan-cial transactions related to Aad-haar, eKYC, unified payment inter-face (UPI), eSign, and DigiLocker

India Two/Bharat Economy: With India’s internet penetration reaching over 300 million monthly active users, investors, founders and policy wonks are increasingly talking about building solutions for the mar-ket beyond mostly urban internet users. Startups building products for this market will be high on the investors’ radar in 2017

Cockroach Startup: With profitability becoming the new mantra, startups were en-couraged to be like cockroaches which can survive the worst ‘funding’ nuclear winter

Downround/Markdown: A term born out of the drop in value of internet compa-nies. While India’s most-valued internet com-pany Flipkart saw multiple mutual fund in-vestors reduce the value of its shares, Ola is said to be raising a downround or money at a lower valuation than in its previous round.

Startup India: ‘Startup India’ was the common coinage to refer to the govern-ment’s policy push for startups launched in January. 502 companies have been recog-nised as ‘startups’ this year as per the poli-cy definition

For comprehensive and insightful stories about all things startups and technology, log on to www.ettech.com

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