HomeBusiness NewsIndia-focused messaging startup Gupshup raises $240 million for share buyback

India-focused messaging startup Gupshup raises $240 million for share buyback

Gupshup, a Silicon Valley messaging startup with a focus on India, on Wednesday said it raised USD 240 million from Tiger Global Management and others to buy back shares ahead of a possible IPO next year.While venture capital investments are traditionally used for hiring more engineers or expanding sales and marketing, buyback deals allow investors in a startup to realize their investment before an IPO.

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By Reuters July 28, 2021, 11:43:25 AM IST (Published)

India-focused messaging startup Gupshup raises $240 million for share buyback
Gupshup, a Silicon Valley messaging startup with a focus on India, on Wednesday said it raised USD 240 million from Tiger Global Management and others to buy back shares ahead of a possible IPO next year.


While venture capital investments are traditionally used for hiring more engineers or expanding sales and marketing, buyback deals allow investors in a startup to realize their investment before an IPO.

A flood of funds at a time when startups stay private for much longer has led to more buy-back deals on the private market, said Ed Zimmerman, a lawyer at Lowenstein Sandler who teaches venture capital at Columbia University's business school, referring to the market in general.

Gupshup raised USD 100 million in April from Tiger Global and was valued at USD 1.4 billion. Tiger Global has emerged as the biggest funder of venture deals this year.

Gupshup, which means chit chat in Hindi, allows businesses to communicate with customers through existing chat channels like text messaging, said CEO Beerud Sheth.

"We want to build relationships with these large investors because they can help us in a future IPO and for our growth. But ... taking too much money can be dilutive," said Sheth about the buyback. As Gupshup has been around for well over a decade, Sheth said there was even an investor who passed away, making the buyback necessary.

The buyback will also allow employees to cash out, a challenge for many startups as delayed IPOs have kept many founders and employees rich only on paper.

That's helped create an active market for those shares on the private market, said Paul Maguire, managing partner at Iron Edge VC, which set up funds to invest in startup shares. Whether on the public or private market, buyback deals were often a big endorsement of a company, he said, without knowledge of this deal.
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