There were several developments in the startup space during the day. Here’re to startup updates of the day:
1. Will be profitable by 2021; in a fantastic position financially: Sandeep Mathrani, CEO, WeWork
When WeWork withdrew its much-anticipated $47-billion IPO in September 2019, it saw valuations plummet to less than $8 billion on concerns over an erratic management and mounting losses.
The rating agency Fitch downgraded the co-working giant's rating regarding its ability to pay long-term debt to CCC - indicating 'substantial credit risk' where 'default is a real possibility'.
“The Fitch report is a reflection of industry and not WeWork. We ended Q2 with almost $4 billion in liquidity. We will demonstrate Q3 that we will end year with substantial improvement,” said Sandeep Mathrani, CEO, WeWork in an exclusive interview with CNBC-TV18. Mathrani added that the co-working space has no intention to use the original $2.2 billion liquidity from SoftBank and how it is in a fantastic position financially.
Talking about the IPO failure and the impact of COVID19, Sandeep Mathrani said that, “Covid-19 has allowed me to streamline the company and the real estate portfolio. The company has managed to cut down a billion plus operational expenses and has divested all its non-core businesses.”
While India remains to be one of the top markets for WeWork, Karan Virwani, CEO of WeWork India, said that, “No speculative growth for next 12 months in India and the focus remains on creating an asset light model.”
The firms expects COVID-19 will accelerate the demand for flexible workspace and expects to be profitable by 2021.
2. TDS in e-commerce hurting MSMEs, IAMAI suggests reduction of rate from 1 % to 0.25%
The e-commerce sector in India has implemented the recently introduced TDS via the newly introduced Section 194-O of the IT Act in the Budget 2020. IAMAI stated that it understands that it was an important move on part of the Government for better monitoring and realisation of taxation, in lines with TCS under GST.
However, the Internet and Mobile Association of India (IAMAI) raised concerns that TDS on e-commerce transactions risks creating major liquidity challenges for MSMEs and need to be revised.
The association has highlighted that mandatory deduction without any income threshold means that for most small-scale sellers, the 1% TDS rate proposed under section 194-O will likely exceed their Income Tax liability.
IAMAI has shared with the authorities an illustration that suggests for merchants who have a turnover of up to INR 1.25 crore, the TDS under section 194-O would exceed the tax on income, resulting in an unnecessary refund position or in other words, create cash flow and working capital concerns for small businesses.
3. Funding of the day:
Teachmint raises $3.5 million from Lightspeed India and existing investors
Teachmint, an online teaching platform has raised $3.5 million in a seed stage led by Lightspeed India. Existing investors Better Capital and Titan Capital also participated in this round. This is the second round of funding for Teachmint since raising its first round in August this year.
Teachmint plans to leverage this funding for building out its product suite, introducing additional offerings and increasing geographic reach to more tutors.
Railofy raises Rs 4 crore in seed round from Roots Ventures, Astarc Ventures, Better Capital, & others
WL & RAC protection startup Railofy has raised an additional Rs 4 crore in a seed round from Roots Ventures, Astarc Ventures, Better Capital, and other angel investors. Recently, the travel protection startup had raised INR 7 Crores from Chiratae Ventures for the same round. The round also saw Anand Srinivasan, ex-Revenue Head GoAir, and Sunil Kumar, ex-Joint GM (Portals) IRCTC, join the company as mentors.
The funding will be used to cater to passenger demand in the upcoming festive rush and strengthen the presence pan-India to enable protection cover for all train classes across 2000+ passenger trains by 2021. Currently, Railofy protection is available across both SL & AC classes for all special trains running.
B2B grocery e-commerce startup Peel-works raises $3 million from Black Soil & others
Mumbai based B2B grocery e-commerce startup that operates the retail management platform, Taikee Peel-works has secured venture debt of around $1million from BlackSoil Capital. In addition to it, Peel-works has also secured working capital to the tune of $2million from others, including key suppliers.
Peel-works will use the proceeds to expand its network across the country. The company will also use the proceeds to offer even wider assortment and cut fulfillment times further, thus making it even more convenient and economical for its customers to buy from Taikee.
Before the current round of fundraising, the company had already raised $15 million from investors, including HDFC Bank, Chiratae Ventures, Unilever Ventures, Indian Angel Network in the past, and is looking to achieve EBITDA breakeven by the end of this fiscal year.
4. REA Group to acquire controlling stake in Elara Technologies
REA Group has entered into a binding agreement to acquire a controlling interest in Elara Technologies, owner of Housing.com, PropTiger.com and Makaan.com, in a deal that includes cash and newly issued REA shares.
REA is set to spend $71-99 million to take a controlling interest in Elara Technologies and will hold five out of nine board seats and is expected to have a shareholding between 47.2 per cent and 61.1 per cent.
The agreement is in US dollars with a range between US$50-70 million, with $34.5 million ($49 million) payable out of existing cash reserves and the balance to come from newly issued REA shares. The cash sum will pay for 50 per cent of Elara's debt facility.
NewsCorp owns 61.6 percent stake in REA GROUP. REA currently holds a 13.5 percent shareholding in Elara, on completion the company is expected to have a shareholding of between 47.2 percent and 61.1 percent. News Corp's stake will increase to 38.9 percent from 22.1 percent.
Elara Technologies have so far raised USD 105 million equity from various investors including News Corp and its Australian group firm REA, Softbank, Elevation Capital and Accel. Elara has also raised $70 million debt, which will get retired from this deal.
5. Big Tech CEOs Senate hearing ends with little discussion on how to fix companies’ liability shield
The CEOs of Facebook, Google and Twitter testified before the Senate Commerce Committee on Wednesday to defend their legal liability shield. Bipartisan members of the committee are eager to reform Section 230, which protects tech platforms from liability from their users’ posts and also allows them to moderate and remove posts they find objectionable. The shield has come under attack from Republicans who accuse platforms of using it to shield them from claims of bias and Democrats who accuse them of failing to effectively remove harmful content.
Republicans focused their comments on allegations that the Facebook, Google and Twitter censor conservatives on their platforms by creating and applying policies in a biased way. All three CEOs denied that they engage in censorship.
6. Google steps up campaign against EU push for tough new tech rules
Alphabet unit Google has launched a 60-day strategy to counter the European Union's push for tough new tech rules by getting US allies to push back against the EU's digital chief and spelling out the costs of new regulations, according to a Google internal document.
The European Commission will publish rules called the Digital Services Act (DSA) on December 2, after which they will need to be reconciled with proposals from EU countries and the European Parliament before they become legislation.
The proposal has triggered intense lobbying from US tech giants and even some European tech peers worried about the impact on their business models.
7. Amazon eyes first foray into broadcasting soccer matches in Italy – sources
Amazon is set to secure exclusive rights to screen top European Champions League matches in Italy for the 2021-2024 seasons, three sources close to matter said, in what would be its first foray into broadcasting sports events in the country.
UEFA last month invited broadcasters to submit bids for the rights to screen Europe’s premier soccer competition in Italy, in one of the biggest broadcasting rights sales in the European soccer industry after the outbreak of the coronavirus this year.
Amazon is nearing exclusive rights to broadcast Wednesday's Champions League matches on its streaming platform Prime Video in Italy for some 80-90 million euros, the sources said, in a move seen as a way to boost its Prime subscription service. Italy's top pay-TV broadcaster SKY, owned by U.S. Comcast's is nearing a deal to buy most of Champions League matches and Europa League matches, the sources said.