Bangalore Expedition

A startup founder, who hasn’t slept much all week, woke up on a recent Sunday to a phone call from his co-founder. A senior engineer was feeling exhausted and was considering leaving. For the founder, who had scheduled several calls with many of Silicon Valley’s top investors later in the day, talking to this developer about quitting his job quickly became the main agenda item for the rest of the week. -end.

There is a joke among many startup founders in Bangalore that hiring two or three engineers is currently longer and tedious than getting a new round of funding. Strongly supported startups pay large bonuses to attract and retain talent, making it very difficult for their younger siblings to grow. And relying on recruiters is expensive and takes even more than a month to close a hire.

A good engineer with two to three years of experience with any recognizable startup expects $ 70,000 a year as a salary, down from around $ 40,000 a year ago. A bemused startup founder recently asked another industry peer about the cost of a good quality engineer, and then answered the question himself: around $ 35,000, compared to around $ 20,000.

The hardest to poach are those who work in unicorn fintechs CRED and RazorPay, many startup founders have said. Engineers at either company expect as much as $ 150,000 a year, if not more, often four to five times the amount that the founders of early-stage startups make themselves.

The intense competition for talent was sparked by the newly transformed unicorns who increased their captable pool for employee stock options, a concept that was almost elusive just three years ago. Dozens of US and European startups are also aggressively hiring in India as remote working begins to take off.

India produced a record 16 unicorns this year as Tiger Global, Falcon Edge and SoftBank slashed large checks to up-and-coming startups in the country at a rate never seen before in the South Asian country.

Indian startups raised a record $ 10.46 billion in the first half of 2021, up from $ 4 billion in the same period last year and $ 5.4 billion in the first half of 2019, m ‘ said the data analysis platform Tracxn. (In 2020, Indian startups raised $ 11.6 billion.)

The average seed cycle size in India was $ 1.1 million in the first half of 2021, up from $ 800,000 in the same period last year and $ 740,000 in 2019, per Tracxn. The average amount of Series A checks this year was $ 7.67 million, compared to $ 4.30 million last year and $ 5.92 million last year.

Even start-ups are the center of the draw, as virtually everyone is trying to strike a deal. Some second time founders now have the confidence and networking to bypass Sequoia Capital India’s Surge and Y Combinator accelerator program and still have access to some of the perks they offer.

Some do not commit to funds for their seed funding rounds at all. Dozens of startup founders over the past decade have amassed enough capital and reputation to write dozens of checks a year to promising early-stage startups.

The abundance of dry powder in the market and increased competition from some of the industry’s most reputable names also changed the power dynamics between founders and investors. It is becoming common for founders to negotiate from a position of strength to retain the rights and preferential treatment of investors.

On a recent phone call, two founders discussed what many would consider a first-world dilemma: Dozens of investors had agreed to invest in them, but they no longer had so many interests to offer. They therefore devise a strategy to determine what stake to give to whom and how to politely get others to reduce the size of their committed check.

But some investors fear the music will end soon.

Investors from several leading companies have told me that many startups take checks from Tiger Global / Falcon / SoftBank too early in their journey.

They argue that many of these young startups have raised funds at such a high valuation that if they are not able to meet the metrics they have shown to their existing major investors, very few in the industry would be successful. able to engage with them at a later stage.

“And even the likes of Tiger won’t support you then,” said one investor, citing examples such as Bangalore-based Upstox, which raised from Tiger Global in the past, but later Tiger invested in its main rival. Groww. “The tiger supports the race, not the horse,” said another investor.

A bearish cycle is a scenario that many investors are bracing for. But it seems the music, so to speak, has only gotten louder in recent weeks.

Edtech based in Bangalore Brightchamps is at an advanced stage of talks to raise to more than $ 500 million, while Ola Electric has had talks to increase its valuation to more than $ 3 billion, according to several people familiar with the matter. Fidelity and Goldman Sachs held talks to invest in a pre-IPO cycle Payment, one person said.

ShareChat is set to raise $ 150-200 million from Temasek and others, at a pre-currency valuation of $ 2.8 billion. Prosus Ventures is at an advanced stage of talks to conduct an investment in Upstox.

Sequoia is in talks to invest in Gitcoin and back To dive again, while Infra market., which was valued at $ 200 million in December last year and $ 1 billion earlier this year, is in talks to increase its valuation to more than $ 2 billion. Many other startups that became unicorns this year are also in the market to finalize new cycles. Bharat Pe, Open, and Bark are at an advanced stage of talks to finalize new rounds, TechCrunch reported in recent weeks.

There are at least seven more rounds of $ 50 million and above and over a dozen rounds of $ 20 million and above that are expected to close in a few weeks.

Elsewhere in Bangalore, there is another sense of urgency.

Several founders in India are launching crypto startups for clients around the world, but leading investors in India have largely stayed away from this category, in part because of India’s confused stance on currencies. virtual. Their absence has led many of these startups to seek funding from international funds and angel investors.

But that could change soon. Several venture capital funds, including Sequoia Capital India, Lightspeed, Accel, WEH and Kalaari, are currently preparing their theses for investments in crypto startups, people familiar with the matter told me.

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