Kalaari Capitals seems to have a unique link with Mukesh Ambani’s Reliance Industries Pvt Ltd, in a series of sales of start-ups in the company’s portfolio, Urban Ladder, which was recently in the news for being sold to Reliance Retail Venture Ltd, for Rs. 182.12 crores and a 96% buyout is fourth such sale in the company’s portfolio.
Founded in 2006, Bangalore, Vani Kola led venture capital firm invests in the early-stage venture, last stage venture, seed, Series A, Series B, Debt financing, and Series C rounds. It has an impressive investment portfolio and has made 157 investments and 14 exits to date.
With an impressive list of companies that the company has funded so far – from investments in
- Chemical Industry (Power2SME),
- Education (Simplilearn),
- Artificial Intelligence (Embibe),
- Logistics (ElasticRun),
- E-Commerce (Jumbotail Technologies),
- Mobile game (WinZO Games)
- Myntra, acquired by Flipkart in 2014,
- EdGE Networks,
- Urban Ladder,
The portfolio is as diverse as it is unprecedented.
Under the leadership of Vani Kola, who was listed as one of the most powerful women in Indian Business by Fortune India, is the founder and the Managing Director of Kalaari Capital.
Being a through Venture capitalist, Kola has not shied from the selling of the list of portfolio companies as she believes that there are very few companies that establish themselves as platform companies which can, through network effort able to sell many products simply because the brand enjoys the trust and through extensive engagement with the brand.
However, as a seasoned investor, she is also quick to acknowledge that it requires time and access to capital for start-ups to reach a certain level.
Consolidation plays an essential part of the growing up and for the venture to flourish.
In her words, “Consolidation is a real part of that, and it didn’t exist a decade ago. I always advise entrepreneurs that as much as I would love to see you take your company to IPO, you have to see whether you are better off building this company individually or after you have reached a certain scale whether you will get better value out of being part of a larger platform. It was that thinking which is why we were also open to selling Myntra when it was thriving,”
Going by the above rule, Reliance Industries seems to enjoy a particular advantage over other companies. So far, four such start-ups backed by Kalaari Capitals have been acquired by Reliance.
Reliance acquired 73% stake in AI firm Embibe in 2018 and plan to invest further USD 180 million over the next three years into the company.
Reliance Industries subsidiary Reliance Brands which sells many luxury brands in India such as Diesel, Jimmy Choo, Tiffany, and Mothercare, bought out the stake of Ronnie Screwvala owned Unilazer Ventures in Zivame. It was estimated at the time that Reliance could pay $160 million (around Rs 1200 crore) for acquiring Zivame.
However, Kalaari Investments first invested in the company in early 2012. They partially exited to Zodius Capital in 2018, which was then acquired by Reliance.
Reliance Jio acquired a majority stake in Mumbai based Artificial intelligence-based conversational platform Haptik for Rs 700 crore in April 2019.
While RIL has paid Rs 230 crore, the transaction size of ₹700 crore includes an investment of Rs 470 crore, which will come into Haptik over the next five years. Post the transaction; Reliance will hold about 87% of Haptik while the company’s founders and employees will own the rest of the shares through stock option grants. Further, all of Haptik’s business and holdings will be transferred to Reliance Jio Digital Services.
Existing investor Times Internet — which owns over 70% is a part of the Times group which also publishes this paper — will exit as part of this transaction.
The company’s other institutional investor is venture fund Kalaari Capital, had cashed out in earlier funding.
Haptik had received $1 million seed funding in September 2014 from Kalaari Capital.
Urban Ladder has been the latest in the line for Kalaari Capital, which was acquired by Reliance Retail, 96% equity shares for Rs 182.12 crores.
Reliance said that it would additionally invest Rs. 75 crores in Urban Ladder and could be completed by the year 2023.
Urban Ladder – A distress sale?
According to the reports, the buzz in the market is that Urban Ladder acquisition by Reliance Retail was, in fact, a distress sale. Reliance Industries acquired Urban Ladder, a sixth of the startup’s peak valuation in 2018.
Kalaari Capital started with a $1 million investment into the company in May 2012, with continuous investments in the follow-up rounds over the years. The other marquee investors being Sequoia India, Steadview Capital, ELEVATION Capital.
However, Vani Kola led Kalaari Capital had stepped down from Urban Ladder’s board in 2019.
According to reports, the investors in Urban Ladder have got back just one – fifth of the investment.
Covid -19 led consolidation.
The covid -19 crises may have triggered a consolidation in the start-up sector. Several companies have been acquired in recent times. As businesses struggle to survive, the start-up sector, in particular, may see a churning, leading to a string of consolidations and acquisitions in the near future.
One of the main reasons for the same would be surviving competition while maintaining profitability.
Reliance Retail’s acquisitions spree
Reliance Retail has been on fire, having picked up stakes in start-ups like Netmeds, Zivame making headway into new retail areas.
BigBasket and Grofers in the grocery space have been getting stiff competition from Reliance e-commerce venture JioMart.
Fashion retail Ajio.com has remerged as a competitor to Myntra.
However, the biggest of all acquisitions, that of Future Retail for Rs 25,000 crore, is currently challenging Amazon.
In the last three months, Reliance Industries has raised a total of$6.3b billion from investors and is set to dominate India’s retail industry.