Zetwerk Secures $120M Funding with Steady Valuation Growth
In the dynamic world of technology startups and venture capital, news of funding rounds often makes headlines, especially when they involve significant amounts.
Zetwerk, a Bengaluru-based B2B (business-to-business) marketplace for manufacturing, recently secured a substantial investment of $120 million.
While the funding amount is undoubtedly impressive, what caught the attention of many was the fact that this funding came at a “flat valuation.”
The unicorn of B2B e-commerce Avenir Growth Capital led the $120 million initial capital offering for Zetwerk, which specialises in specialised manufacturing. Post-allotment of the Series F2 round, the firm was valued at around $2.7 billion.
A regulatory filing with the Registrar of Companies revealed that the board of the Bengaluru-based firm has approved a special resolution to issue 2,37,29,324 Series F2 compulsory convertible preference shares at an issue price of Rs 407.4 per share in order to fund Rs 966.7 crore, or $118 million.
Given that it was last valued at about $2.68 billion when it raised $210 million under the leadership of Greenoaks in December 2021, the company’s worth has remained stable.To far, Zetwerk has secured $674 million in investment. The Bengaluru-based company’s most recent transaction represents its first equity investment in 2023.
With an investment of roughly $75 million, Avenir Growth Capital led the most recent round. Footpath Venture, Greenoaks, Avenir Growth Capital, Di Capital Partners, Peak XV Partners, Lightspeed Ventures, and Steadview Capital each contributed about $1 million.
Peak XV Partners, Lightspeed, and co-founder Amrit Acharya now own 13.91%, 11.72 %, and 7.95% of the company, respectively, while Avenir Growth Capital has 4.7%.
Three-year-old Zetwerk connects customers and suppliers with small manufacturers who do jobs including fabrication, machining, casting, forging, and galvanising of machine components. Zetwerk was founded by Acharya, Srinath Ramakkrushnan, Rahul Sharma, and Vishal Chaudhary.
It claims to service over 100 customers in more than 25 sectors in India, North America, the Middle East, and the SEA area and is operational in more than 15 countries.
While the company’s losses climbed by 46.3% to Rs 60 crore in FY22, its operating revenue surged 6X to Rs 4,961 crore from Rs 835 crore in FY21.
Zetwerk, founded in 2018 by Amrit Acharya and Srinath Ramakkrushnan, aims to revolutionize the manufacturing industry by providing a digital platform that connects businesses with manufacturing and supply chain solutions.
The company’s platform helps streamline procurement, production, and quality control processes, making it easier for businesses to source high-quality manufactured products.
Zetwerk has witnessed rapid growth since its inception, attracting attention from both investors and industry players. It has managed to build a robust network of manufacturers, engineers, and buyers, positioning itself as a key player in India’s manufacturing and supply chain ecosystem.
In October 2023, Zetwerk announced the successful closure of its Series E funding round, raising an impressive $120 million. The round was led by existing investors, including Sequoia Capital India and Accel Partners. Other participants included B Capital Group, Greenoaks Capital, and Lightspeed Venture Partners, among others.
Notably, Zetwerk’s valuation remained unchanged from its previous funding round. This is what is meant by a “flat valuation.” In other words, the company did not see an increase in its valuation despite securing a substantial amount of funding.
A flat valuation in a funding round is a departure from the typical trajectory seen in the startup world. Normally, when a company raises additional funds, especially in subsequent rounds, it often results in an increase in the company’s valuation. This reflects the market’s confidence in the company’s growth potential and is seen as a positive signal.
However, a flat valuation is not necessarily a negative development. In some cases, it can be a strategic move by the company and its investors. Here are some potential reasons behind Zetwerk’s decision to maintain its valuation:
- Strategic Focus: Zetwerk may have decided to prioritize other strategic objectives over valuation growth. This could include expanding its market presence, improving its technology platform, or enhancing its customer service.
- Investor Confidence: The fact that existing investors led the funding round suggests that they remain highly confident in Zetwerk’s long-term potential. A flat valuation may have been agreed upon as a means to attract additional capital without diluting existing shareholders significantly.
- Market Conditions: Valuations in the startup world can be influenced by a variety of factors, including market sentiment, economic conditions, and industry trends. Zetwerk and its investors may have taken a pragmatic approach in light of the prevailing market conditions.
- Negotiation Strategy: Negotiating a flat valuation could have been a deliberate strategy employed by Zetwerk and its advisors to secure the funding terms they desired, such as favorable terms or governance provisions.
Zetwerk’s successful $120 million funding round at a flat valuation highlights the complexity of startup funding dynamics.
While it may appear unconventional, it can be a strategic move driven by various factors, including the company’s long-term vision, investor confidence, market conditions, and negotiation strategies.
Ultimately, what matters most is the company’s ability to utilize these funds effectively to further its growth, expand its market presence, and continue innovating in the manufacturing and supply chain space.
Zetwerk’s journey will be closely watched, not just for its valuation but for the impact it continues to make on the B2B manufacturing industry.
