Bengaluru/Mumbai: Earlier investors in enterprise HR technology platform Darwinbox, including Lightspeed Ventures and Endiya Partners, may exit the company partially or completely as part of a secondary funding round, three people familiar with the matter told Mint.
“Some early-stage investors are looking to cash out and have given soft mandates to bankers to look for buyers,” the first person said, adding that these investors may be looking to sell their stakes at a discount of 10-15%.
Other early investors including Peak XV and StartupXseed may also exit the company completely, depending on the contours of the deal, another person said. StartupXseed, which is currently sitting at the end of its fund life cycle, invested in Darwinbox in 2017 along with other investors and has already sold part of its stake.
In a secondary transaction, existing shareholders sell shares to other existing investors or new ones, and no new capital is injected into the company itself. Secondary transactions generally take place at a discount to the primary shares.
In 2022, a $72 million Series D funding round led by Technology Crossover Ventures (TCV), made Darwinbox a unicorn – a private company valued at more than a billion dollars. In January 2023, the company raised an undisclosed amount from Microsoft and SBI at the same valuation, as part of an extended Series D round.
Spokespersons for Peak XV, Lightspeed, Endiya, Darwinbox and StartupXseed did not respond to Mint’s queries.
The SaaS slowdown
In November 2022, Darwinbox’s co-founder Rohit Chennamaneni said the company aimed to become profitable and go public by 2025. But software-as-a-service (SaaS) firms have seen their growth slow down and valuation multiples taper in recent years as clients have slashed budgets and turned cautious amid a sluggish global economy. This, along with delayed sales cycles and the growing availability of artificial intelligence-related solutions, has forced many SaaS startups – including Yellow.ai, SpotDraft and Plotline – to experiment with new pricing models.
The second person cited above said, “Many early-stage investors want to take some money off the table and return capital to their LPs (limited partners). There are a lot of secondary transactions happening in SaaS companies.”
In a June 2023 report, management consulting firm Zinnov and venture capital firm Chiratae Ventures revised revenue projections for Indian SaaS startups from $100 billion to $26 billion by 2026.
In FY23, Darwinbox’s operating revenue nearly doubled to ₹224 crore from the previous year, but its loss more than doubled to ₹158 crore, according to several media reports. The company receives the bulk of its revenue from South-east Asia and India. It has a presence in Indonesia, Singapore, Vietnam and Thailand, and has also opened offices in Saudi Arabia, the UAE and the US, according to reports.
Founded in 2015 by Jayant Paleti, Chennamaneni and Chaitanya Peddi, Darwinbox helps companies with their human resource needs across recruitment, onboarding, attendance, leave, payroll and people analytics. Its clients include BigBasket, PineLabs, IIFL Finance, Makemytrip and Unacademy, according to the company’s official website.
