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BENGALURU : Kirana-tech startup Khatabook on Tuesday said it has raised $100 million as part of its Series C funding round, led by US-based venture capital firms Tribe Capital and Moore Strategic Ventures. The capital was raised at a valuation of $600 million.

Other investors who took part in the round include Alkeon Capital and existing investors B Capital Group, Sequoia Capital, Tencent, RTP Global, Unilever Ventures and Better Capital.

It also saw participation from former and current general partners of Andreessen Horowitz, including Balaji Srinivasan and Sriram Krishnan, who invested in their personal capacities.

Alongside this round, Khatabook will also be buying back $10 million worth of employee stock ownership plan (ESOP) shares to acknowledge and reward employees, ex-employees and early investors who contributed to the company’s growth. Eligible employees will be able to sell as much as 30% of their vested options, the company said. With the fundraise, Khatabook has also expanded its ESOP pool to $50 million.

The two-and-a-half-year-old startup plans to strengthen its talent base by accelerating hiring across engineering, product, design, analytics and data science functions. Currently, Khatabook has more than 200 employees.

Khatabook will also tap proceeds from the fundraise to launch financial services offerings for its merchant partners. Mint had earlier reported that the firm was looking to enter the financial services space and launch insurance and credit offerings for partners.

For FY20, the startup posted losses of 126 crore, with nil operating revenue. However, the company plans to start focusing on monetization through the distribution of financial services.

“The first phase of our journey was enabling digital transformation by building a tech ecosystem for Indian MSMEs (micro, small and medium enterprises). Now that we have created a widely accepted digital platform, the next step will be digitally-enabled financial services for small businesses. We are humbled by our investors’ confidence in our mission to help local businesses succeed by providing them with the right digital empowerment," said Ravish Naresh, chief executive officer and co-founder, Khatabook.

The startup currently provides digital tools to kiranas and enables MSMEs to grow efficiency and recover dues. This includes staff and salary management platform Pagarkhata, and its flagship bookkeeping app and digital online storefront for kiranas MyStore.

Earlier this year, it also acquired software-as-a-service accounting software Biz Analyst for $10 million to offer premium value-added services like on-demand access to sales, purchase, inventory management and more.

“At Tribe, we believe strongly in the power of the network effect and how it can create moats for businesses. Khatabook has successfully built such a network by empowering this seismic shift among MSME businesses to move from paper to digital, literally. Despite its large early success and fast adoption to date, the company is early in its path to power the segment," said Arjun Sethi, co-founder and partner, Tribe Capital.

Without disclosing absolute figures, Khatabook said it had recorded 150% growth in revenue in the financial year ended March 2021.

“We are excited to partner with Khatabook as they continue to provide millions of small and medium-sized retailers in India with outstanding software products. This round will accelerate the growth of technology products with which Khatabook’s customers can better serve consumers. Additionally, this round enables the launch of a next-generation financial services platform to escalate the growth of those same customers," said James McIntyre, senior managing director and chief operating officer, Moore Strategic Ventures.

Khatabook is currently available in 13 languages and claims to have more than 10 million monthly active users on its platform.

With covid inducing a shift towards digital, the competition in the kirana-tech space has heated up. Khatabook competes directly with Lightspeed and Tiger Global-backed OkCredit and Matrix-backed Dukaan.

Dukaan is also in the midst of a fundraise and is in talks to raise its new round from Tiger Global.

Khatabook also faces stiff competition from incumbents such as Paytm, which has launched Business Khata for its 17 million merchant base.

PhonePe, which claims to have 17.5 million merchants on its platform, is focusing on enabling hyperlocal commerce for kiranas and small businesses.

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