Fintech startup Khatabook's valuation tops $600 mn after raising $100 mn

The firm is also buying back ESOPs worth $10 mn to acknowledge and reward employees, ex-employees, and early investors

Khatabook, a leading fintech start-up, has closed a $100 million Series C funding round, with a valuation now close to $600 million. The round was led by US-based VC firms Tribe Capital and Moore Strategic Ventures (MSV). Other investors in this oversubscribed series C round were Alkeon Capital, with continued investment participation from internal investors B Capital Group, Sequoia Capital, Tencent, RTP Global, Unilever Ventures, and Better Capital. In addition, top Silicon Valley investors Balaji Srinivasan, Sriram Krishnan participated as independent investors among others in Khatabook's series C funding round.

"The first phase of our journey was enabling digital transformation by building a tech ecosystem for Indian MSMEs,” said Ravish Naresh, CEO, and co-founder, Khatabook. “Now that we have created a widely accepted digital platform, the next step will be digitally-enabled financial services for small businesses.”

The startup is also buying back $10 million worth of ESOPs (employee stock ownership plan)  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 per cent of their vested options. Khatabook has also expanded its ESOP pool to  $50 million.

Amid the growing demand for technology solutions by India's MSMEs, Khatabook experienced 150 per cent year-on-year growth FY 20-21. Currently, Khatabook, across all its software products, has over 10 million monthly active users. Besides the flagship ledger application, Khatabook, the company is also focused on the growth of its software ecosystem for MSMEs through its other apps. These include Pagarkhata for staff management, Cashbook for expense management, and recently acquired Biz Analyst for insight-driven decision making and business management for Tally ERP9 user base.

“Khatabook has successfully built such a network by empowering this seismic shift among MSME businesses to move from paper to digital, literally,” said Arjun Sethi, co-founder and Partner at Tribe Capital. “Despite its large early success and fast adoption to date, the company is early in its path to power the segment.”

Khatabook has a user base in almost every district in India. In the next phase, the focus for the start-up will be financial service disbursement through its tech platforms. The financial services on the Khatabook platform will digitally foster lending, payment, and deposits related efficiencies in the ecosystem. As Khatabook builds financial services, it will be looking for the right partnership opportunities that enable the seamless rollout of solutions benefiting the economic aspirations of millions of small businesses.

“This round will accelerate the growth of technology products with which Khatabook’s customers can better serve Indian consumers,” said James McIntyre, senior managing director and chief operating officer of MSV.

Over the last year, small local businesses have adopted technology to become more operationally resilient in the face of the Pandemic. Khatabook represents the most extensive digital MSME network in India. The company intends to leverage this platform reach in building equal access to financial services.