Late-stage start-ups tap alternative funding route amid softening valuations

October 12, 2022

Business-to-business ecommerce platform Udaan is in advanced talks to close a fresh round of debt financing of $150-200 million through convertible notes, people in the know told ET.

This will mark the second such capital infusion for the B2B startup this year at a time when late-stage equity funding is becoming scarce in one of the world’s fastest-growing startup ecosystems.

These notes, which will convert into equity at a later date, require no valuation to be ascribed to the startup currently. With desired valuations not coming their way, startups are resorting to these debt instruments to tide over the economic whiplash where cautious investors are demanding better unit economics and a path to profitability.

Udaan was last valued at $3 billion in January 2021.

Earlier in January, the Bengaluru-based company had raised $200 million through convertible notes from a group of investors before Microsoft also pitched in, taking the total to about $225 million.

“The new tranche of funding is coming largely from existing investors while one or two new investors may also join,” people cited above said.

Online pharmacy marketplace PharmEasy, which has scrapped its plans to go public, is also looking to raise about $100 million through convertible notes, ET reported earlier, signalling the growing difficulties for late-stage startups looking to pick up equity capital in the current environment.