E-commerce remains among the biggest tech opportunities in India, one of the world’s most populated countries whose economy continues to rapidly evolve and now has over 500 million people connecting to the Internet. And today, a startup that is playing in this space — aiming to make it easier to take and make payments online — has announced a significant round of funding.
Razorpay, which has built a payments gateway for businesses to quickly integrate payments services into their websites and apps by way of an API, has raised another $20 million at what reliable sources have told us is a valuation of over $100 million, to fuel its next stage of growth.
The funding, a Series B round, is led by Tiger Global with participation also from Y Combinator via its Continuity Fund and Matrix Partners. All three are previous investors. (Razorpay went through the YC program, and launched its business there, at the start of 2015.) It brings the total raised by the startup to $31.5 million.
(Other notable previous investors point to how Razorpay has positioned itself in the market, and the credibility it’s building: MasterCard has also invested an undisclosed amount in the startup, as have the founders of large Indian tech companies Snapdeal, InMobi and Freecharge; Visa’s Global Head of Strategy; Flipkart ex-CPO Punit Soni; Justin Kan; and Tikhon Bernstam.)
Interestingly, the funding comes at a key moment. There have been a number of big boosts to the business of e-commerce in the country over the last several years, with companies like Flipkart and Snapdeal duking it with international players like eBay and Amazon out among online storefronts; and companies like Ola, Uber, and Zomato making it second-nature for many people to rely on digital payments for their goods and services. But more recently there has been a sizeable shift specifically in the area of payments.
It was only weeks ago that Stripe — a would-be competitor — announced the start of a private beta in India. PayPal — another potential, and large, international rival — turned on services in India just a month before that. Add to that the existence of established local players like PayU and PayTM also looming large, and it’s a moment for RazorPay to double down and cement its own place, either as a longer term player in its own right, or as a key partner or acquisition target in a wider consolidation play.
Harshil Mathur, the CEO and co-founder, told TechCrunch that the plan will be to use the money to expand the business across India by both picking up more customers and adding new products to its platform.
Today, Razorpay offers 6 different services, including subscriptions, invoicing and payment URLs alongside its basic payment offering, and the idea will be to add more products into the mix, providing any and all payment services to companies doing any part of their business transactions online. “Our aim is to be a complete payment management platform for India,” he said in an interview.
So far, the company’s growth has been impressive. In the last year, Mathur said that the company went to 65,000 merchants from 20,000, and it’s been seeing 30 percent growth month-on-month in its revenues. The company is “almost” profitable he said, and the plan will be to tip into the black this year, as well as expand its customer base to 200,000. “It’s a pretty exciting year for us,” he added.
A lot of e-commerce is a game of scale, where margins are often very thin and therefore you need a model based on many, many transactions to get good returns. But companies like Razorpay, especially in their early days, have opportunities for other reasons.
It is no small task to forge a payments business in India, where there is a lot of red tape that has slowed down the growth of many online services.
So far, Razorpay has “built a lot of partnerships and put in a lot of time”, in Mathur’s words, to develop a payments business. “There is a lot of buy-in required, which is one reason you see relatively few startups in the payments segment in India,” he said.
This has also meant that Razorpay is attracting the attention of companies that are interested in doing more payments business in India, both as partners and as potential acquirers. Sources tell us that Stripe, PayPal, Amazon, Adyen and others have all approached Razorpay for potential partnerships, and potentially a little bit more.
“We are excited to participate in Razorpay’s Series B round. The company’s vision and execution over the last 3 years has shown tremendous results, especially for an India focused SAAS company,” said Anu Hariharan, Partner at Y Combinator’s Continuity Fund, in a statement. “With the online and digital payment space going through a massive transformation in India, their business is only going to grow further. There is now an inherent need for better systems, process and infrastructure in place and we are confident that Razorpay is perfectly suited to make the most of the changing landscape. They have disrupted the market with top talent shipping out great products, through cutting-edge technology and a customer-centric approach. We are excited to continue our relationship and eagerly looking forward to the progress this company will make over the next few years.”
Updated with correction on who led the funding (Tiger Global alone).