Darwinbox’s early investors look to exit at a 10-15% discount amid SaaS slowdown

“Some early-stage investors are looking to cash out and have given soft mandates to bankers to look for buyers," one of them said, adding that these investors may be looking to sell their stakes at a discount of 10-15%.

Other early investors including Peak XV Partners and StartupXseed may 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 lifecycle, invested in Darwinbox in 2017 and has already sold part of its stake.

Also read: ‘Innovation will be key differentiator in SaaS’

In a secondary transaction, shareholders sell their stakes to other existing or new investors, and no new capital is injected into the company. Secondary transactions generally take place at a discount to the primary shares.

Darwinbox was valued at $1 billion when it raised $72 million in a Series D funding round led by Technology Crossover Ventures (TCV) in 2022, earning its unicorn tag—a private company valued at or more than a billion dollars. 

In January 2023, the company raised an undisclosed amount from Microsoft and Stata Bank of India 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 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.

“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," said the second person mentioned above.

In a June 2023 report, management consulting firm Zinnov and venture capital firm Chiratae Ventures slashed their revenue projections for Indian SaaS startups from $100 billion to $26 billion by 2026.

Last year, Indian SaaS startups were able to raise a total of only $1.2 billion from investors amid an extended funding winter. In 2022, they had raised $4.5 billion, and $7 billion in the year prior, show data provided by Tracxn.

Also read: Why investors are wary of SaaS startups, apart from rock-bottom valuations

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's financials for FY24 aren't yet available. 

The company receives the bulk of its revenue from Southeast Asia and India. It has a presence in Indonesia, Singapore, Vietnam and Thailand, and also has 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 website.