Exclusive: Tencent investing $75 Mn in KhataBook

Weeding out the paper from conventional khata-bahi (bookkeeping) appears to be a segment that is drawing unprecedented interest from venture capitalists.

Top tier VCs such as Sequoia Capital, Lightspeed and hedge fund Tiger Global have already picked up their bets in the segment, which did not exist a year ago. We have never seen such confidence for institutional investors in a B2B segment so early.

While the first two investors chose OKCredit in the segment, Sequoia put a bet on its Surge’s accelerator portfolio - KhataBook.

DST Partners Fund, Ribbit Capital along with 20 top angels were reportedly investing $20 million Series A round in KhataBook. According to three Entrackr sources, the round has already been executed. Now, it’s raising a new round in what appears to be a Series B from Tencent and GGV Capital.

“It’s in advanced discussion to raise $80-85 million fresh financing round from Tencent and GGV Capital,” said two sources aware with the details of the deal on condition of anonymity. 

The investment from the Chinese conglomerate in KhataBook is coming at a time when Tiger Global and Lightspeed Venture Capital ramped their stakes in its rival OKCredit by investing over $60 million. 

Entrackr had exclusively reported the deal on Friday. 

“While Tencent will be putting about $70-75 million, the remaining $5-10 million will come from GGV,” added sources. According to them, the contours of the deal has been finalised, and it will be announced soon. 

This is the first pure-play B2B investment for Tencent in India.

KhataBook is a cash management tool, specially designed for tier II, tier III and beyond, used by 500 different types of businesses. Recently, it claimed 12X merchant onboarding growth between March to July this year. 

According to KhataBook’s founder and CEO, Ravish Naresh, the company had crossed 20,000 crore entries in August. Further, it claims that Shopkeepers across 3,000 Indian cities are using KhataBook along with it being used in Pakistan, Nepal and Bangladesh.

So far, Tencent invested in seven firms including five Unicorns - BYJU’s, Dream11, Hike, Swiggy and Ola. It also put money in Flipkart (now exited) and OTA - ibibo (now part of MMT) and TIL-hatched music streaming app Gaana. 

On the other hand, KhataBook would be the second bet for GGV capital in Indian B2B space. Last month, GGV invested $15 million in Udaan. 

Entrackr had exclusively reported its participation in $300 million closure by B2B marketplace in ongoing Series D round. The VC firm with 11 Unicorns in its global portfolio such as Airbnb, Bytedance, Xiaomi, Slack and Wish also invested in Tala. 

Tala generates credit profile to enable collateral-free loans to consumers. It announced Indian launch along with its Series D round.

KhataBook competes directly with OkCredit and indirectly with Vypaar.

Queries sent to Tencent and KhataBook on late Monday didn't elicit any immediate responses. We will update the post as and when they respond. GGV Capital couldn't be contacted immediately.

Though there has been an unprecedented interest of VCs in the nascent bookkeeping space, none of the companies has revealed their monetisation plans. It’s no secret that they would eventually target lending in one form or another to make money. 

Since there are dozens of fintech companies in B2B and B2C segments eyeing to make money via lending, the bigger question: who all survive until monetisation phase?