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Startups across the world have received enormous amounts of funding in the last two years. In India, around 44 startups crossed the $1 billion valuation mark in 2021 alone, entering into the prestigious unicorn club. 

Despite the maturity of the ecosystem, the process of investing in a startup is a tedious one. And, Mumbai-based fintech startup Tyke is on a mission to solve this problem.

For all the talk around digital platforms and promises of operation optimisations in the startup ecosystem, funding in these platforms has been offline and in some cases, unstructured. 

Karan Mehra, previously a Chartered Accountant working at Deloitte, notes,

“The investment process happens completely offline.  It’s all happening in a very broken manner. It’s happening on various different platforms like WhatsApp, Zoom, Gmail. Then, you contact your bank, then you contact a trustee.”

“It was a long, long process. It will take you two to three months to close one deal completely offline,” he adds. 

The pain points around this investing process are what became the problem statement that he decided to solve with Tyke. He incorporated the company in January 2021 and took up the role of CEO. 

Tyke allows startups to transact and complete fundraise digitally and instantly.

The beginning

 Karan launched the product –  a web application– in June 2021 with his childhood friend Purav Bubna, who is now the chief operating officer at Tyke.  A 2021- chemical engineering graduate from D. J. Sanghvi College of Engineering in Mumbai, Puram had worked with Karan in the ideation phase. 

“The moment it materialised, it was pretty easy to get him on board,” says Karan, who had been researching the idea for a year before he incorporated the company. 

While working at Deloitte, Karan realised the multifold returns that some startups were getting to their investors. These startups usually conducted a friends and family round during the initial stage of their funding, where people could invest a low sum of money. “And suddenly, one two years down the lane, they exited at a multi fold valuation,” says Karan. 

Convinced of the opportunity, he wanted to invest in startups, but found no way to do that without putting a large sum of money. “It seemed very obvious to me that investing in a startup will be something that is already solved for,” Karan says. 

He realised that for him to be able to invest, he had to be a part of some closed groups with very high entry barriers, such as a huge net-worth because he would need to put in at least Rs 5-6 lakhs per deal. 

This is when he started looking for solutions to this problem and realised the bigger problem – the absence of a digital medium. The time it took for the deal to happen was also something he wanted along with these problems.

“If at that point of time you spoke to anybody about this face, they would say, this is not possible,” says Karan. 

Payment gateways do not allow capital account transactions, but allow business-to-business (B2B) or revenue-based transactions.  In capital account transactions, there are more restrictions that come in, which are not solved for on a traditional payment gateway. There are more procedures to follow, which is what the company built. 

“Building the entire system end to end, the infrastructure behind that was the biggest challenge for us, because it was not done earlier,” says Karan.  “So solving that, building Escrow systems ( a legal arrangement where a third party receives and disburses money for the primary transacting parties), building up a manner in which all the laws involved are complied with. That was the challenge,” Karan adds. 

Presently, Tyke is building tools for founders to raise capital, digitally, and instantly, from early stage funds to venture capital rounds. 

Last month, in December 2021, the company secured $1.5 million in a pre-seed funding from 9Unicorns, Better Capital, Ratio Ventures, Venture Catalysts , and some angels. 

At the time, Apoorva Ranjan Sharma, co-founder and President, Venture Catalysts Group, said, “Tyke has created a value proposition that would simplify fundraising and make it seamless, and we envisage this as a blue-ocean opportunity in fundraising.”

Behind the scenes

Through its offerings, Tyke allows investors to conduct capital account transactions in different types such as in equity, debt, asset backed leasing. Companies can run campaigns on Tyke’s platform or integrate its API (application programming interface) to run a campaign at their own app or website. 

Currently, the platform aims to automate private equity investment deals with services that enable startup founders to create a round, set terms and invite investors to participate. It also helps them to handle the requisite documents, signatures and powers the fund transfer instantly. 

For onboarding any startup, Tyke asks for an email id, which gets certain OTPs and magic links, and fills in the required details. From here, startup founders can create a deal page and invite investors to a private campaign. 

Tyke has recently started community rounds, which allow startups to accept smaller investments from their user base. “Opening up the investor pool to one’s larger network instead of seasoned investors allows a company to generate brand loyalty and increase user retention,” Karan said. 

For these community rounds, people can start investing with a minimum amount of Rs 5000. 

It works similarly for investors, who get directed to the platform and has to sign up using a basic KYC check, and accept all the risks involved in investing in startups. Once on the deal page, they can invest on that deal page and pay through payment providers or UPI and even debit cards. The company has partnered with payment gateways like Cashfree in India and international payment gateways like Stripe and Fairexpay. 

Tyke has partnered with AI-based due-diligence companies, which provide them with KYC checks and give them reports on government portals. The PAN and Aadhar details of investors are checked to ensure their risk capabilities. 

The company has already onboarded more than 45 startups and 6500 investors, Karan says. It operates on a transaction fee model. 

Tyke, which raised a pre-seed round through its own platform, plans to use the funds to build the products and team.. At the moment, it has crossed 25 people. “We have to build awareness, to make people understand that they can invest in startups, or they can raise money online,” Karan signs off.