a16z backs CoinSwitch Kuber in first India investment

Andreessen Horowitz and Coinbase Ventures have minted a new unicorn in India: CoinSwitch Kuber. The two firms have co-led a $260 million investment in the Bangalore-based cryptocurrency trading startup, valuing the young firm at $1.9 billion, they said on Tuesday.

This is a16z’s first investment in India. TechCrunch reported last month — twice — that the two firms were in talks to back the Indian startup and had proposed a valuation of $1.9 billion.

The four-year-old startup, which including Wednesday’s Series C round has raised about $300 million to date, was valued at over $500 million in its Series B financing in April this year.

Existing investors Tiger Global and Sequoia Capital India also participated in the new round, which is also the largest for a cryptocurrency startup in India. CoinSwitch is the 30th Indian startup to become a unicorn this year, and only the second in the crypto space. (B Capital-backed CoinDCX became the first Indian crypto unicorn in August.)

CoinSwitch is one of the handful of startups in India that allows users to buy and sell cryptocurrencies. From the functionality and user interface standpoints, its offerings are much superior, according to dozens of users TechCrunch has spoken to in recent days.

The eponymous app offers users over 70 cryptocurrencies to choose from and the trading is instant, said Ashish Singhal, co-founder and chief executive of CoinSwitch Kuber, in an interview with TechCrunch. Users on the app can trade as little as 100 Indian rupees, or $1.3.

CoinSwitch has amassed over 10 million registered users, most of whom are young and first-time investors, he said. More than half of the startup’s user base is aged 28 or below, he said.

The excitement around trading in cryptocurrency comes as India’s largely young population has reached the inflection point, he said. “Youngsters are increasingly looking at investments as an option,” he said.

India’s Supreme Court overturning the nation’s central bank’s ban on cryptocurrency two years ago — which led to banks playing nice (somewhat) with trading app — also helped, he said. “When that happened, many youngsters who had been watching crypto trading in the western markets and had realized that they were sort of late to get into crypto, decided to explore investments,” he said.

But it hasn’t escaped the startup that most of its users are new to this investment world. To address this, CoinSwitch Kuber recently partnered with Indian news outlet NDTV to publish stories to explain cryptocurrencies, trading and the risks associated with them. It also hosts a podcast on this subject, he said.

Andreessen Horowitz’s first India investment

“We are incredibly excited about the crypto market opportunity in India, and with its breakout growth, CoinSwitch has emerged as the leading retail platform in the country,” said David George, general partner at Andreessen Horowitz, in a statement. “Ashish and the team have demonstrated strong execution abilities and the ambition to deliver an investment platform for the masses in India.”

A16z’s arrival in India comes at a time when the startups in the world’s second-largest internet market are raising record amounts of capital. Several of the firm’s global peers — Tiger Global, Sequoia, Falcon Edge Capital, Lightspeed, Accel, Temasek and SoftBank — have increased their pace of investments in the country in recent quarters.

The firm has been exploring markets like India for years. In a talk at Stanford Graduate School of Business five years ago, a16z co-founder and general partner Marc Andreessen (pictured above) said it was “extremely tempting” to back startups in emerging markets. But it was also challenging for a firm like a venture fund to expand to a new country, he explained. Venture capital is a “very hands-on process of understanding the people you’re working with for both evaluating the company and work with the company.”

“If it continues to be a hands-on business like that then there is the problem of geographic remoteness, which is if I’m not present in another geography, do I really know those people to make the decisions. So what a bunch of firms have been trying to do is staff local teams. But then there’s the fundamental problem that if the local team is really good, then they can easily leave and run their own firms. If they are bad, they stay working for me…which has its own issues.”

According to people familiar with the matter, A16z has evaluated a handful of other startups in the country in recent months. The firm said it’s investing in CoinSwitch from both its crypto and growth funds.

“We are humbled by the trust shown in CoinSwitch Kuber by two of the biggest names in the global crypto investment arena with Andreessen Horowitz choosing us to be their first investment in India. Coinbase Ventures’ investment is also testimony to the confidence they have in CoinSwitch Kuber’s business model and the tremendous potential India’s crypto space has to offer,” said Singhal.

CoinSwitch Kuber’s future plans

Singhal said the startup will deploy the fresh capital to add more asset classes for investment on its app. But he declined to reveal what those asset classes will be. Additionally, it’s also working to add support for institutional clients to use the app, he said. The startup, which aims to amass over 50 million users, says it’s also looking to hire for several roles at the firm, including many in leadership positions.

One of the typical moves many of the Indian crypto trading startups have made in the past years is to expand outside of India. This is in part to offset any catastrophic regulatory changes in India. Singhal said CoinSwitch Kuber will continue to focus on users in India and has no plans to expand outside of the country.

In recent months, several Indian ministers have spoken negatively about the potential risks of cryptocurrencies and have suggested that they might ban cryptocurrency in the country. Singhal said the engagement he has had with lawmakers have been fruitful and by bringing so many high-profile and credible investors to the cryptocurrency space in India, he hopes CoinSwitch is able to make a case for its legitimacy.

“Will there be stringent regulation on cryptocurrency? There should be,” he said. “Because right now crypto is like the wild wild west.”

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