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One quick thing: Zepto has reached a deal to raise $340M in funding led by General Catalyst

In today’s newsletter: 

• Why VCs are quitting to start up secondary funds
• Hyderabad dislodges Chennai to become Cognizant's largest centre globally 
• Etsy’s India gamble falters

Programming note: Wishing all our readers a Happy Independence Day. There will be no edition of MCTech3 on August 15 and we’ll be back in your inbox on Friday (August 16)!

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India has historically been a tough market for venture capital exits. While some new-age companies go public, others fold or merge with larger players. However, this is now changing.

An increasing number of fund managers are quitting to set up their own secondary funds, industry participants told us.

• A secondary fund is one that buys shares in a company from another shareholder, with no money going to the company itself 

• At least three global limited partners and family offices have reported a rise in inquiries about setting up secondary funds in India

Eight Roads Ventures' Raj Dugar and TPG NewQuest's Nitin Agarwal, are among those who have exited to likely dabble in the secondaries space.

Most secondary transactions are happening because VC funds have realised they aren’t providing exits in the timeframe they should be (8-10 years) 

• If VC funds do not provide (good) exits at the right time, it will be difficult to raise for them to raise their next fund from LPs
  
  
• Dearth of primary capital has also fueled secondary transactions 

From BharatPe to Swiggy and Cult.fit to Meesho – shares of several large companies are changing hands.

While secondary transactions aren’t new, the way they're done has changed, thanks to a more mature market.

• Secondary funds buy shares from existing investors, founders, and/or employees

• Some transactions involve an entire block, where shares from several companies are bundled together and sold to another investor as a package

What’s different now?

“...now there's significant desperation to sell shares from the investor side unlike earlier when (there was) desperation from the founder’s side…a majority of secondary players aren't necessarily looking for distressed sales…They're looking for great businesses but distressed investors,” a partner said. 

Dig deeper

Things change

Hyderabad has eclipsed Chennai as Cognizant's largest global center.

• Cognizant's Hyderabad centre now has over 57,000 employees, racing past Chennai's 55,000-56,000

Hyderabad’s count is only going to rise, with Cognizant planning to add 15,000 seats there. 

In 1994, when Dun and Bradstreet wanted to set up an in-house tech operation in India they chose Chennai over Bengaluru. 

• The captive would go on to become Nasdaq-listed Cognizant, which competes with Indian rivals such as TCS, Infosys and Wipro
  
  
• For three decades Cognizant became synonymous with Chennai

Cognizant’s move to expand at a faster clip in Hyderabad signals a significant shift in its India operations.

• It has also been selling owned campuses in Chennai to bring down costs

Jayesh Ranjan, Telangana’s Special Chief Secretary for the Department of Information Technology, Electronics & Communications told us that while Chennai was indeed an attractive destination for IT companies to set up their India centres a few decades ago, that aura has dimmed.

“Unfortunately, the agility that other cities have shown, particularly Hyderabad, in improving infrastructure, focussing on skill development, and being proactive in making the global MNCs feel welcome, hasn't been displayed by Chennai,” he said.

Dig deeper

Once a shining star in Etsy's global ambitions, India is now a significant challenge.

• The American e-commerce platform, which entered the country in 2018, is facing a full-blown crisis

Declining sales and tough competition from giants like Amazon and Flipkart have forced Etsy to ‘deprioritise’ the Indian market.

• The company has even paused new seller onboarding for the past eight months

Adding to the woes, Pankaj Jathar, the former Amazon executive appointed to make Etsy a household name in India, has resigned.

While new sellers are unable to join the platform, existing Etsy sellers are facing significant challenges transitioning to the company's mandatory in-house payment system. 

• Many have reported delays and difficulties during the setup process

To make matters worse, Etsy has made the decision to entirely eliminate domestic sales within India, restricting sellers to international customers only.

Etsy’s troubles extend beyond India. A slump in consumer spending has impacted the company worldwide, leading to a staggering 80% drop in stock price since 2021.

Find out more

It's a Zindagi Na Milegi Dobara moment for Indians who have planned their five-day long weekend getaway that starts with the August 15 (Independence Day) holiday. Flight bookings alone have increased by 40-50%. 

• Airlines like IndiGo are expected to operate at around 92-95% capacity with a surge in bookings across metro and Tier II and III routes.

Spiritual hotspots like Varanasi and Amritsar have recorded 84% and 81% year-on-year increase in flight bookings. 

• Top domestic destinations that have seen a spike in bookings include Dehradun, New Delhi, among others. Indians are also flying to Bangkok, Kuwait, Dubai, Singapore. 

Find out more

• Elon Musk's AI startup xAI has unveiled a new version of its chatbot Grok with image generation capabilities, intensifying competition in the AI market against OpenAI, Google, Meta, and Microsoft.
  
  
• Intel, facing layoffs and industry challenges, sold its entire stake in Arm Holdings during the second quarter, a regulatory filing showed.

Robots are no longer just good at crunching numbers and outsmarting humans at chess. 

• They're now serving up a serious challenge on the ping pong table

Google DeepMind has created a robotic arm that can not only hold its own but outright beat human players in a game of table tennis. 

• The robot, armed with a 3D-printed paddle, managed to win 13 out of 29 games against a mix of human players

Watch the video

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