Inside Startups

For December 27, 2023

Here's a look at today's Startups briefing.

⚖ Code.org sued Byju's subsidiary, WhiteHat Jr, for not paying licensing fees.
📈 AI startups dominated uprounds in 2023.
👥 Exampur delayed staff salaries due to severe financial strain

Thank you.

U.S. educational nonprofit Code.org sued Indian edtech startup Byju's subsidiary WhiteHat Jr over payment dues. Code.org alleges that WhiteHat Jr did not pay licensing fees while continuing to use its platform.

More:

Byju's acquired WhiteHat Jr for $300M in 2020.
In 2021, WhiteHat Jr partnered with Code.org to use its platform for four years.
- WhiteHat Jr was obligated to pay Code.org $4M for the services.
Code.org claims that WhiteHat Jr paid the initial $1M licensing fee in 2022 but failed to make the remaining $3M payments.
WhiteHat Jr says it notified Code.org earlier this year that it will not be able to make the remaining payments.
Code.org asserts that WhiteHat Jr was liable to pay the remaining payments even in the case of termination, per the original contract's terms.

Most startups that raised up rounds in 2023 belonged to the AI sector, per Crunchbase.

What the numbers say: The startup that saw the biggest valuation jump was OpenAI, which received a $10B funding from Microsoft. The round catapulted OpenAI's valuation from $1B to $29B. Databricks witnessed a 14% valuation surge from $38B in 2021 to $43.2B at its Series I round this September. The valuation of open-source AI model developer Mistral AI surged by 672% from $300M earlier this year to $2B during its Series A round. Other notable startups that raised up rounds include InflectionAI, CoreWeave, Vast Data, Hugging Face, and Helsing.

Relevance: On the other hand, several startups have had to contend with down rounds and valuation markdowns. Most of the startups that had to face valuation markdowns were mature startups that were gearing up for their IPO debuts. Stripe debuted in the IPO market at a $50B valuation, 47% lower than its previous private valuation of $91B. Chinese fashion e-commerce firm Shein, which reportedly filed to go public, slashed its valuation from $100B by 34% to $66B at its down round in 2023.

The U.S. SEC has reportedly charged medical device startup Stimwave Technologies' former CEO and co-founder Laura Tyler Perryman for allegedly duping investors. The complaint, filed on Dec. 19, alleges that Perryman raised $41M from investors by making false and misleading statements about the company's products.

More:

The SEC complaint alleges that Perryman made false claims about Stimwave's nerve pain treatment device from 2018-2019, including that it contained a non-functional fake component implanted in patients and that it was approved by the U.S. Food and Drug Administration.
Perryman also reportedly inflated financials and revenue projections.
After news of the fraud surfaced, the company filed for bankruptcy in 2020.
The SEC seeks permanent injunctions, civil penalties, and a directorship ban against Perryman.
In December, the U.S. Attorney's Office added criminal securities fraud charges against Perryman, adding to previous criminal counts.

Home, office, and classroom stationery products startup mcSquares, otherwise known as M.C. Squares, filed for Chapter 11 bankruptcy with the district court of Colorado on Dec. 22. The company intends to propose a reorganization plan to address its outstanding debts with creditors.

More:

Per the filing, mcSquares had $5.7M in net operating losses and owed creditors about $3.34M.
The startup, which appeared on ABC's Shark Tank in 2020, only had about $903,000 in assets.
McSquares has between 20 creditors, including Shark Tank's investor Kevin O'Leary.
- O'Leary acquired an 11% stake in the firm by investing $50,000.
The startup owes $33,657.84 to O'Leary Productions, $850,000 to the Micro Cap Opportunity Fund, and $408,700 to Denver Angels as highlighted in the filing.

Exam test preparation startup Exampur is reportedly under severe financial strain and has held off paying staff salaries, sources informed Moneycontrol. Some sources claim that the firm has not paid wages to some employees since July. The firm has also not made full and final settlements with former employees.

More:

News of Exampur's dire situation comes almost a year after UpGrad backed out of an acquisition of the startup.
CEO Vardaan Gandhi said, "There was a potential acquisition that did not work for us and we had to scale operations down because we were running out of funds."

Zoom out:

UpGrad initiated the acquisition of Exampur last August for an undisclosed amount.
However, the deal fell through after a conflict in business alignment and discrepancy over valuation.
Despite the failed deal, UpGrad remains an investor in Exampur.

Cincinnati, Ohio-based medtech startup Palarum is relocating to a larger headquarters as it gears up for growth in 2024. The firm is moving from a 3,000-square-foot facility to a 5,000-square-foot space roughly two miles away. Palarum estimates it will need an additional 1,000 square feet of space each year to accommodate the company's growing needs. The city of Lebanon gave the startup a $50,000 forgivable loan to keep the firm's headquarters in the city.

More:

Palarum has developed a smart sock that can help prevent patient falls by alerting a nearby nurse when a patient is unassisted and might require help upon leaving their bed.
The startup has patented the wearable technology, which includes sensors to count steps, distance, step length, weight variation, and other parameters.
Since launching in 2014, the firm has raised more than $20M from angel investors.
The firm reported $2M in revenue in 2023 and expects to be cash flow positive in 2024, eliminating the need to raise additional capital.

Quick Hits:

Raising capital in 2024? Foundersuite is your secret weapon. Build a target list with our DB of 216,000+ investors, manage the raise with our CRM, run due diligence with our data room.*
Wastewater treatment startup Rapid Radicals Technology LLC is set to receive a $100,000 grant through the SBIR Advance program, which is administered by the Wisconsin Center for Technology Commercialization and the Wisconsin Economic Development Corp.
Enterprise drone solutions startup DroneAcharya Aerial Innovations acquired a 51% stake in camera drones, DIY kits, and customized drone maker PYI Technologies for an undisclosed sum.
Indonesian quick commerce startup Dropezy rebranded to Sekilo. In addition, the firm announced it has moved into the poultry downstream industry to streamline poultry distribution.
AI and advanced data analysis startup Maiora partnered with QuantyMize to develop an AI tool for the foodtech and catering industry called Resmart.
Frec Direct Indexing lets you achieve index-like performance but end up with more money through tax loss harvesting. See what the hype is all about.*