Speciality Chemical Startup Mstack Raises $40 Mn To Bolster R&D In India, Middle East

Cross-border speciality chemical manufacturing platform Mstack has raised $40 Mn (about INR 335 Cr) in its Series A funding round co-led by Lightspeed and Alphawave. 

The funding round was a mix of equity and debt, with HSBC Innovation Banking providing the debt. The round also saw participation from some unnamed angel investors.

Mstack plans to utilise the fresh funds for further expansion in its biggest market, North America, along with regions like Latin America, the Middle East, and Asia. A portion of these funds will also be used to enhance its R&D capabilities in India and the Middle East to drive innovation and generate more intellectual property.

Founded in 2022 by Shreyans Chopra, Mstack is a custom manufacturing platform focussed on speciality chemicals. It has offices in Bengaluru and Mumbai in India, while its R&D facility is based in Hyderabad. 

Mstack offers mid-to-large scale enterprises a full-stack solution for sourcing speciality chemicals through a reliable supply chain. It claims to have codified its entire operation into a single platform, allowing buyers to source, test, ship, deliver, and track all of their speciality chemicals in one place.

Mstack founder Chopra clarified that the platform is not a marketplace connecting buyers and sellers. 

“We are building our own brand where buyers come to the Mstack platform and buy chemicals under the Mstack brand, but at the backend, instead of building our own capacities and investing crores in capex, we are utilising the existing capacities that are available in emerging markets like India, Saudi Arabia, Korea, Thailand, Vietnam,” Chopra told Inc42.

Currently, it caters to four categories – oil and gas, water treatment, coatings, and home and personal care. With the fresh funding, Mstack also plans to make inroads into agrochemicals and pharmaceuticals sectors.

Mstack’s business is completely export-oriented. However, about 20% of its speciality chemical sourcing happens in India.

“Our suppliers are largely family-owned businesses that have been operating in the chemical industry for the last two to three decades. However, the problem with these emerging markets and the low-cost production countries is that supply is extremely fragmented and unstructured. So, while they are very good with manufacturing, dealing with Western buyers, cross-border logistics, and managing quality at scale are some of the challenges these manufacturers face. So in a way, Mstack is also becoming the catalyst of growth for these SMEs and small factories to go international,” he added.

Meanwhile, Mstack also set up its own R&D lab three months back. About 20% of its revenue comes from its own customised and IP-generated chemicals, the founder claimed.

While Chopra did not disclose the company’s revenue figures, he said Mstack has grown 15X in the last 12 months while also achieving profitability in the June quarter of FY25.

Speaking on the investment, Bejul Somaia, partner at Lightspeed, said, “Geopolitical dynamics pose risks for supply chain disruptions in the global speciality chemicals market. With demand for these chemicals growing rapidly, there is a need to increase R&D investments and unlock new pockets of supply… we believe that the company has tremendous potential to lead this transformation.”

It is pertinent to note that China held the leading market share in this sector so far. However, with the China+1 strategy driving businesses to explore new markets, it is opening doors for countries like India. Mstack currently supplies its speciality chemicals to over 50 enterprises in the US.

“The new round of funding will enable them to unlock the full potential of their tech-driven platform and undertake cutting-edge research, offering high-quality products to customers across the world,” Somaia added.

Mstack competes with the likes of Scimplify and Distil, among others. While Mumbai-based Distil raised $3.1 Mn in funding in June this year, Scimplify raised $9.5 Mn from Omnivore, Bertelsmann, and others in August.

As per a report, the global speciality chemicals market was valued at $800 Bn in 2023 and is expected to reach $1.04 Tn by 2029.

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