SUMMARY
Ahmedabad-based web3, AI startup ZYBER 365 Technologies recently claimed to become India’s 109th unicorn after having raised $100 Mn at a valuation of $1.2 Bn
Founded in May 2023, the company currently has zero products to offer and claims to build a suite of products in the next three years
Many founders and analysts believe that ZYBER 365 may set an inappropriate precedent for the Indian startup ecosystem
On July 25, 2023, a London and Ahmedabad-based web3 AI startup, ZYBER 365 Technologies, announced its ascension to the ranks of India’s unicorns, claiming the title of the country’s 109th unicorn after securing $100 Mn at a valuation of $1.2 Bn.
The Series A funding came from SRAM & MRAM Group, a UK-based diversified business group with a focus on futuristic tech and the sole participant in this round, while the initial seed round was funded by its founders and friends.
Notably, ZYBER 365 Technologies Ltd. was established by Pearl Kapur, the founder and CEO, and Sunny Vaghela, the cofounder and CPO, on May 3, 2023, in London. Subsequently, an Indian subsidiary by the name of Zyber 365 Technologies Private Limited was formally registered on July 20, 2023, in Punjab.
While the company claims that its India office is based out of Ahmedabad, Gujarat, as per the Ministry of Company Affairs, its registered office is in Hoshiarpur, Punjab.
The company’s strategic focus spans a diverse array of domains, including web3, AI, and cybersecurity, with an emphasis on Globalisation 3.0 and sustainability. With headquarters situated in London and operational roots firmly embedded in India, the company’s ambition is to establish India as the epicentre of its operations.
Commenting on the infusion of funds, Kapur expressed her pride in ZYBER 365’s tireless efforts in spearheading the development of a groundbreaking web3 AI ecosystem to drive Globalisation 3.0. The capital injection was poised to expedite the company’s expansion efforts and usher in a new era of value creation for its clientele.
At a cursory glance, achieving unicorn status within three months of incorporation is undoubtedly impressive. Among the notable Indian web3 and crypto startups that have the coveted unicorn tag are Coinswitch Kuber and CoinDCX.
However, it is worth acknowledging that both of these unicorns have established businesses over the course of more than five years, navigating through several ups and downs. Another blockchain unicorn 5ire, also backed by SRAM and MRAM Group, was set up in 2021 and turned unicorn a year later.
In contrast, ZYBER 365’s aspirations rest on forthcoming product launches. So far, the company has not introduced any product, not even in the alpha or beta stages. The only action taken has been the publication of a white paper.
The founder of the company, Kapur, is the director of three other companies — No Lines Retail Pvt Ltd, Billion Pay Technology Pvt Ltd and Brock Pharmaceuticals Pvt Ltd.
What’s more strange is that as per the UK filings, Kapur was born in 1997 and hence is currently around 26 years old. However, as per his company’s website (Brock Pharma), Kapur has more than two decades of experience across business and technical functions. The other cofounder, Vaghela, is said to be an ethical hacker and a cybersecurity expert.
Amid the ongoing funding winter when venture capitalists are cautious about allocating substantial sums to startups, even those in the growth stage, and when decacorns are transitioning into unicorns and unicorns are edging towards soonicorns, many founders and analysts believe that the intriguing case of Zyber 365 may set an inappropriate precedent for the Indian startup ecosystem.
This is especially when the Indian crypto sector has seen three Indian startups, Pillow, Flint Money, and WeTrade, shut down over the past few months due to regulatory setbacks and hostile market conditions.
Moving on, another concern is that the company might expend considerable resources to gain experience and hastily construct products with the sole intention of meeting deadlines.
In essence, these anticipations raise many questions. However, before reaching any conclusion, let’s delve deeper into the curious case of ZYBER 365, which had us intrigued in the first place.
As per the UK RoC filings examined by Inc42, the most recent funding round led to a redistribution of ownership within the company, both its cofounders, Kapur and Vaghela, saw a reduction in their ownership stakes. Kapur’s shareholding slipped from 96% to 77.7%, while Vaghela’s stake decreased from 4% to 1.7%.
Two newcomers, Neang Sokhen and Raghav Kapur, now hold 15.3% and 5.3% shares, respectively, in the company. Notably, the new shareholders are associated with the SRAM and MRAM Group. While the latter (Kapur) serves as the group director, Sokhen’s current position is not clear. However, her Linkedin profile reveals that she was an account manager at the SRAM and MRAM Group at one point in time.
Considering that a 20.6% stake was attributed to the SRAM and MRAM Group at $100 Mn, the overall valuation would seemingly be $485 Mn, which is not even half the size for a unicorn.
This prompts a critical question — Has the stated valuation been overinflated?
ZYBER 365: A Unicorn That Is Thinking Of Building Products
In response to Inc42’s inquiries, the company divulged insights into the products it intends to launch. While the company’s website was undergoing development until recently, it has now been updated to include a comprehensive product timeline. The company’s product development strategy is divided into two phases.
In Phase I, ZYBER 365 is slated to develop L0, L1, and L2 blockchains alongside AI-driven autonomous cashless stores. Transitioning into Phase II, the focus will primarily shift towards the development of blockchain operating systems and an array of application suites.
In a white paper, the company elaborates on its product offerings, outlining a conceptual framework for these products and the transformative change they are expected to bring. However, the technical intricacies of each of these product stand undisclosed.
Developing A Complete Blockchain Ecosystem From The Scratch
Before we get into the specifics of L0, L1 and L2 blockchains that ZYBER 365 intends to offer, let’s take a look at L0, L1 and L2 blockchain layers.
L0 blockchains serve as cross-chain interoperability protocols, enabling the smooth transfer of information and tokens between incompatible blockchains. Projects like Polkadot, Cosmos, and Chain Link exemplify this by providing off-chain data to apps and blockchains.
Layer 1 blockchains act as fundamental digital ledgers, supporting secure data storage and employing distinct consensus models and smart contracts for automated transactions. Some examples include names like Ethereum, Solana, Binance Chain, Ripple, Monero, and Litecoin.
Layer 2 blockchains are built upon existing blockchains and offer enhanced scalability through reliance on Layer 1 infrastructure. Ethereum’s Polygon, Arbitrum, and Optimism are Layer 2 instances, trading some decentralisation for speed and cost-efficiency; however, they are contingent on Layer 1 networks and may not match their security.
ZYBER 365 has shared its own specifications for L0, L1, and L2 blockchains with us.
For comparison, while existing L0 layer Polkadot offers 1,000 Transactions Per Second (TPS), L1 layer Solana and L2 layer Polygon are much faster with 65K and 75K TPS, respectively.
Regarding tokenomics, a company spokesperson indicated that the design of the tokenomics structure will be finalised after the architecture and incentive structure are fully developed. This comprehensive approach aims to safeguard the tokenomics against potential vulnerabilities and ensure that the investor community’s interests are upheld.
While the company expresses its commitment to deliver products in the future, the reality remains that it has yet to offer any tangible product. The ‘unicorn’ has recently onboarded a few individuals as advisors, including Nikita Sachdev, founder, Luna PR; Daniel Diemers, cofounder, SNGLR Group; Maya Marbuger, executive board member, Zurich Film Festival, and Antonia Martina Durisch, a film producer and an advisor.
Given that hardly anyone in the web3 arena is familiar with what the company does or who its founders are, legitimate concerns have been triggered within the crypto startup community, with many industry leaders questioning the identity of this startup and founders.
Further, ZYBER 365 is confidently pledging to deliver within a specific timeline when regulations and complexities that envelop many blockchain applications are ambiguous on a global scale.
Isn’t this an irony of sorts?
Sharing his insights, Shivam Thakral, the founder and CEO of BuyUcoin, emphasised the necessity for these businesses to uphold their commitments, translate their vision into tangible products, and demonstrate clear pathways to revenue to instil confidence and credibility among investors.
Voicing his perspective, Sharat Chandra, one of the cofounders of India Blockchain Forum said, “A significant influx of funds alone cannot guarantee value creation when there is an absence of product, product-market fit and a lack of clear product differentiation. What the web3 industry truly requires are innovative solutions and products capable of onboarding the next billion users, generating meaningful impact, and unlocking opportunities for both web2 native businesses and enterprises.”
Web3 Startups Want Valuation Yardstick To Change For Them
Despite agreeing that ZYBER 365 needs to perform first, crypto founders demand a separate yardstick for web3 startups. Mahin Gupta, the founder of Liminal, a crypto wallet platform, commented that in the realm of innovation, valuations that transcend billions without a tangible product or revenue may appear unrealistic but it also reminds us of the power of ideas.
Despite being a 3-month-old startup that is not even registered with DPIIT, some may say, Zyber 365’s rise to a unicorn with no products or revenues in sight definitely challenges conventional wisdom and could be seen as both a testament to the founders’ ability to attract investor interest and a reflection of the high-level of optimism and potential perceived in their plans for L0, L1, and L2 blockchains, along with a blockchain operating system.
“However, the success or failure of Zyber 365 will ultimately depend on the execution, the demand for its offerings, and the ability to turn its vision into reality,” Gupta added.
Seconding this, Poorvi Sachar, head of operations, Tezos India, a blockchain adoption entity said that web3 ventures should be judged on their vision, the strength of their ideas, and their capacity to challenge accepted norms. The courage to invest in game-changing ideas could revolutionise several industries, she added.
Meanwhile, Zyber 365 has risen to wear the unicorn sash when several companies are seeing valuation markdowns in the books of their respective investors due to reasons ranging from operational bottlenecks, bloating losses, and regulatory setbacks, just to count a few.
Recently, US-based investment firm Vanguard slashed the valuation of its stake in homegrown ride-hailing giant Ola for the second time this. Similarly, last month, US-based asset management company Fidelity Investments slashed the valuation of its stake in SaaS unicorn Gupshup by more than 20%.
In July, Fidelity also cut the valuation of fintech startup Pine Labs by nearly 9.2% to $4.5 Bn. these names are just a few of the many Indian startups whose valuations have been slashed recently.
However, what’s mindboggling here is seeing a startup with zero offerings and revenues become a unicorn just three months after its inception when many others with a range of tangible products are facing investors’ wrath and are bogged down in performance pressure.
