Amazon-backed payments startup Tonetag is reportedly in advanced discussions with Iron Pillar to raise at least $50 million (approximately Rs 420 crore), according to sources familiar with the matter. The funding round is expected to consist of both primary and secondary share sales, with additional new investors likely to participate. Should the transaction proceed, it would more than double the Bengaluru-based company’s current valuation, which was around $100 million, as per Tracxn.
The sources indicated that approximately $30-35 million would come from the primary share sale, while the rest would be raised through secondary share sales, where existing investors would sell their shares to new investors without the proceeds going directly to the company.
Iron Pillar, known for investing in startups such as Bluestone, Curefoods, and Amazon-backed FreshToHome, is expected to potentially co-lead this round along with other investors who have already started discussions. “Iron Pillar may co-lead the round along with other investors, with whom talks have begun,” one of the sources mentioned.
Simultaneously, Tonetag is said to be exploring acquisition opportunities from strategic investors, though discussions are still in the early stages, with no certainty of a deal being reached. The company, which specializes in sound-based merchant payment solutions for offline and online stores, also provides an inventory management suite for online merchants. Additionally, Tonetag collaborates with the National Payments Corporation of India on UPI123 Pay, a payment solution designed for feature phones.
Despite multiple queries, both Tonetag and Iron Pillar had not responded by press time.
Revenue Growth and Market Potential
Founded in 2014, Tonetag has secured approximately $14 million in funding from prominent investors, including Reliance Capital, Amazon, Mastercard, and 3One4 Capital. The company has also established commercial contracts with major technology firms like Google and Amazon, contributing to a surge in its valuation.
While Tonetag’s technology for sound-based payments is promising, it faces challenges in scaling up due to the dominance of QR code-based payment methods in India. The company is now positioning its software as a service for various payment use cases on platforms like Amazon and Google, enabling voice-based transactions via devices such as Amazon Echo.
According to sources, Tonetag closed the first quarter of the current financial year with a revenue of Rs 45 crore, marking a profitable period. For the financial year 2022-23, the company reported a total revenue of Rs 23.5 crore, according to Tracxn data.
A senior executive from a venture fund that assessed Tonetag noted that the startup has developed compelling technology. Given the expansive Unified Payments Interface (UPI)-driven digital payments landscape in India, there is potential for widespread adoption. However, “the company needs to demonstrate consistent revenue growth and business adoption to realize its potential as a significant player in the payment technology space,” he added.
“They have built a unique technology where sound emitted by the point-of-sale device can be identified via the customer’s mobile phone, enabling transactions to be initiated and completed on the phone,” said one of the sources.
