Payments firm Tonetag looks to bag $50 million from Iron Pillar, others

Amazon-backed payments startup Tonetag is in talks with Iron Pillar for raising at least $50 million (about Rs 420 crore approx.), according to people with knowledge of the development. The funding would be a mix of primary and secondary share sale where other new investors are also likely to join, they said.

The transaction, if it goes through, would more than double Tonetag’s valuation. The Bengaluru-based company was last valued at around $100 million, according to Tracxn.

Around $30-35 million of the amount is expected to be raised from primary share sale while the remaining would be in the form of secondary share sale, the people said.


In a secondary deal, existing investors sell their shares to new investors and the money doesn’t go to the company coffers.

Iron Pillar has invested in startups including Bluestone, Curefoods and Amazon-backed FreshToHome.
“Iron Pillar may co-lead the round along with other investors, with whom talks have begun,” said one of the persons, who did not wish to be identified.

The funding round is being put together even as the Bengaluru-based firm is simultaneously exploring potential acquisition from strategic investors. However, the discussions are still in early stages and it’s not clear if the company would go through with this option, the people said.

Tonetag offers sound-based merchant payments for both offline and online stores. It also offers an inventory management suite for online merchants. The company is working with the National Payments Corporation of India on UPI123 Pay, a feature phone based payment mechanism.

Queries emailed to Tonetag and Iron Pillar didn’t elicit a response till press time.

Revenue surge

The startup, founded in 2014, has raised around $14 million till date from prominent investors such as Reliance Capital, Amazon, Mastercard and 3One4 Capital.

“Tonetag has bagged commercial contracts with large technology firms like Google, Amazon and such and thus there is an interest in the company now with a significant jump in valuation,” said the person cited earlier.

Tonetag builds software and hardware for sound-based merchant payments. The technology, while showing promise, has not been able to scale up to a large commercial use case in India given the domination of QR code-based payments.

The company is trying to offer its software as a service for various payment use cases on Amazon and Google. Voice-based payments can help consumers make purchases via devices like Amazon Echo. Tonetag’s software can enable smart devices which are connected to the internet to process payments as well.

Another person said that the startup closed the first quarter of this financial year with revenue of Rs 45 crore and that it is profitable too. For 2022-23, it had reported total revenue of Rs 23.5 crore, according to data from Tracxn.

A senior executive at a venture fund who had evaluated Tonetag for a prospective funding deal said that the company has built interesting technology and given the large Unified Payments Interface (UPI)-led digital payments market in the country, there is scope for its wide-scale adoption too. “But the company needs to show consistent revenue and business adoption, and once that happens, it can be an interesting piece of payment technology to come out of India,” he said.

One of the persons cited earlier said, “They have built a unique technology where sound emitted by the point of sale device can be identified via the customer’s mobile phone and transactions can be initiated and completed on the phone.”