ToneTag, a Bengaluru-based digital payments startup, has raised $78 million in new funding from stock market veteran Ravi Dharamshi's private equity fund ValueQuest Scale Fund and venture capital firm Iron Pillar. Existing investor Elevate Capital also took part in the round.

Iron Pillar invests in startups including BlueStone, CureFoods, and others.

ToneTag founder Kumar Abhishek stated that the round is a mix of primary and secondary capital, but declined to disclose who sold their shares in this round.

Secondary capital does not go to the company; rather, it is channeled to the selling investors.

ToneTag, unlike other payment companies, is a product startup that has developed a sound-based payment system to support both online and offline merchant transactions. It also provides an inventory management system to merchants and collaborates with the National Payments Corporation of India (NPCI) to power UPI123 Pay, a feature phone-based payment system.

ToneTag, which has over 30 million daily interactions, uses its patented soundwave protocol to provide payment solutions to global tech giants such as Google and Amazon, as well as leading Indian banks such as State Bank of India (SBI) and ICICI Bank.

With the new funds, the company plans to expand its operations and enter global markets. The startup currently has a team of about 90 people.

ToneTag believes that as the Indian digital payments market grows and more merchants accept sound-based payment systems, it will be able to expand its operations. In India, the default payment method is QR codes and point-of-sale (PoS) terminals.

Investors who had evaluated ToneTag told how it could power transactions as more devices become smart and connected to the internet. Voice-based payments can be made via platforms such as Amazon Echo.

The startup, founded in 2014, had raised $14 million from major investors including Reliance Capital, Amazon, MasterCard, and others. The company's last major institutional round occurred in 2018.