Amazon chief Jeff Bezos may have committed an additional $3 billion for his firm’s Indian operations but investors in a host of other e-commerce players seem to be tightening their purse strings. Data released by Tracxn Technologies show money isn’t moving into start-ups quite as freely these days as it was last year. Just $899 million was invested between January and May this year, far less than the $1.6 billion in the comparable period of 2015.
The number of deals — across Series A,B and C — at 73 this year is also smaller than the 94 in 2015. Among those that saw more money come their way are marketplaces such as Snapdeal and Shopclues, online travel firm Ibibo, online grocer BigBasket and CarTrade.
The value of investments in Series C funding, however, has risen. Ashish Fafadia, CFO and principal, Blume Ventures, points out that by the time a start-up is due for a Series C funding, the business model is more or less proven. “The next stage is about achieving profitability and scaling up operations so investors are willing to top up the investment,” Fafadia observed. Blume Ventures is an investor in Ola and had also taken a bet on TaxiForSure.
The tighter funding environment is leading to consolidation in some e-commerce verticals, especially hyperlocals — Peppertap, for instance, has shut its grocery delivery business.
However, taxi aggregators are likely to be find support from investors.
Globally too, the taxi aggregation space continues to attract investments. On Thursday, Didi Chuxing announced it had raised $7.3 billion while Uber announced in early June it had mopped up $3.5 billion from Saudi Arabia’s Public Investment Fund.
Although the number of online shoppers in the country, currently estimated at between 30 million and 35 million, is expected to rise, analysts observe that e-tailers are finding it hard to attract customers unless they offer hefty discounts. Not surprisingly, businesses are being scaled back or even shut down.
“We believe this shake-up may intensify further, leading to the emergence of one or two strong companies within each sub-sector,” Kotak Institutional Equities wrote recently. A KIE study showed that losses across a clutch of 22 e-commerce businesses in FY15 amounted to nearly Rs 8,000 crore or roughly half their combined revenues of around Rs 16,200 crore.
Analysts at the brokerage believe the hyper-valuations seen in successive rounds of funding in 2015 and 2015 is
Investors continue to mark down investments. In late May, Morgan Stanley lowered the value of its holdings in Flipkart by nearly 16%, valuing the e-retailer at $9.3 billion. In June, 2015, it commanded a valuation of $15 billion.
The government’s recent guidelines for foreign direct investment (FDI) in e-commerce disallowed inventory-based models. The rules have also hurt e-tailers since they are not permitted to influence the price of merchandise in any manner whatsoever — in other words, they cannot offer discounts on their platforms.
Vijay Shekhar Sharma, founder and chief executive, Paytm, believes investors are now looking at new businesses.
“These online businesses will be largely value-add providers to the existing players such as analytics firms and business-to-business service providers, amongst others,” Sharma said. In April this year, Paytm invested $5 million in Jugnoo, leading the Series B round of fund-raising.