Online marketplace Snapdeal has raised $500 million in a new round led by Alibaba Group, Foxconn and Japanese telecom and Internet giant SoftBank. Existing investors Temasek, BlackRock, Myriad and Premji Invest also participated in this round.
It had earlier raised more than $1 billion from SoftBank, eBay, BlackRock, Bessemer Ventures, Kalaari Capital and Nexus Venture Partners. Snapdeal’s move will enable it to take its battle with home grown e-tailer Flipkart and multinational giant Amazon to the next level. With this investment, Alibaba Group will have a stronger foothold in the Indian e-commerce industry. Its financial arm Ant Financial took 25% stake in Paytm, an online recharge and bill payment company which recently forayed into marketplace and competes directly with Snapdeal and Flipkart.
“We see this milestone as a significant endorsement of Snapdeal’s strategy and commitment to creating life changing experiences for millions of small businesses and consumers in India. With global leaders like Alibaba, Foxconn and SoftBank, in addition to our other existing partners, supporting us, our efforts towards building India’s most impactful digital commerce ecosystem will be propelled further, enabling us to contribute towards creating a Digital India,” said Kunal Bahl, Co-Founder and CEO, Snapdeal.
Snapdeal, which was launched in 2010 by Kunal Bahl and Rohit Bansal, changed its business model from being a deals site to online retailer to online marketplace of sellers and buyers. Snapdeal has more than 150,000 sellers on its platform selling more than 15 million products.
It faces fierce competition from Flipkart, which is valued at $15 billion and Amazon that is aggressively growing its two-years-old business in India. Amazon founder Jeff Bezos has announced a $2 billion investment in its Indian e-tail arm and more is on its way. Flipkart has raised more than $2.5 billion so far. Hence, an investment of this nature was crucial for Snapdeal at this stage.
These online marketplaces are burning huge cash to acquire customers by offering huge discounts and other add-on freebies such as free home delivery, flexible payment options, no-questions asked return policy, etc. Both Snapdeal and Flipkart which has raised funds from a bunch of marquee global investors are yet to show profits.