Looks like raising money is no more a cakewalk for the Indian e-commerce industry. While the volume of investment deals in the sector increased, their value decreased in the first quarter of this calendar year over last year.
As per investment data released by VCCEdge, the financial research platform of VCCircle.com, the January-March 2015 period saw the number of deals increase to 28 from 16 during the same period last year, but their value came down to $231.15 million (January-March 2015) from $394.78 million (January-March 2014).
A cautious approach by investors is one reason behind the decline in the value. “The business plan has to make sense. As an investor I would only invest in an online company that has scope for expansion in the specific market it is operating in, especially in case of niche players who cater to particular needs. In a market full of startups, one has to be doubly sure before investing in any e-comm business,” said Rahul Chowdhri, partner, Helion Advisors.
Agrees Supam Maheshwari, co-founder and CEO, Firstcry.com, who feels that the markets are more benign than what they were 12-15 months back.
“While its no longer that easy to raise funds, companies with a consistent performance that are able to create value in the minds of consumers get the necessary support from investment firms,” said Sanjay Sethi, co-founder and CEO, Shopclues.com, whose parent company Clues Network has clinched the biggest investment deal worth $100 million in a series D funding round so far this year.
E-commerce companies claim that much of the money will be spent in expanding their operations. While e-commerce firms such as Shopclues plan to acquire technology-based firms to bolster their back-end operations, apart from adding 10 million sellers on the site by March 2018, online baby product seller Firstcry.com intends to investing in building its private label business.
For Sandeep Sharma, co-founder and COO, Yepme.com, 2015 is going to be a crucial year. “In addition to entering new categories such as ethnic wear and inner wear, we aim to grow three-folds in terms of revenue. We clocked $30-million revenue in 2014 and plan to touch the $100- m mark in 2015,” said Sharma.
Interestingly, analysts believe fund infusion also helps e-commerce firms up their valuation. This ensures big returns if the owners decide to sell the business tomorrow. For example, after the latest round of funding, Shopclues is close to touching the $1-billion mark in terms of valuation. However, e-commerce firms say the game is not about valuation.
“Valuation is a function in many variables. I am sure every entrepreneur and management team understands this well and focuses on building real tangible and sustainable value,” said Maheshwari of Firstcry.
For the record, after raising $26 million in February this year from Valiant Capital Partners and existing investors IDG Ventures India, Vertex Venture Holdings and SAIF Partners, Firstcry has raised an additional $10 million from New Enterprise Associates.
As per Chowdhri of Helion Advisors, e-commerce firms will find it even more difficult to raise bigger sums of money going forward. “Businesses that are doing well in terms of number of consumers, transactions, etc, and have a clear goal will remain in the game,” he added.
For Updates Check Company News; follow us on Facebook and Twitter