Funding for e-commerce could slow to a trickle

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Published: April 20, 2020 5:00:51 AM

Indian internet consumer businesses raised $2.1 billion from investors in the January-March period, about 14% less year-on-year, data from market research firm Tracxn showed.

The strategy surrounding merchandise too could change in the post Covid-19 world with a greater focus on groceries rather than electronics.

Life for the Internet consumer business will change dramatically in the aftermath of the global pandemic as investors turn cautious with capital and shift focus from growth to P&L. Financial support could slow to a trickle, according to Satish Meena, senior analyst at Forrester Research, who expects little big-ticket funding for start-ups this year.
A fair number of term sheets were pulled back between mid-February and March end, Atit Danak, principal at Zinnov Consulting, told FE. “The risk capital is available but the risk parameters have changed,” Danak added.
Meena believes VCs could stay away from new ventures altogether while cautiously supporting the existing investments until the sentiment improves sometime in December or early next year.

Danak points out investors would encourage managements to be fiscally prudent rather than chase growth.“VCs will support only those firms that have sustainable business models. Post Covid-19, for early stage-funding, revenue generation will be central while for late-stage funding, profitability will be the key-metric,” Meena explained.
The days of mega rounds of funding may be over. “Even in 2019, we saw fewer mega rounds compared to 2018 with the capital a lot more spread out,” Danak said.

The strategy surrounding merchandise too could change in the post Covid-19 world with a greater focus on groceries rather than electronics. Food delivery companies will prioritise hygiene rather than offer big discounts or rope in more restaurants for the platform.

Indian internet consumer businesses raised $2.1 billion from investors in the January-March period, about 14% less year-on-year, data from market research firm Tracxn showed. The fall was partly due to the Covid-19 outbreak.
The ed-tech sector secured bulk of the funding during the January-March period —Byju’s mopped up $400 million in two tranches from new investor Tiger Global Management and existing backer General Atlantic. Unacademy raised $110 million in February from a clutch of investors led by Facebook.

In the food delivery space, Swiggy raised a fresh $113 million in February from existing investors as part of its series I round of financing. Rival Zomato in January announced a $150-million fundraise from Ant Financial at a pre-money valuation of $3 billion. SoftBank pumped in close to $150 million in baby-care retailer Firstcry as part of its larger $400-million funding round in the Pune-based company. Two-wheeler rental start-up Bounce led the funding in the mobility space, raising a little over $100 million in January led by Accel and B Capital Group.

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