Analysis of VCfunding in the Indian E-Commerce space                                           By Aravind G.R and         ...
Investments in E-commerce    •    52 E-Commerce companies raised close to $700 Mn in Venture Capital over the past 3 years...
VC Investments by Category (Post Pivot Positioning)                                          2   Home Décor      $10 Mn   ...
PIVOTS : Morphing to Survive                                               Pivots from                Pivots into         ...
E-commerce exposure – Most Investors overexposed to the sector     Accel                                                  ...
CURRENT STATUS• Series A non existent and Series B drought for E-Commerce Companies; only 30% of funded  companies have ma...
FUTURE OUTLOOK• Fundamentals of E-commerce are strong – growing internet user base, acceptance of online  commerce, paymen...
CONTACT USDeepak Srinath      deepak.srinath@allegroadvisors.com                 +919845499822Aravind G.R         aravind....
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VC Investments in Indian E-Commerce

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Data and analysis of VC investments in Indian E-commerce companies, December 2012

Published in: Economy & Finance

VC Investments in Indian E-Commerce

  1. 1. Analysis of VCfunding in the Indian E-Commerce space By Aravind G.R and Deepak Srinath Dec 2012 1 Allegro proprietary data
  2. 2. Investments in E-commerce • 52 E-Commerce companies raised close to $700 Mn in Venture Capital over the past 3 years* Series A Series B Further Rounds $185 Mn across 52 firms $210 Mn across 16 firms $300 Mn across 7 firms • 10 Horizontal portals (multi category retailers) have garnered over $355 Mn** (half the amount Horizontal invested in the sector) $355 Mn $691 Million • $220 Mn of investment into 21 Apparel and Apparel & Accessories e-tailers Accessories • $30 million across 5 firms in the Baby Products $180 Mn category Private Label Apparel • Daily deals portals raised $25 Mn; however, Apparel $40 Mn Others most of them pivoted into horizontal e- 221 Mn 52 commerce $115 Mn Companies • 13 other niche category e-tailers*** raised about $61 Mn* Excluding Seed and Angel funding** Including Flipkart’s $150 Mn round 2*** Includes Home Décor, Health & Beauty, Jewelry & Groceries Allegro proprietary data
  3. 3. VC Investments by Category (Post Pivot Positioning) 2 Home Décor $10 Mn 2 Jewellery $10 Mn Health & 2 $10 MnNumber of Investments Beauty Quantum of Investments 2 Groceries $12 Mn 5 Miscellaneous $19 Mn 3 Daily Deals $25 Mn Baby & Kids $30 Mn 5 wear 4 Apparel - $40 Mn Private Label 17 Apparel & $180 Mn Accessories 10 Horizontal $355 Mn 3 Allegro proprietary data
  4. 4. PIVOTS : Morphing to Survive Pivots from Pivots into Niche Vertical Horizontal (4 Companies) or Horizontal Home Appliances Marketplace & Electronics (8 Companies)Continuing Original Pivots - 25% (4 Companies) Model - 75% Apparel - Niche (3 Companies) Apparel & Accessories Daily Deals (5 Companies) (2 Companies) Companies have pivoted mainly to: • Increase the basket size and/or move to segments with higher ticket sizes and margins • Build loyalty and Increase Lifetime value of an acquired customer • To move to a marketplace model (platform play without carrying inventory) 4 Allegro proprietary data
  5. 5. E-commerce exposure – Most Investors overexposed to the sector Accel 10 • 47 Venture Funds and Institutional Tiger… 8 Investors have invested in 52 companies IDG 5 over various rounds Kalaari 6 • 10 investors have invested in 3 or more Helion 5 companies, with estimated exposure of NVP 4 $30 - $50 Mn per fund SAIF 4 • 18 investors have more than 1 E-Lightspeed 3 Number of Investments Commerce investment Sequoia 3 Nexus 3 • In the frenzy of 2011 and early 2012, VC firms may have overexposed themselves Seedfund 2 to ecommerce without properly Infoedge 2 estimating the capital requirement of the Naspers 2 sectorQualcomm 2 • It is unlikely that any of these firms will Nokia 2 invest in a new E-Commerce ventures Intel 2 Matrix 2 Bessemer 1 DFJ 1 5 Allegro proprietary data
  6. 6. CURRENT STATUS• Series A non existent and Series B drought for E-Commerce Companies; only 30% of funded companies have managed to raise Series B• Capital required to achieve profitability is a factor of 10 of initial estimates (High Customer acquisition costs leading to negative unit level margins)• Investors are trying to salvage investments via consolidation of companies Company Acquirer VC Lets Buy Flipkart Accel & Tiger Global (common investors) Urbantouch Fashionandyou Accel, Tiger, Sequoia, Intel, Norwest & NGP Exclusively.in Myntra Accel & Tiger (common investors), Kalaari & IDG• Estimated 70%- 80% of VC funded companies are on life support, in dire need of funds• Current FDI rules and the investigations against Flipkart and others for alleged violations are adding to investor caution and apprehension 6 Allegro proprietary data
  7. 7. FUTURE OUTLOOK• Fundamentals of E-commerce are strong – growing internet user base, acceptance of online commerce, payments and logistics infrastructure improving (as shown by the huge spike in online sales on GOSF day - Dec 12, 2012)• 2 or 3 horizontal brands and one or two players in the larger verticals - apparel, babywear, jewelry and home décor – are likely to survive and eventually become profitable entities• Inventory carrying horizontal players may require $200 MN to get to profitability; others may require est $80 to $100 Mn• Higher ticket size categories like jewelry and furniture may require lesser capital (est $50 -$60 Mn) as they have higher absolute margins that can cover the customer acquisition cost• VC’s need to brutally cull their portfolio and back one or two portfolio companies with the necessary capital• Investors need to figure out meaningful exits for companies that manage to survive – IPO’s likely to be challenging and acquirers willing to pay valuations required to show returns may be even harder to find• In summary, brave investors with deep pockets, infinite patience and global e-commerce experience have the opportunity to create winners 7 Allegro proprietary data
  8. 8. CONTACT USDeepak Srinath deepak.srinath@allegroadvisors.com +919845499822Aravind G.R aravind.gr@allegroadvisors.com +919901288004ABOUT US Bangalore (Head Office) 9th floor, “The Residency”, 2 Residency Road, Bangalore 560 025Allegro Capital Advisors is an independent full service Ph: +91 80 6707 0100investment bank with offices in Bangalore, Mumbai andGurgaon Mumbai ERA, 1st Floor, NM Wadia Building, 123,Allegro’s Corporate Finance team specializes in fundraising, debt restructuring, IPO advisory and domestic & MG Rd, Fort, Mumbai 400 001cross border M&A Ph: +91 22 6060 7888Sector expertise includes Technology, Digital Media, GurgaonPharmaceuticals, Biotechnology, Healthcare, Consumer, No. 403, 4th Floor,Power etc. Solitaire Plaza, MG Road, Gurgaon 122 002Web: www.allegroadvisors.com Ph: +91 124 6060 788 8 Allegro proprietary data
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