2. 2
E-Commerce VC investment summary
53 E-Commerce companies have raised ~ USD 853 Mn in Venture Capital over the past 3 years*
*Excluding Seed and Angel funding and un-reported deals until May 2013
**Jabong and other Rocket Internet backed firms are not included in this report as
investment data has not been disclosed
Horizontal
USD 458 Mn
Total Investment
USD 853 Mn
Others
USD 164 Mn
Apparel
USD 231 Mn
USD 191 Mn
across 53 firms
USD 245 Mn
- 11 firms
53 firms raised
USD 191 Mn
Series A
11 firms
raised
USD 245 Mn
Series B
Series C,D
10 firms
raised
417 Mn
• 11 Horizontal e-retailers (multi category) have garnered ~USD 458 Mn (over
half the amount invested in the sector)
• 20 Apparel & Accessories firms have been funded to the tune of USD 231 Mn
• 5 Baby Products focused firms have raised USD 41 Mn cumulatively
• Daily deals portals raised USD 25 Mn ; however, most of them have pivoted,
shut down or merged with horizontal e-retailers
• 14 other niche category players have raised about USD 98 Mn
• Of the 53 firms who raised Series A, only 11 companies have managed to
raise further rounds **
4. 4
E-Commerce exposure of VC funds
• 49 Venture Funds and Institutional Investors have
invested in 53 ecommerce companies over various
rounds
• 11 investors have invested in 3 or more
companies, with estimated exposure of $40 - $50
Mn per fund
• 18 investors have more than 1 E-Commerce
investment
1
1
2
2
2
2
3
3
3
4
4
4
6
6
6
8
10
ebay
Unilazer
Matrix
Nokia
Qualcomm
Naspers
Sequoia
Lightspeed
Intel
SAIF
NVP
Nexus
Kalaari
IDG
Helion
Tiger Global
Accel
More funds
5. 5
2011-12 – Pivoting to survive
Continuing
Original Model
- 75%
Niche, 4
Home Appliances
and Electronics, 4
Apparel - Niche,
3
Daily Deals, 2
Pivots - 25%
Horizontal
8 Companies
Apparel &
Accessories
5 Companies
Pivots into
75% Venture funded ecommerce companies in India are continuing with their original model. However, anecdotally
the ones who pivoted seem to be doing much better.
Companies have pivoted mainly:
• To offer more choices and a bigger basket to the current user base
• To increase the ARPU & Lifetime value of an acquired customer
• To add segments which (a) Are complimentary (b) Offer better margins (c) Make strategic sense
6. 6
E-Commerce investment activity in 2013 (Jan-May): Incumbent Investors
putting more money into select portfolio firms
• 9 follow on investments in 2013 (Jan-May) with a
cumulative value of USD 155 Mn
• Key deals:
– Nexus and Bessemer, along with new investors eBay and
Recruit Co s invested USD 30-50 Mn in Snapdeal
– Helion s follow on investment of USD 12 Mn in the Babyoye &
Hoopos merged entity
– SAIF Partners follow-on investment of USD 10 Mn in the Zovi &
Inkfruit.com merged entity
– Tiger Global’s follow-on round of USD 15 Mn in Caratlane
– Intel Capital and Sequoia Capital s investment of USD 14 Mn
Series B in Healthkart
– Norwest Venture Partners investment of USD 8 Mn Series B in
Pepperfry
– Unilazer & IDG s investment of USD 10 Mn Series B in Valyoo
(Lenskart)
• There were no fresh Series A investments in this
period
• There is a rising trend of investment into merged
entities, which will drive more such similar mergers in
the sector
Investor Company
7. 7
E-Commerce M&A Activity
• In CY2012 the key M&A deals were horizontal E-Commerce players acquiring category firms
• In 2013 the emerging trend is Tier-2 players merging and raising funds to compete effectively against leaders
• M&A activity in the sector has largely been investor driven, especially when firms have the same investors
• Majority of these M&A s are cashless stock deals and similar deals are expected in the short term
2
4
7
3
CY 2010
CY 2011
CY 2012
CY 2013
Target Acquirer
8. 8
Evolving E-Commerce market structure
Inventory led Managed Marketplace
Vendor led
Marketplace
Offline Brands
• Indian E-Commerce market is at a similar stage to China 5 years ago
• Horizontal players are adding third party sellers (marketplace) for certain categories to capture the long tail of
vendors and reduce inventory holding costs, similar to Amazon s blended model
• Flipkart & Jabong have added third party sellers on their platform. We expect horizontal players to
generate a significant share of their business from marketplace models in the future
• Inventory costs, reconciliation & returns make inventory led retailing a difficult proposition
• Generating demand for products and connecting sellers directly to buyers is less expensive; however,
marketplaces need to address trust issues and control the buying experience & fulfillment process
• Offline brands tapping the online market will be a significant growth driver
9. 9
E-Commerce industry evolution in China
• Marketplaces dominate the China market, with companies like Taobao (Alibaba Group), PaiPai (Tencent Group).
Large B2C players are Tmall.com,360buy.com, Suning.com and Amazon.cn
• Ecommerce buyers have increased from ~40 Mn in 2007 to more than 242 Mn now, which is 75 Mn more than US,
6x the number in UK, more than 2x of Japan
• China E-Commerce market is expected to surpass the US market this year with size of USD 265 Bn and surpass US,
UK, France and Germany combined by 2020 reaching USD 650 Bn in size
• Key drivers for growth are the burgeoning middle class and increase in internet penetration from 16% in 2007 to
~42% currently
China E-Commerce market projections in USD Bn
Data Source : China E-Commerce research from MGI and Li&Fung
7 17 33 64 102 142 185 224 255
2 5
11
25 47
79
120
170
-
100
200
300
400
500
CY 2007 CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015
Marketplace Inventory led
10. 10
0.2 0.6 1.8
4.3
8.4
1.1
2.2
3.4
4.3
4.5
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
CY 2012 CY 2013 CY 2014 CY 2015 CY 2016
Marketplace Inventory led
E-Commerce industry evolution in India
• By 2016 we expect the Indian E-Commerce market to touch USD 13 Bn, with significant contribution from
Marketplaces and Offline brands
• Market-place models will level the playing field by allowing the long tail of suppliers/ manufacturers from Tier II/III
cities to service national demand
• There will be significant rise in offline brands tapping the online channel through own e-Commerce sites and on
marketplaces
India E-Commerce market projections in USD Bn
Data Source : Allegro Research and expert/industry estimates
11. 11
Short/Medium-term trends shaping the Indian e-commerce landscape
• Demand centers will expand beyond Metro/ Tier I cities to Tier II/III cities and beyond
• Offline brands & OEMs increasingly focusing on online channel
• New categories like auto parts, pharma, groceries will develop
Emergence of new
categories and
markets
• Cost of customer acquisition continues to remain high and profitability remains elusive
• E-Commerce players will move to outsourced logistics and fulfillment services, as self-
logistics will remain unviable
• Of the 53 VC funded companies, it is unlikely that more than 15 will survive as
independent entities by 2014
Economics will
remain challenging
• Inventory holding costs will continue to put pressure on margins; horizontal players are
adding third-party sellers on to the platform to transfer the inventory holding burden
• We expect horizontal players to generate significant business from marketplace model in
the future
• Local retailers/manufacturers will use market-places to tap into new demand channel
• Pure play marketplaces need to work hard on controlling the buying & fulfillment experience
and address trust issues of first time online buyers
Emergence of
marketplace model
12. 12
Funding and Exit Outlook
• Now that the land grab is over, Series B and follow on rounds will continue to be a challenge for most E-Commerce
Companies except category leaders and the big 3 or 4 horizontal players
• Series A funding for e-commerce will be virtually non existent for the next 12 months; however, E-Commerce
services companies in logistics, payments, front-end technology, etc may see some investments
• The FDI & regulatory overhang still continues; however, a marketplace is technically not ‘retailing’ as per law and
this seems to have prompted some of the ‘pivots’ to marketplace model
• For cash strapped E-Commerce companies, venture debt is proving to be an option for bridge funding despite
stringent loan terms. Snapdeal, Myntra, FirstCry, etc have raised debt from SVB
• We expect to see a few more consolidation of portfolio companies in the next 6 months
• Possibility of Flipkart or Homeshop18 doing an IPO in the next 12-18 months; but unlikely to be more than 2 or
3 IPO’s in the space in the foreseeable future.
• Listings likely to be outside India, since they cannot match the continuous profitability criteria for listing in
India
13. 13
Contact Information
Deepak Srinath,
Bangalore
• deepak.srinath@allegroadvisors.com
• Director, Digital Media Practice
Aravind G.R,
Bangalore
• aravind.gr@allegroadvisors.com
• Digital Media Practice
Srikrishna Swaminathan,
Bangalore
• srikrishna.swaminathan@allegroadvisors.com
• Digital Media Practice
