The Venture Intelligence Blog

Economic Times has an interesting article on the opportunities and challenges of E-Commerce in regional languages. Extracts: About 75% of Indian internet users are expected to be regional language speakers by 2021, as per industry estimates. To reach this demographic, companies including Helion Ventures-backed Wooplr and Beenext-backed Elanic are working on launching platforms in vernacular languages including Hindi, Telugu and Tamil so sellers and buyers can engage better.... ...Industry players and experts believe that re-cataloging of products in vernacular languages is a massive challenge and a major cost for established ecommerce companies. Even Paytm Mall’s platform, whose user interface is available in several vernacular languages, has a lot of its product listings in English. The KPMG-Google study reported that around 44% of Indian language users find it difficult to comprehend product description and customer reviews on ecommerce platforms. “High involvement categories ...

Knowledge @ Wharton quotes Venture Intelligence data and founder in its article titled "Will SoftBank Vision Fund’s $6 Billion Bet in India Pay Off?" Extracts: "(says) Arun Natarajan, founder of information and analysis firm Venture Intelligence: “Given how the future of so many of the local internet and mobile unicorns was hanging in the balance in 2016, the arrival of such a deep-pocketed investor is a sigh of relief.” "He points out that other than the 2011 investment in InMobi, SoftBank really started to invest in the Indian market directly only in late 2014. The less than three-year period is too early to pronounce a verdict on their ‘track record’,” Natarajan says. He also notes that the “sheer mathematics” of the Vision Fund means that it needs to find and invest in “dozens of companies” that can absorb $1 billion, if not more, each. “Which naturally means that these companies should have already achieved significant scale — at least in their ho...

The Lessons E-Commerce Entrepreneurs & Investors Should Learn from their Microfinance Peers In an article for  Economic Times , Private Equity investor Vivek Singla points why blaming the measurement parameter Gross Merchandise Value (GMV) for the ills of the E-Commerce is not productive. He recommends E-Comm Entrepreneurs and Investors take a leaf out of how the Microfinance industry emerged from its regulatory crisis - by resetting their valuation expectations. For the investors, one of the reasons behind the sharp reversal in sentiment is the build-up in bitterness against the GMV, with many now labelling it as a pure vanity metric...instead of being dismissive about the GMV and e-tailing at large, investors should augment the gross dollar spend with deep dive into the business performance. After all, GMV is an important component of the due diligence checklist, but not the only one.  ...most international GMV based trailing multiples fall below 1×. On the ot...

Mint has listed (on its front page) various fancy "GMV" goals totted out by CEOs of Indian E-Commerce Unicorns - at various points to various media outlets - but have been "missed by big margins". Extract: Payments start-up Paytm launched its e-commerce business only in 2014, years after Flipkart and Snapdeal. But that didn’t stop the company from spelling out growth targets that would put its rivals to shame. Alibaba-backed Paytm said in an April 2015   interview with   Mint   that it will generate annualized GMV of more than $4 billion by December 2015. In an interview this February with the   Hindu BusinessLine  newspaper, Paytm CEO Vijay Shekhar Sharma said the company was clocking GMV of $3 billion, which means it missed its sales target. No sweat. Paytm has set an even more ambitious target of hitting $10 billion in GMV by this December.   ..."If these goals are anything to go by, it would seem as if accountability isn’t high on the list of pr...

The founder of the retailing focused Future Group has declared e-commerce as an optional area in an interview to Mint : “I have been a very good student of e-commerce business,” Biyani said in an interview on 12 April. “I have been watching it by doing it myself with Futurebazaar(.com) and by meeting a lot of people who have been in this business. I have met everybody in this business. I have experimented with exclusive tie-ups with particular e-tailers and have also worked with the father of multi-channel retail (Love Goel, chairman of global investment firm GVG Capital Group) to understand global trends,” he said.  He explained that this was done as a part of six-month immersion programme last year, and it led to the realization that “it’s not very important to be online”. Biyani has offered more arguments (on why e-commerce doesn't work) in a Forbes India interview (emphasis mine): My cost of doing business is 12-18 percent of sales. In online, it is 45-50 percent of sal...

Frankie Brown of Investec has an interesting take on Indian E-Commerce in Economic Times . Extracts: The funding slowdown has revealed as much about the Indian venture capital market as the companies they evaluate. It is a small world of IIT buddies and their gossiping, of egos and posturing, bluff and counter-bluff. Where the fearful see chaos, the wise see opportunity — the market is full of increasingly attractive deals. ...What concerns me is the over-reliance of the market on such a small number of investors. With traditional private equity reluctant to get involved, and offline players choosing to remain wilfully blind, Tiger, Naspers, Soft-Bank and Alibaba have run riot, waving magic wands and making princes and paupers of those they select and jettison. There remains a concern that in the world of “bigger is better,” inefficiencies are creeping into the market. ...Valuations are a matter of conjecture, but what is happening on the ground is indisputable. The seismic shif...

Kashyap Deorah, author of "The Golden Tap: The Inside Story of Hyper-Funded Indian Startups" and the former President of the Future Group's aborted e-commerce venture Futurebazaar.com, seems to be having a good time amidst Flipkart's key investor Tiger Global buying into rival Amazon and the recent write down of its valuation by another investor, Morgan Stanley.  Extracts from his latest column in Mint : ...this is the beginning of a slide that will continue until Flipkart’s valuation equals invested capital, currently $3.2 billion.  ...With 200-250% revenue growth and 20-40% operating losses, even at a reduced $11 billion, a multiple of 3-5x seems high. ...Now let us look at the funding scenario. Tiger Global Management bought over $1 billion of Amazon shares a quarter ago. Since June 2015, Amazon has grown by 50% in market capitalization, while JD.com and now Flipkart are down 30%. Amazon has the luxury of free cash flow, as is the outcome of a true e-commerc...

One by one, well funded players in the foodtech and hyperlocal sectors - including leaders Zomato and Grofers - are announcing closing down of their operation in Tier II cities. The withdrawal reminds one of the early days (2006 - 2008) of Private Equity Investing in Real Estate when PE-RE firms had spread out beyond the metros to invest in cities like Jodhpur, Kochi, Jaipur, Nagpur, Nashik, Mysore, Indore and Vishakhapatnam. The stats highlighting the boom across Tier II & Tier III towns were, of course, supporting.  But, come financial crisis, PE-RE investors turned allergic to Tier II and started to explicitly state that they would henceforth focus on Tier I markets only . Does the Zomato and Grofers experience mean that the "pent up demand in small town India" phenomenon that works for big guys like Flipkart and Snapdeal, will not work for food and local delivery? At least until the road traffic in these cities and towns does not make going out to eat or t...

Haresh Chawla has an biting beginning-of-the-year post for start-ups at Founding Fuel . There are two Indias: the top 10% that can afford your clone offering, and the remaining 90% that can’t or simply won’t...The Indian consumer is value-driven, not convenience-driven. We have all the time in the world to research and find the best price. Most have time to find a competing offer. We hate paying for service. And loyalty—what is that? Indians will not pay for delivery, service or extra conveniences and will accept deals from your competitors with both hands. Does your clone-model account for this? Servicing the 90% can become a continuous drain on your business. There is no farming with them, only hunting. What I find utterly baffling is that while our startup entrepreneurs put up Amazon, Uber and Airbnb as their idols, they never focus on how these folks did it. They never tune into the fact that Amazon’s founder Jeff Bezos knows that he is playing a thin-margin game and winning d...

Alok Goyal of SAIF Partners (and prior to that CEO of FreeCharge and redBus) writes in Economic Times : According to various industry sources, the total burn rate across the top 10 ecommerce players appears to be ~$9 million per day...If we were to assume a year-on-year growth of 150%, by next Diwali, the top 10 companies would need about $22 million per day to sustain business with the current unit economics. That means companies will burn about $6 billion to sustain the current trend until next Diwali.   There are hardly any investors out there who can support that pace of cash burn.  Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

The latest $700 million funding for Flipkart got announced not in the form of press releases as on previous occasions, but through leaks and confirmations . Also, the new round does not seem to have attracted any new investors. The closure of rival Snapdeal's $500 million round is reported to have been protracted over mismatch in valuation expectations. Why the seeming nervousness among investors over India's two E-Commerce poster children? Is it the crash of Alibaba's stock price in recent months? Or something else? Media executive-turned-Private Equity investor Haresh Chawla has some answers in his new post at Founding Fuel . Extracts: On why an IPO is impractical for Flipkart, SnapDeal Most listed Unicorns in the West eventually trade at earning multiples that range between 40 and 60 times their earnings. Listed Indian internet companies like Naukri, Justdial and Makemytrip trade at similar multiples....Flipkart, now eight years old, to justify its $15 bill...

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

In an interview to Mint , Aswath Damodaran - the well known US-based valuations expert  - has opined that India’s e-commerce and consumer technology start-ups "may be collectively overvalued". "The size of the macro story may not justify the micro-valuations," he says. Economic Times (in its Corporate Dossier supplement) had earlier featured the views of two local practitioners - Sharad Sharma, Angel Investor and Jacob Mathew, Founder of MAPE Advisory - on the same topic. Sound Byte from Sharad Sharma : "Unfortunately, due to just one individual - Lee Fixel of Tiger Global - Flipkart has gone from being a poster child to being the single biggest risk to the technology ecosystem."  His main argument: Right now, Flipkart is valued at about $500 per transacting user. This is comparable to what Vodafone paid for Hutch in 2007 - the most expensive mobile operator acquisition ever. Built into the Vodafone offer at that time was a belief that the hocke...

Lee Fixel, Partner & Head of Venture Capital Riding on its early and aggressive bets in the E-Commerce segment, New York-based Tiger Global Management currently enjoys a “lion’s share” of the mindshare in the Indian Venture Capital ecosystem. At the Venture Intelligence APEX’15 PE/VC Summit in March, one VC speaker candidly admitted: “ If there is one foreign investor who knows the Indian Internet & Mobile landscape better than us locals, it’s him” (meaning Lee Fixel , the head of Tiger’s VC operations) . A mid-market Private Equity investor wistfully remarked: “ While we will never be good at it as the Tigers of the world, we really need to figure out this E-Commerce thing - if we are to produce supernormal returns for our investors ”. Sharad Sharma, Angel Investor & Co-Founder iSPIRIT writes in the Economic Times : "Unfortunately, due to just one individual - Lee Fixel of Tiger Global - Flipkart has gone from being a poster child to being the single ...

Economic Times has an article quoting some worried voices on Hedge Funds adventuring into startup territory: Hedge funds, which have fuelled frenzied deal-making in Indian internet companies and stoked valuations to stratospheric levels, are moving down the food chain to take positions in younger, smaller startups.  Early-stage startups such as Zop-Now, Vserv and MobiKwik have got hedge funds to bet on them. But as these investors plant themselves firmly in India's startup landscape, analysts as well as entrepreneurs are wary about the funds' potential to abruptly pull out in a crisis, as they did during the econom ic downturn that began in 2008. ...The entry of these high-risk appetite investors and the rising pace of deal-making reminds some investors about previous peaks in investment cycles. ...“From 2006 to 2008, we saw prop books and hedge funds say that they will be in India for the long run, some even having teams on the ground. But after 2008, we did not see ...

Mint has a blow-by-blow account. Hats off to Raghunandan G for being so open. Extracts from the article - that reminded me a lot of the John Maynard Keynes quote "Markets can remain irrational longer than you can remain solvent": Ola’s rival, across town, TFS, was watching the firm’s every move closely. Ola’s logic was clear. The company had raised Rs.250 crore in a round of funding in July 2014 and was burning money to get more customers and drivers on its platform. In the process, it was losing as much as Rs.200 on every ride.  ...On 1 November, TFS decided to play the game. It came up with a simple strategy. Thanks to the higher per km rates, consumers weren’t using the service for short distance travel. So, at the consumer end, TFS dropped rates. To Rs.49 for the first 4km and then Rs.14 per km. But at the driver’s end, it needed to incentivize drivers to pick up rides. So it held on to the old rates for drivers (Rs.200 for the first 10km). So if a customer was pa...

March 11: Snapdeal in talks to acquire Komli Media for $300-M Economic Times March 12: Foxconn may invest $600-M in Snapdeal Business Standard March 16: Snapdeal in talks to acquire logistics firm GoJavas for Rs 200 crore PTI What's today's snap deal? Flipkart seems so last week! Actual / rumoured deals by these guys are what fills Page 3 of the business papers (formerly Page 1 - before Housing.com / Olacabs / Hotstar took that over). And of course, there's  the Uber style bad behaviour . Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

By Arun Natarajan At the dawn of 2014, ad industry executive Ramesh Srivats had jokingly predicted : Flipkart will get a few hundred million dollars from VCs in March, July, and maybe November. With Flipkart raising $1000 million in July to add to the $210 million raised in May and spending (a reported) $300 million on Myntra.com in April, I wonder if Srivats was joking at all. And, if not, what numbers Flipkart will spring in November. The billion dollar deal making it to front pages of mainstream newspapers along with new Whatsapp/Airbnb/Uber triggered waves from Silicon Valley, makes an (unfortunately) old timer like me wonder if “I have seen this movie before”. Flashback The star deal of the 2000-2001 era was of course Sify’s acquisition of content portal IndiaWorld for about INR 500 crore (small change by today’s billion dollar standards but “eye popping” was the descriptor used for it in those days). That “mega” acquisition was promptly followed by companie...