VC Investment in Indian Ecommerce 2013

Less than 15 out of 53 Venture Capital Backed E-commerce Companies in India Will Survive 2014

Of the fifty three venture capital funded ecommerce players, it is unlikely that more than 15 will survive as independent entities by 2014, according to a new report. Of the ecommerce companies that have raised close to $853 million venture capital over the past 3 years, only 30 % could raise the next round of funds.

Out of the 53 companies which managed to raise nearly $191 million in series A, 11 firms went on to raise $245 million in series B and and 10 companies went on to raise $417 million in further rounds taking the total to about $853 million, according to a study conducted by Bangalore based Allegro Capital Advisors.

The investment figure includes Snapdeal $50 million funding and excludes angel and individual funding into the sector. As of now in 2013, the ecommerce sector saw 9 follow-on investments with cumulative value of $155 million. Meanwhile, there were no fresh series A investment recorded during the period (Jan 2013-May).

VC Investment in Indian Ecommerce 2013
Venture Capital Investment in Indian E-commerce (Source: Allegro)

The report highlights the rising trend of investment into merged ecommerce entities like Babyoye-Hoopos and Zovi-Inkfruit. Both Babyoye and Zovi raised $12 million and $10 million respectively post merger.

Unlike 2012, this year smaller players are merging and raising funds to compete effectively against leaders in the space. Majority of the merger and acquisition are cashless stock deals and similar deals can be expected in the short term.

Indian E-commmerce Marketsize & Funding in 2013

The Indian ecommerce industry is expected to touch $13 billion in revenues by 2016 with significant growth coming from marketplace model and offline brands – which will harness the online channel. Marketplace model will thrive in ecommerce as it weeds out the pain of keeping inventory, and horizontal players are more likely to adopt this model.

Currently, Series A is almost non-existent and there is a series B crunch for ecommerce companies in India.  However services enabling ecommerce such as payments, logistics and technology may attract investor’s interest.