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

1. Analysis of VC
funding in the Indian
E-Commerce space
By Aravind G.R and
Deepak Srinath
Dec 2012
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Allegro proprietary data

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. VC Investments by Category (Post Pivot Positioning)
2 Home Décor $10 Mn
2 Jewellery $10 Mn
Health &
2 $10 Mn
Number 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
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Allegro proprietary data

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)
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Allegro proprietary data

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 sector
Qualcomm 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
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Allegro proprietary data

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
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Allegro proprietary data

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
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Allegro proprietary data

8. CONTACT US
Deepak Srinath deepak.srinath@allegroadvisors.com +919845499822
Aravind G.R aravind.gr@allegroadvisors.com +919901288004
ABOUT US
Bangalore (Head Office)
9th floor, “The Residency”,
2 Residency Road, Bangalore 560 025
Allegro Capital Advisors is an independent full service Ph: +91 80 6707 0100
investment bank with offices in Bangalore, Mumbai and
Gurgaon Mumbai
ERA, 1st Floor, NM Wadia Building, 123,
Allegro’s Corporate Finance team specializes in fund
raising, debt restructuring, IPO advisory and domestic & MG Rd, Fort, Mumbai 400 001
cross border M&A Ph: +91 22 6060 7888
Sector expertise includes Technology, Digital Media, Gurgaon
Pharmaceuticals, Biotechnology, Healthcare, Consumer, No. 403, 4th Floor,
Power etc. Solitaire Plaza, MG Road,
Gurgaon 122 002
Web: www.allegroadvisors.com
Ph: +91 124 6060 788
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Allegro proprietary data