Shifting trends of venture capital in Indian ecommerce: A report by Allegro

Over the past 3 years, 53 ecommerce companies have raised approx USD 853 Mn in venture capital, as shared in a recent report by Allegro advisers. The report also says that current e-commerce market is at a similar stage to China 5 years ago, with horizontal players adopting amazon’s blended model, followed with more offline brands going multichannel in their retailing strategy.

However, the report does not include deals having seed and angel funding till May 2013. Also, Jabong and other Rocket Internet backed firms are not included in this report as investment data has not been disclosed.

The current report is an update of the allegro’s analysis of VC investment in Indian ecommerce space in Dec 2012.

Here are some key highlights from the report:

In the past 3 years, 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.

Of the 53 firms who raised Series A (Total: USD 191 Mn), only 11 companies have managed to raise series B (Total: USD 245 Mn) and 10 companies were able to raise series C and D (Total: USD 417 Mn).

Horizontal etailers have raised around USD 458 million, maximum in the sector followed by Apparel and accessories industry with USD 189 million.

Key deals (Jan – May 2013)

As per Allegro, no series A investment was done in this period. Total investment was around USD 155 Mn with around 9 follow on investments.

Merger and acquisition trend

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The analysis shows that 2012 trend of M&A deals where category firms are being acquired by horizontal ecommerce players has seen a shift to cashless stock deals with Tier-2 players merging and raising funds to compete effectively against leaders.

Funding and Exit Trend

Series A and Series B funding for ecommerce sector will continue to be a challenge for most of the startups. However venture debt financing could be a possible option for ecommerce companies needing funds.

Future propositions

By 2016, the Indian ecommerce market is expected to reach USD 13 Bn, with marketplace models expanding from Tier II/ III cities to service national demand. There will be significant rise in offline brands tapping the online channel through own ecommerce sites and on marketplaces. The report shows a rising trend of investment into merged entities, which will drive more such similar mergers in the sector.

Founded in 2002, Allegro advisors is a full service investment bank that builds value for a spectrum of clients. Get full report here