CashKaro may be profitable in next 18 to 20 months 

Shipra Srivastava, Retailer  
New Delhi, 30 December 2016

The Gurgaon-based  cashback  and  coupon website  which has raised Rs 25 crore in its Series A funding round from Kalaari Capital in November 2015, and  a very small amount of investment  from Ratan Tata in January this year, is very close to achieve its break-even.  

In an exclusive conversation with, Rohan Bhargava, Co-founder,, said, “We are very close to our break-even. In fact, we should be profitable in next 18 to 20 months.” The raised funds are being utilised to ramp up marketing, technology and expanding the human resource.  Currently, the company has the human resource of 75 people.  As of now, CashKaro  is earning minimum 10% commission of every transaction that happened via Cashkaro collaborated e-retailer.

The company is scouting for suitable investors to support its future campaigns.  “We would be keen for Series B and C funding from the investors who are sufficiently funded to support us in our future campaigns. We are also looking for expansion in to new countries,” informed Bhargava.

Presently, the company is registering ten to twenty thousand transactions per day, and has tied up close to 1200 online retailers including category leaders like Flipkart, Amazon, Yatra, makemytrip, and so on. The company is in talks with many offline retailers to initiate a programme that would offer an add-on value to customer on existing loyalty programme that is run by the retailer.

Speaking on same Bhargava said, “In next two weeks I will be able to give provide more information on same. We are in talks with many offline retailers.  Again, our offerings will be add-on to existing loyalty programme offered by the retailer.  We would be working with retailer on making customer experience seamless. Our motive is, for customers, the speed of getting the cashback should be great. Same time, the entire exercise should fetch value to retailer. On top of that, the specific needs of the retailer should be addressed.” 

The company is also very bullish on tier 2 expansion. Currently, 40 percent of its traffic comes from small towns. The company is also looking to tap unorganized players (in retail segment) from small towns.

No doubt, affiliate marketing sites like CashKaro can help to maintain a diversity of sources for customer traffic in a cost effective way. In fact, in some cases affiliate traffic may be better as affiliate sites usually already provide some context to the product (for instance, product comparison websites or lifestyle blogs), so the traffic is more of qualified leads.

“Currently, with footfalls and spending being affected by a muted consumer sentiment, cashback deals and coupons can help to create not only traffic, but conversions for brands,” shared Devangshu Dutta, Chief Executive, Third Eyesight.

“However, in the longer term, the business environment for affiliate websites is tougher – over time, with fewer online players to send their traffic to, commissions may be squeezed, margins slabs could be changed, and the period for expiry of a referral may be shortened. Therefore, expanding the offline footprint and deeper penetration into the market is vital for the sustained success of an affiliate marketing player,” he summed up. 

(Published in Retailer)

Grow Up To Find Growth

In 2016, brick-and-mortar modern retailers seemed to have begun recovering their confidence, and cautiously investing in expansion. However, currency shortage has significantly dampened demand at the end of the year. The hangover would continue into the first half of 2017, and consumers could be muted overall on discretionary purchases, including fashion, mobile upgrades and out-of-home dining.

On the other hand, while digital transactions introduce a note of caution (friction) in the consumer’s purchase decision, for e-tailers they do reduce complexity, cash-handling costs and potential returns which could provide significant unexpected wins.

I’ve written about this for years, and don’t tire of reiterating: the retail sector must recognise that shopping is a unified activity for the consumer; physical stores and non-store environments are alternative but complementary channels. Brands can and must use whatever channel mix works for them, and brick-and-mortar retailers need to invest in creating an integrated growth blueprint towards “unified commerce”.

On their part, while e-commerce companies are constrained by FDI policy, they will need to invest more in developing “old economy” strengths – strong product differentiation and distinguishable brands. Fashion, accessories, home decor and other lifestyle products are strong drivers of gross margin for all multi-product retailers, and e-commerce players struggling on the path to profit would focus on these even more, as well as on private labels. They also need to have management teams that are able to cast their minds 3-5 years into the future, while keeping close watch on immediate cash flows. Capital is available, but turning risk-averse. All businesses need to focus on up-skilling their teams, retaining good people, improving processes and adopting technology. In recent years, growth in the retail sector seems to have been driven by a “spray-and-pray” approach, not necessarily management sophistication. Spending like there’s no tomorrow is a sure way to no tomorrow.

In short, 2017 could be the year where the entire retail sector grows up – a lot. We hope.

(This piece was published in The Hindu – Businessline on 29 December 2016).

2016: The year start-ups began their call for protectionism 

Alnoor Peermohamed, Business Standard

Bengaluru, 28 December 2016

The year 2016 will go down in history as a tumultuous one for India’s new economy companies that utilise the reach of the Internet to do business. The year started off on a low in terms of funding and valuations of start-ups, carrying over a sentiment of excessiveness from the previous six months.

It was a contrarian 12 months, with every expert under the sun saying that the fundamentals of the market — growing Internet penetration, increasing per capita income, a strong economy compared to a weak global market — remained extremely strong, yet companies riding on this wave were being punished.

This neglect from investors finally culminated when Sachin Bansal and Bhavish Aggarwal, two of the biggest poster boys for India’s start-up ecosystem, passed on the blame to foreign competition which came into the country with pockets full of cash. To their dismay, the red carpet treatment for foreign firms isn’t going anywhere, with Chinese big-daddy Alibaba planning to make an entry soon.

“My concern would be that 2017 may be a resurgence of aggressive pricing and discounting. It’s great for advertising and the media, but from the point of view of the sustainability of business, from the point of view of having a healthy consumer business ecosystem, you need a balanced approach,” said Devangshu Dutta, chief executive of Third Eyesight. “Just purely from a capital availability point of view and ability to spend point of view, Flipkart and Snapdeal would be at a bigger disadvantage.”

The year began with Prime Minister Narendra Modi’s big push for Start-up India with announcements of a fund of funds, incubation centres and promoting local start-ups across the country. But as the year came to a close, Modi’s move to scrap large value currency hit start-ups as business slowed across industries.

However, one bright spot was digital payment companies such as Paytm, Freecharge and Mobikwik which benefitted immensely from the move, with their user bases and the number of transactions on their platform going up in instantly.

Growth in digital payments, considered the backbone of e-commerce globally, could turbocharge the rest of India’s Internet ecosystem. Experts have dubbed 2017 the year of FinTech in India, with the government’s digital push helping grow and giving rise to secondary digital finance companies that deal in lending, helping consumers invest in capital markets and those that offer services to small businesses for handling the day-to-day running digitally.

Going into 2017, it is to be seen if the confidence in India’s start-up space returns. While angel investments have remained strong, the transition to Series A and further rounds needs to pick up steam. Consolidation in sectors such as e-retail, grocery delivery and food tech could give investors more confidence to return.

The focus on the scale will continue, however. “VC’s today are looking at how quickly can you add your first customer, your millionth customer and your 200 millionth customer. India is a volume game, if you do not get your 10 million customers in 6 months time they feel you have lost the game,” said K S Viswanathan, vice president, Industry Initiatives, Nasscom. 

(Published in Business Standard)

For QSRs, India isn’t a quick-fix but a long game

Dominos India

When American fast food standard bearers McDonald’s and Domino’s Pizza stepped into India in the mid-1990s, the market was just ripe enough for take-off.

McDonald’s and later Domino’s Pizza can be credited with not just growing the consumer appetite for fast food but also for fostering an entire food service ecosystem, including fresh produce, baked goods, sauces and condiments, and cold chain technology.

India has been typically difficult for business models driven by scale, replicability and predictability. The customer is price sensitive, operating costs are high and non-compliance of business standards is a frequent occurrence. In this environment, these brands have reinvented the meaning of meals, snacks and treats.

Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.

Product experimentation has also been an important part of their success; it keeps excitement in the brand alive and help improve footfall. However, how far a product sustains and whether it becomes a menu staple can’t be predicted accurately. New products also need significant investment in both supply chain and front-of-house changes in standardisation-oriented QSRs, so the new product launch cannot be undertaken lightly. This is one reason these successful QSR formats don’t overhaul their menus drastically but make changes incrementally.

For these market leaders, future scale and deeper penetration is only feasible with higher visit frequency. For growth in middle-income India, they need to become a significantly cost-competitive option to be seen as more than a ‘treat’ or celebration destination.

So, while both McDonald’s and Domino’s Pizza have invested significantly in Indian flavours and menu offerings, perhaps it’s also best for them to reconcile with the fact that there will be a significant part of the consumer’s heart, stomach and wallet that will remain dedicated to indigenous offerings.

In a global environment that’s turning hostile to fast food, India isn’t a quick-fix growth market, but it’s certainly one to stay invested in, for the longer term.

And I have no doubt that as much as these companies aim to change India, over time India will also change them.

(Also published in Brand Wagon, The Financial Express)

eBay India’s sales jump three-fold, but losses mount

Richa Maheshwari, The Economic Times
Bengaluru, 27 December 2016

eBay India, one of the earliest online marketplaces in the country, posted a three-fold jump in sales in 2015-16. However, its losses widened to Rs 262 crore in FY16 from Rs 172 crore a year ago despite various costcutting initiatives.

The company posted revenue or income of Rs 392 crore for the fiscal 2015-16, according to its annual filing to the Registrar of Companies. It’s revenue stood at Rs 132 crore in the previous fiscal.

In comparison, Amazon Seller Services’ turnover for the previous fiscal rose 116% to Rs 2,217 crore, while Flipkart Internet’s sales increased 153% to Rs 1,952 crore during the same period.

These numbers are not earnings from actual goods sold on their portals, but transaction and listing fees from sellers and advertising revenue, which form an e-commerce site’s actual income. E-commerce firms charge sellers anything between 5% and 20% of the value of goods as commission.

“eBay is now playing defensive rather than strategic for some time as India is not a priority market for them. They have reconciled themselves as a small player and are now narrowing down their losses,” said Devangshu Dutta, CEO of consultancy firm Third Eyesight. 

“Investments by ecommerce giants Amazon and Flipkart have helped in expanding the footprint of the sector, especially of players with a small base like eBay,” he added.

The company declined to comment. “eBay India is a 100% subsidiary of eBay Inc and as a policy we don’t comment on country-specific financials,” said the official spokesperson of eBay India.

The company is now reducing its workforce in India by laying off engineers and data analytics professionals. Last Month, the company sent across an email to its employees in Bengaluru, saying, “We are also eliminating full time employee (FTE) and additional workforce (AW) roles supporting other domains in Bengaluru.

This is not a cost-cutting decision, rather, it is a decision to focus resources in locations with critical mass.” A copy of the mail seen by ETalso said that eBay will be hiring replacement roles at other locations particularly Shanghai and some in the United States. “A limited number of Bangalore based individuals will be asked to stay on for a transition period or offered relocation to the US.”

San Jose-based eBay bought local auction platform for $55 million (about Rs 344 crore) to enter India in 2004, at a time when online retail was unheard of.

The company, however, lost its earlymover advantage in India to rivals Flipkart, Snapdeal and Amazon as these players took to investing heavily in customer acquisition by offering deep discounts. Last month alone, Amazon invested Rs 2,010 crore in its Indian unit, taking the company’s total investment in Amazon Seller Services to Rs 11,638 crore.

According to a Morgan Stanley Research released early this year, India’s ecommerce market will be pegged at $119 billion by 2020 against the earlier estimate of $102 billion, and the total Indian internet market size (including the online food-aggregation business) will grow to $159 billion from $137 billion.

(Published in The Economic Times)

Private labels to become a $5-bn business for e-tailers in 2017 

Alnoor Peermohamed, Business Standard
Bengaluru, 26 December 2016

The contribution of private labels in India’s online shopping segment is expected to triple to around $5 billion in 2017 as e-tailers try to boost earnings and fill gaps in the market in high-margin categories such as fashion, furniture and home decor.

Private labels make up less than 10% of online sales today, or around $1.5 billion in value, largely driven by fashion retailers such as Myntra, Jabong and Koovs. Going forward, it is expected that this contribution could grow closer to 20% and will also be driven by high-value items such as furniture, according to RedSeer Consulting.

“What horizontal players are doing is they are consolidating buyers of unbranded products in electronic accessories and some few other categories and introducing products in those gaps,” said Anil Kumar, chief executive officer of RedSeer consulting. “This helps them earn additional margins where people really don’t care what brand they’re buying as long as the price is right.”

The largest of the horizontal players, Flipkart and Amazon, are launching new private labels to improve margins in commodity products such as electronic accessories. Flipkart recently launched Smartbuy, an umbrella brand for selling electronic accessories and home decor products, and plans a second brand next year.

Amazon, too, has its own private label Amazon Basics to sell electronic accessories and Symbol and Myx in the fashion space.

Rival Flipkart relies on subsidiaries Myntra and Jabong to drive private label fashion sales, with estimates suggesting around a third of the sales of the two brands being driven by fashion labels.

Amazon did not respond for comments and Flipkart said it was too early to comment as the private labels were launched this month.

With India’s e-commerce expected to grow by 60-70% in 2017, making it a $30-34-billion industry, a sizeable part of that will be driven by sales of private label products. The push for private labels largely comes from investor pressure on e-commerce companies to improve earnings and get on their way to profitability.

“Given how the market is at the moment, where there is pressure from investors who have been asking about profitability or a route to profitability, products that earn additional margins are going to be a focus,” said Devangshu Dutta, chief executive at Third Eyesight.

Globally, Amazon has adopted the private label route, selling everything from groceries under its own brand to electronics such as Kindle tablets. While private labels will grow to contribute under 10% of sales on large platforms such as Flipkart and Amazon, smaller niche players will look at them more deeply.

As of today, online furniture retailers see over 50% of their sales being driven by private labels. Pepperfry and Urban Ladder, the two leading players in this space, almost exclusively sell furniture under their own brand names. In online fashion this contribution is 25-30% while for online groceries it is close to 20%, says RedSeer.

“One reason is that when you’re stepping into a gap in the market, there’s no competition so you are not forced to discount. Secondly, if you’re sourcing it directly and cutting out a brand, the cost of product development and marketing can be made by the retailer,” added Dutta.

(Published in Business Standard)

Amazon on a high! Cloudtail surpasses Shoppers Stop’s revenue; sales up 300%

Sagar Malviya & Shambhavi Anand, The Economic Times
Mumbai/New Delhi, 21 December 2016

Amazon’s largest seller Cloudtail surpassed the country’s largest department chain Shoppers Stop by revenues which grew fourfold during the year to March 2016, highlighting the growing popularity of online buying as well as of Jeff Bezos’ company in India. This has also posed an unusual problem for the world’s largest online retailer which has to slow down sales of its Indian joint venture firm to comply with government norms.

Cloudtail, a JV between Amazon Asia and Infosys founder Narayan Murthy’s personal investment vehicle Catamaran, posted over 300% jump in revenues to Rs 4,591 crore. This is slightly higher than the consolidated revenue of Shoppers Stop at Rs 4,582 crore and almost twice that of the Tata-owned Trent that logged sales of Rs 2,397 crore during the same period. A year ago, Cloudtail had clocked sales of Rs 1,145 crore. Its net loss too has narrowed to Rs 30 crore from Rs 32 crore.

“On paper, Cloudtail is just a merchant on Amazon but essentially the kind of growth it has seen would not have happened without Amazon’s support,” said Devangshu Dutta, chief executive, Third Eyesight, a consultancy firm.

But for all its success, Amazon is scrambling to reduce its dependence on Cloudtail which as of now accounts for over a third of the sales that take place on its shopping platform in India. That’s because government regulations announced earlier this year do not permit a single vendor to account for more than 25% of sales of an online marketplace where foreign money has been invested.

Amazon, Flipkart and other similar marketplaces have to comply with this guideline by March 31, 2017.

Over the last few months, Cloudtail has almost stopped selling mobile phones. Smartphones constituted the largest category of ecommerce sales and formed a big part of Cloudtail’s overall sales in previous years. But it continues to sell Amazon private labels in India.

An Amazon spokesperson said the company has put a process in place to assess the performance of the sellers on the platform and update sellers if they are close to or about to exceed the 25% threshold. 

“Cloudtail is one of the 140,000 sellers that sell on the marketplace. Our marketplace has grown tremendously in the last three years, and sellers have seen growth in business. Our continued belief is that a robust marketplace cannot be built on a single seller focused strategy. We have a robust platform which is open to all,” said the spokesperson. “We have and we will continue to operate within the parameters of the laws and policies of India as we do in each country we operate in.”

Amazon India’s largest rival Flipkart was also heavily dependent on a key vendor, WS Retail, for over three-fourths of its sales until two years ago. But it has gradually reduced its dependence on WS Retail and claims it has moved towards a pure marketplace model which can allow over one lakh sellers to compete on the portal within nearly 80 categories.

India is one of the fastest growing markets for the US etailer and its founder Bezos has pledged to invest $2 billion in local operations. Last month, it invested Rs 2,100 crore in its main India unit, taking total capital invested in Amazon Seller Services to over Rs 7,000 crore in the last 12 months.

The country’s ecommerce market is expected to grow to $103 billion by 2019-20 from $26 billion now, according to Goldman Sachs.

Amazon expects India to overtake Japan, Germany and the UK to become its largest overseas market, besides becoming the quickest to reach $10 billion in gross merchandise value in the company’s history.

It’s showing in Amazon’s performance already. Amazon Seller Services has more than doubled its revenues in the year ended March. It earns its revenues through commissions, advertisements and shipping fees that they charge to sellers.

“Being a third-party market has caused a lot of invention on our side. The team in India has been very creative on whenever they find a roadblock or something that has not existed in another country, they create it themselves, whether from delivery stations to working with small merchants,” Brian Olsavsky, CFO at, told investors in October this year.

(Published in The Economic Times)

Bally eyes India comeback in joint venture with Reliance 

Sapna Agarwal, Mint
Mumbai, 14 December 2016

Switzerland’s 165-year-old luxury brand Bally is returning to India in a joint venture with Reliance Brands Ltd, with plans to open its first store at the DLF Emporio mall in New Delhi in March 2017.

Under the terms of their agreement, the joint venture will invest in building a world class retail experience by investing in training of staff and opening stores.

Bally is the latest addition to the Reliance Brands portfolio which includes Steve Madden, Thomas Pink, Brooks Bro’s, Diesel and Super Dry. The company will establish a network of stand-alone Bally stores across major Indian cities.

“In the future, India is the most important country for us. We want to invest and develop the brand in India,” said Frédéric de Narp, chief executive officer of Bally who took charge in November 2013 to turn it around. “Part of this turnaround strategy is the joint venture in India,” said de Narp, who is credited with the successful turnaround of American jeweller and watchmaker Harry Winston Inc.

Bally first entered India in a franchise partnership with Bird Group, which has interests in travel technology, hospitality and aviation. It had two stores in India, one at the Palladium mall in Mumbai and the other at DLF Emporio Mall. Both these stores have closed in the past two years. The partnership was ended earlier this year.

This time round the company has spent a few years finding the right partner and fine-tuning its strategy for India. “We have been working in developing this joint venture by developing the trust for the last few years,” said de Narp, adding that more importantly, the joint venture is with Reliance, a profitable company and a reliable retailer.

In India, Bally will sell its entire range across men’s and women’s footwear and accessories. The new store will be part of the brand’s global expansion which has seen the opening of two new concept flagships in Tokyo’s Ginza and Los Angeles’ Rodeo Drive this year. The joint venture will open four stores in Delhi, Mumbai, Kolkata and Chennai in the next 3-4 years, said Darshan Mehta, chief executive officer, Reliance Brands.

In its previous partnership, Bally which is part of JAB Holding Company, a privately held group known for its brands like Jimmy Choo, Krispy Kreme and Belstaff globally, “had underestimated the challenges in investing in India,” admits de Narp. “Franchise is a challenging model,” he added. De Narp is looking at investing this time to build a healthy and sustainable business in India.

To be sure, a majority of international retailers that have launched operations in India have come through the franchise route in the last 4-5 years, said Devangshu Dutta, chief executive officer, Third Eyesight, a retail consultancy firm. “Franchise model is a low-risk approach for a retailer who is not entirely sure about the market. It is about experimenting and exploring the market,” said Dutta, adding, “However, once they have committed they prefer to invest.”

(Published in MINT)

Is there life after startups? Here’s what these founders did next 

Suparna Goswami Bhattacharya, TechinAsia

Bengaluru, 12 December 2016

The entrepreneur overcoming all hurdles to emerge as an icon for millions – that’s the typical positive story startup media is abuzz with. Such narratives are often considered the only way to attain startup goals. In the clamor, we can forget that each startup journey is unique: before tasting success, even successful entrepreneurs have faced failure.

The startup narrative can be one-sided, observes Sharad Sharma, co-founder of Indian tech industry think-tank iSPIRT. “So many startups fail, but there’s no focus on those entrepreneurs. Then there are small companies which do not enjoy high valuation[…] Their learnings can make a big impact in the startup ecosystem.”

Rude awakening

True. Not all entrepreneurs have to be the next Sachin Bansal or Mark Zuckerberg. And this should be fine, as long as they are fulfilling their dreams. 

Shakir Basha couldn’t agree more. He’s the founder of Zippon, a packing and moving service, which eventually had to shut shop. 

“I believe in setting up a profitable business on a small scale and gradually taking it to higher levels, especially when you lack business skills and you are a first-timer. But many in today’s generation want to aim for the sky, forget to keep their roots intact and hence fail at what they do. I have personally faced that,” he says. (Right: Zippon founder Shakir Basha. Photo credit: Shakir Basha)

Little wonder then that Aishwarya Raman, who started auto-rickshaw app AutoRaja, found peace working as a zonal head for Ola Auto.

“My main motive of starting AutoRaja was to make the auto-rickshaw drivers a part of the organized sector. Here at Ola Auto, I’m working with the same motive – of course, on a much bigger scale,” says Aishwarya. 

In September 2015, AutoRaja shut down mainly because of lack of funds. After lying low for a few months, Aishwarya decided to give her dream another shot.

(Above: Aishwarya Raman founded rickshaw aggregator AutoRaja. Photo credit: Aishwarya Raman.)

This time, the approach was different. “I didn’t want to start another company immediately. Though my parents encouraged me not to give up on my dream, I thought I should gain experience by working in a similar industry but with a different setup.” She approached Ola and they were more than happy to hire her, given her relevant startup experience.

It’s common to battle a funding crunch after your startup closes: that’s when working a regular job provides a much-required cushion. Case in point: Akash Sharma, who founded Delivree King, a tech-enabled logistic startup, and Fitfood, a healthy food delivery company. He now works for MobieFit, a fitness app. “To say that I am disappointed as my previous ventures did not work will be an understatement. But I’m happy to be part of the food and fitness industry, which I’ve always wanted. What life has to offer in terms of opportunities is not known yet, but for now I am happy working and gaining experience,” says Akash.

Not all entrepreneurs have to be the next Sachin Bansal or Mark Zuckerberg.

It’s all about timing

2015 saw many startups shutting shop. For Akash, Delivree King and Fitfood were victims of market corrections. Delivree King specialized in four-hour delivery and guaranteed same- and next-day delivery, besides offering promotional services for its clients. It had to be shut down for want of funds. For Fitfood, the timing, unfortunately, was not right.

“I started Fitfood when food-tech companies were growing. However, by the time it reached a stage where we needed funds, none of the venture capitalists we approached were ready to even look at the company. The timing was bad,” rues Akash. (Left: Akash Sharma founded FitFood and Delivree King. Photo credit: Akash Sharma.)

For Tapan Kumar Das, access to venture capital wasn’t a problem. The founder of online meal service iTiffin faced a different problem: low investor confidence. “There was a lot of negativity around the food industry. I had to choose between burning my money or shutting down,” he says, adding that there’s still scope for innovative food-tech companies despite negativity around the industry.

Knocking at the wrong door

Entrepreneurship is a place of constant comparison. There is a pressure to raise a certain amount which will eventually land them adequate press coverage. However, raising funds from VCs is no cakewalk – especially if one is not part of the networking circle.

“There is an expectation that all entrepreneurs either have to be from an IIT, IIM or one of the top two-three institutes in the country,” says Sukanth Srivastav, who founded Tooler, a laundry startup. He’s referring to India’s elite Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs). “The fact remains that a business can be run by anyone who has an aptitude. We don’t need to complicate things.”

It’s a tough world out there, especially if you are not well-networked.

Graduates of IITs and IIMs typically have large networking circles, of which venture capitalists are also a part. “My experience with VCs has not been pleasant. I had met many of them during my startup stint but the purpose of their funding is different from what we wanted to achieve as a startup,” Sukanth says.

The experience taught Sukanth an important lesson: don’t go by the hype. “Newspaper reports are replete with stories of VCs out there looking to fund you. This is not the reality. It’s a tough world out there, especially if you are not well-networked.” Aishwarya’s experience with VCs was also unpleasant. “I guess I approached the wrong VCs; they never believed or understood what I wanted to do.”

Pressure-cooker scene?

Failure is not taken lightly in India – or, for that matter, in any country. 

Says Devangshu Dutta from Third Eyesight, a retail- and consumer-focused consulting firm, “There’s nothing wrong with aiming high. But entrepreneurs should not feel like failures when their company does not reach a particular size or valuation.”

Then there’s family pressure to look for a stable monthly source of income. “I come from a family where my father has spent his entire professional career in one company. They do not understand this concept of joining a startup or starting a business. After my startup stints, I was left with no money. My mother would often ask why I am wasting my IIT degree on startups when MNCs are ready to offer me high-paying jobs. So yes, I felt that pressure,” says Akash.

For Sukanth, the situation was more or less the same. “In terms of financial growth, I have made zero progress. I did not have the heart to borrow from my parents to start another company. There is enough pressure from society to earn a certain amount. In fact, no one believes in your dreams until you start making money. That’s the hard fact.”

Editing by Neha Margosa, Michael Tegos, and Steven Millward

(Published in TechinAsia)

Markdowns A Good Wake-Up Call For E-Commerce Companies, Say Investors

Nishant Sharma, Bloomberg Quint

New Delhi, 2 December 2016

In its ever biggest markdown of the Indian e-commerce company, a mutual fund managed by Morgan Stanley slashed Flipkart’s valuation by 38 percent on Tuesday. With this, the valuation of the country’s most valuable internet company stood at at $5.54 billion – the lowest since September 2014.

But Flipkart is not alone. Japanese investment giant Softbank earlier this month, announced a 58.1 billion yen ($513 million) investment loss in two of its biggest investments in India – cab-hailing firm Ola (ANI Technologies Pvt. Ltd) and e-commerce marketplace Snapdeal (Jasper Infotech Pvt. Ltd).

This comes at a time when these companies are looking to raise additional funding.

Reality Check

The country’s top startup evangelists and investors are not too worried though. Investors BloombergQuint spoke to said that a markdown in valuation is a much-needed market correction which will bring maturity in the Indian startup ecosystem that saw euphoric valuations over the last two years.

“This is nothing but a natural cycle that is bound to happen”, said Ben Mathias, managing director of Vertex Ventures in a telephonic interview. Vertex Ventures is the venture capital arm of Singapore state investment firm Temasek Holdings. “Last two years, there was a lot of rapture around startups and valuation were driven up because of that. The situation wasn’t limited to India but was also seen in Silicon Valley, China and other markets. What we are seeing today is a rationalisation of valuations and expectations. A needed market correction has taken place.” 

Raising heaps of money from late-stage mutual funds and cross-over funds in a heated fund raising environment leads to bubble valuations which increases the risk of potential markdowns when the market cools off, added Anshuman Verma, founder and managing director of venture capital firm M1L and a former partner at Accel Partners.

The Indian startup ecosystem was booming till 2015, with venture capital investments flowing in. Indian startups raised $5.5 billion (Rs 36,000 crore) from VC firms and angel investors in 1,096 deals, in 2015 alone, according to data compiled by research firm VCCEdge.

Tough Times Ahead?

The markdowns may cause promoters some pain as they will have to dilute a higher stake to raise funds, but industry experts said that if the company performs well and is able to meet its targets, lower valuation will not necessarily dent their ability to raise more funds.

“You can’t raise money on valuations alone. There are key metrics like profitability, margins, return rates. All this is what really matters and is what investors focus on while making investments,” said Sunil Rao, Partner, Lightspeed Venture Partners

Mathias of Vertex Ventures added if a company has reached the target it has set for the year, it shouldn’t worry about raising funds. It can raise money at robust valuations, despite markdowns.

Not everyone shares that view though.

“Trying to raise money for your venture post meaningful markdowns is akin to trying to refill and write with a broken (leaking) pen. It is tiring, messy, and irritating to write with such a pen. Isn’t it? Markdowns are demoralisers for companies, and act as leakers.” said Anshuman Verma, Founder and Managing Director, M1L

Lessons From Markdowns

Verma’s advice to e-commerce entrepreneurs is they should look at markdowns as a wake-up call. “They should consider markdowns as pointers to fundamental problems in the business that must be solved. It should push them to become more realistic, pragmatic and action-oriented,” he said.

According to Devangshu Dutta, chief executive at management consulting firm Third Eyesight, markdowns are a sign that investors were far more bullish and aggressive earlier, a view they no longer hold. “If the survival of the company depends on raising funds at lower valuations, one should do that. Survival should take precedence over valuations,” he said.

Verma said that with subsequent markdowns the startup ecosystem will see non-prudent founders and their investors accept the harsh realities of the art of markdowns.

“We will see further humbling of such founders/investors/companies. Many from the ecosystem still have not come to terms with the reality of loss-making in late-stage ventures in India. Few larger internet ventures are not accepting the state of affairs as they are, and this could be the starting point of all the problems,” he said.

(Published in BloombergQuint)