Bengaluru: Lower valuations caused by a funding crunch have brought barbarians into the gates of some large Indian start-ups, to paraphrase the title of a famous business book.
Since late last year, some well-known start-ups have sold for prices that were lower than what their investors had put into these companies or what the companies were worth in their last funding rounds.
While not quite as high-stakes as the bidding war in the 1980s for tobacco company RJR Nabisco (a story chronicled in the book, Barbarians at the Gate), the sale of Jabong, an online fashion retailer, last week was packed with drama: the suitors included two online shopping stores that are arch-rivals and some of India’s largest offline retailers. In this case, however, the presence of several bidders didn’t push up Jabong’s price: the final sale value of $70 million capped one of the most precipitous declines of a once high-flying start-up.
Mint lists distress sales of start-ups since the start of the year.
Jabong to Flipkart
Flipkart Ltd bought Jabong in a cut-price deal that values the online fashion store at $70 million, moving to preserve its position as India’s no.1 e-commerce marketplace in the face of an onslaught by Amazon India. Jabong’s promoters, Kinnevik and Rocket Internet, had pumped in some $250 million into the company since 2011, according to a Times of India report. In September 2015, Jabong was seeking a valuation of $500-800 million. Read here.
FabFurnish to Future Group
The Kishore Biyani-led Future Group purchased online furniture store FabFurnish for just Rs.15-20 crore in April. FabFurnish was another company launched by Germany’s Rocket Internet, which together with Kinnevik invested more than $30 million into the company. FabFurnish lost out to local rivals Pepperfry and Urban Ladder, and Rocket was forced to take a massive haircut on its investment. Read here.
CommonFloor to Quikr
Online real estate firm CommonFloor unwillingly sold itself to Quikr India Pvt. Ltd, an online classifieds site, for an estimated $120 million in stock, in a deal orchestrated by common investor Tiger Global Management Llc. While the sale price was more than what CommonFloor had raised (around Rs.321 crore since starting out in 2011), it was lower than its valuation of $150 million when it last raised its last round in December 2014. Analysts say CommonFloor may have fetched a much lower price if it wasn’t for the presence of Tiger Global. Read here.
Tinyowl and Roadrunnr
This was another merger pushed through by common investors looking to cut losses. Food ordering app Tinyowl Technology Pvt. Ltd, which raised more than $20 million in funds from Sequoia Capital, Nexus Venture Partners and Matrix Partners, was struggling to compete with Swiggy and Zomato.
Logistics start-up Roadrunnr, on the other hand, got into trouble after a rumoured deal fell through. Roadrunnr had raised $10 million from Sequoia and Nexus in one of the largest Series A funding rounds raised by an Indian start-up but that cash soon ran out as the company offered low rates to attract e-commerce firms, food delivery apps and other clients.
The common investors at the two start-ups orchestrated a deal in order to try and salvage whatever they could of their original investments. The merged entity, Runnr, is now a food ordering app and provides logistics services to third parties. Read here.