Bengaluru: Online baby products store Hopscotch, owned by Hit The Mark Inc., is in advanced talks to raise about $20 million in a Series D funding round from a clutch of new and existing investors, a move that will give the five-year-old firm ample firepower to hold fort against larger rival Firstcry, said two people aware of the development.
Hopscotch, founded by Harvard Business School alumni Rahul Anand and Lisa Kennedy in November 2011, has received commitment from new investor IIFL Seed Ventures Fund, a unit of IIFL Holdings Ltd, the two people said on condition of anonymity.
The company had earlier raised at least $25 million in three funding rounds between May 2014 and February 2016 from a clutch of investors including Facebook Inc. co-founder Eduardo Saverin, Velos Partners, Jabbar Internet Group, LionRock Capital, Rise Capital and Toivo Annus, one of the early employees at Skype and founder of Ambient Sound Investments.
“Most of the existing investors, including Velos Partners, have participated in the round. Hopscotch has got some good traction and there aren’t many competitors, which helped the company raise another round,” said one of the two persons cited above.
Hopscotch co-founder Anand denied the development. An IIFL Holdings spokesperson did not respond to an email seeking comment.
Hopscotch sells apparel, storage units, shoes, toys, school bags, stationery and fashion accessories among others for children, having partnered with brands such as Campana, D’chica, Jaybee, Dress Up Dreams, Disney, Frangipani, Skiphop, Intex and Altius among others.
This apart, the start-up also sells kitchenware and home furnishings, an attempt to expand its offerings.
“This has essentially become a private label play, hence it becomes an interesting business as the margins are good. While some of the incumbents are marketplaces, the end destination is private labels. For instance, even Firstcry did not start with private labels, but they have a sizeable portfolio now.
“Baby care is a relatively small segment, but is expanding fast. There aren’t many offline businesses in this segment as well. Hence, there is ample opportunity to create a brand,” said Abhishek Goyal, co-founder at Tracxn, a start-up tracker.
While start-ups in segments such as food delivery and grocery delivery were flush with funds in the heydays of 2014 and 2015, not many start-ups in the baby care segment managed to court investors. According to data from Tracxn, about 75 baby care start-ups were founded in 2015 as against 33 in 2016. As much as $48.2 million was invested in the sector in 2015, which marginally increased to $54.6 million last year.
According to a report by KPMG and CB Insights, Indian start-ups raised $3.3 billion in 2016 across 859 deals, as against $8.2 billion across 890 deals in the previous year.
Hopscotch, which has restricted its scope to online sales, mainly competes with Firstcry (Brainbees Solutions Pvt. Ltd)—the most well-funded start-up in the segment, having raised about $130 million from a clutch of investors.
Firstcry expanded its lead over other incumbents last year after acquiring the franchise division of Mahindra Retail Pvt. Ltd, a subsidiary of Mahindra and Mahindra Ltd, which owns online baby care business BabyOye, for Rs362.1 crore in a cash and stock deal.
The acquisition helped Firstcry significantly expand its offline presence to about 300 physical stores in 125 cities, Mint reported in October.
Mahindra Group had acquired BabyOye, which had raised about $15 million from Tiger Global Management, Accel Partners and Helion Venture Partners, for an undisclosed amount in February 2015.