Fresh funding from GIC and investors Tiger Global, Nexus values e-commerce firm at over $1.1 billion
New Delhi: There’s a new unicorn in India, and its name is ShopClues.
Less than fifteen months ago, investors and analysts were uncertain about ShopClues’ survival. The firm was still coping with its founder Sandeep Aggarwal’s departure and was in the process of raising funds to keep the business alive.
On Tuesday, the online marketplace for masses (as the website sees itself) announced that it has raised a fresh round of funds led by sovereign wealth fund GIC Pte Ltd, with participation from existing investors Tiger Global Management LLC and Nexus Venture Partners, at a valuation of more than $1.1 billion.
Though the company did not disclose the amount raised, two persons close to the development, and who spoke on condition of anonymity, estimated it at $100-140 million. “The money is expected to come in tranches," said one of the two people mentioned above.
The company’s move to raise capital from the public markets fund at GIC is being viewed as a strategic step towards an initial public offering (IPO) in 2017.
GIC was the pre-IPO investor in China’s Alibaba Group Holdings Ltd as well as JD.Com Inc.
“Today, we are the dominant player in low price-point and unstructured categories like lifestyle, home, kitchen, electronic and automotive accessories, etc. Our focus on selection, value and trusted shopping for Indian middle-class consumers has given us tremendous scale with a rapidly growing buyer and merchant network. We are confident that our capital efficiency and execution will make this our last fund raise before we become profitable with the eventual IPO in 2017," said Radhika Aggarwal, co-founder and chief business officer at ShopClues.
Investors seem to like ShopClues because it is not running the same race as Flipkart, Snapdeal and Amazon India. Not only the buyers, but even the sellers on the platform are different. The firm is focused on taking unstructured categories online.
ShopClues, which counts the Indian middle-class looking to buy unbranded goods as its target clientele, currently ships over 3.5 million items and gets over 100 million visitors a month.
The company has 350,000 sellers on its platform with 80-85% sellers live at any point of time.
ShopClues said its gross merchandise value (GMV, or the cost of goods sold) has grown over four times since January 2015 and that it expects to be profitable by the first half of 2017.
During 2015, when Flipkart and Amazon India were focusing on structured categories, such as smartphones and branded apparel, ShopClues sold millions of mosquito killers with night lamps and cow dung cakes during the Hindu festival Navratras.
From helmet locks to screwdrivers, and from unbranded apparel that starts at ₹ 199 to unbranded appliances, ShopClues has hit the sweet spot.
“It has occupied the space of a Sarojini Nagar (a neighbourhood of Delhi popular for inexpensive unbranded clothing) while others are in the category of malls," said Sanjeev Aggarwal, a co-founder at Helion Venture Partners, an early investor in ShopClues. “The needs of customers in tier II and III markets is very different from metros. ShopClues caters to the real India."
The marketplace, run by Gurgaon-based Clues Network Pvt. Ltd, will use the money to build new products in order to enable small and medium enterprise (SME) merchants digitize their business and further entrench itself as the e-commerce operating system on the cloud, the company said in a statement.
“As a long-term investor, GIC believes in the strong growth potential of India’s e-commerce industry. We are confident that ShopClues’ merchant-first mindset and solid management team will enable the company expand its reach, especially in the tier-II and tier-III cities, bringing its unique value proposition to even more consumers and merchants," said Ravi Balasubramanian, GIC’s head of Asia Equities Research.
For ShopClues, home and kitchen is the fastest growing category, followed by fashion.
ShopClues was founded in 2011 by Sandeep Aggarwal, who bootstrapped the company with his own funds and angel money that he raised from his friends and family till the first institutional raise of $4 million in January 2012. He stepped down as the chief executive after he was arrested for alleged insider trading in the US where he was an analyst, in mid-2013.
In January 2015, ShopClues received $100 million in a funding round led by Tiger Global, the investment firm that backs India’s largest online firm Flipkart and China’s Alibaba.
Between Flipkart that caters to the slightly premium online customer and ShopClues that targets the mass audience, Tiger Global has enough market share in the overall e-commerce market of India.
“ShopClues has consistently demonstrated that hyper growth and strong business fundamentals are not mutually exclusive. The recent addition of GIC and the continued strong support from our existing investors is a validation of our capital efficiency with a clear path to profitability. This investment will enable us to double our focus on digitizing our merchants’ businesses so that they scale to fully leverage the opportunity online commerce provides them," said Sanjay Sethi, chief executive and co-founder of ShopClues.
In December, Mint reported that ShopClues.com was looking to invest close to $50 million in either buying stakes in or completely acquiring as many as eight start-ups to accelerate its expansion. The firm is looking to clinch deals in the so-called hyperlocal, ad-tech and Internet payment domains over the next six months.
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