Bengaluru: Trendsutra Platform Services Pvt. Ltd, which owns online furniture marketplace Pepperfry, has raised $100 million (around ₹ 600 crore) in a Series D funding round led by Goldman Sachs Group Inc. and Zodius Technology Fund, the company said on Monday. Existing investors Bertelsmann India Investments and Norwest Venture Partners also participated in the round.
Representatives from Goldman Sachs and Zodius will join the company’s board. Manipal Education Group chairman T.V. Mohandas Pai and chief executive of Manipal Education and Medical Group Ranjan Pai also participated in the funding round through Zodius Technology Fund.
The company, which was founded by former eBay executives Ambareesh Murty and Ashish Shah in 2011, has raised $28 million in three previous rounds, the last being a $15 million round in May 2014, in which Bertelsmann India Investments and Norwest Venture Partners took part.
Avendus Capital was the exclusive financial advisor to Pepperfry in the latest round.
The funds will be used to open more distribution centres in an attempt to expand the company’s reach in small cities and towns and strengthen its logistics network, which comprises a fleet of more than 300 vehicles at present.
Pepperfry is aiming at a three-fold increase in the fleet size. Significant investments will also go into technology, engineering and marketing. Besides, the company plans to shore up its offline presence through the launch of about 15 more so-called experience centres, in addition to the present six, in the next 12 months. Customers will be able to experience its products first-hand at the centres before placing an order.
“With the investments that we are planning to make, we will be able to accelerate our lead over competitors," said co-founder and chief executive officer Murty.
“We will become a billion-dollar business in two to three years from now," he said.
The company claims to have about 2.5 million unique monthly visitors and more than 1,000 merchants on its marketplace.
Pepperfry estimates the domestic furniture and home products market at $32 billion, poised to increase to $71 billion by 2020.
The market is highly unorganized, with industry experts estimating that less than 5% of businesses are online. According to a Goldman Sachs report, the present Indian e-commerce market is worth an annual $20 billion, poised to grow to $300 billion by 2030.
Investors have been bullish about the online furniture space. While companies such as Pepperfry and Sequoia Capital-backed Urban Ladder, which so far raised has raised $77 million in four rounds, are the leaders in the segment, businesses like Livspace and HomeLane have been growing with their niche offerings.
For instance, Livspace offers readymade home-design solutions while HomeLane offers customizable kitchens, wardrobes, entertainment and vanity units—segments which both Pepperfry and Urban Ladder are also chasing.
The furniture segment has also caught the attention of online marketplaces such as Flipkart, Snapdeal and Amazon. Flipkart, for instance, has tied up with home retail brands like HomeTown and HomeStop in an attempt to capture a larger share of the furniture market. Snapdeal is also bullish on the furniture and home décor segment.
According to experts, the high margins and bigger ticket size of about ₹ 10,000-12,000 make vertical businesses such as Pepperfry and Urban Ladder a lucrative proposition for investors.
“They have their own brands, own merchants and run their own promotions. If you sell your own brands, the margins can be as high as 60-70%. Besides, they have a significantly high lifetime value for customers, which can run into a few lakhs," said Harminder Sahni, founder of advisory firm Wazir Advisors.