The e-commerce leader’s latest round of funding matters to startups not jut in terms of further investment inflow.
On 12 April, Zestmoney Co-founder and CEO Lizzie Chapman ran into Flipkart Co-founder and Group CEO Binny Bansal on a flight to Barcelona, just two days after Flipkart announced raising $1.4 billion from the likes of Tencent, eBay, and Microsoft.
“I said to Binny, THANK YOU for saving the startup industry in India. We are all relieved. All the global investors we spoke to last year were like ‘oh e-comm [sic] in India is dead’. No way is it dead!” Lizzie told YourStory over WhatsApp.
Being the poster boy of the Indian startup ecosystem, Flipkart’s success and failures have an impact. The news of their latest round of funding has brought about excitement for startups. “The round demonstrates the confidence restoration of foreign investors in the Indian startup story,” says Varun Khurana, Co-founder of agri-focused supply chain startup Crofarm.
There is surely hope for more investment inflows; many are also expecting the second revolution in e-commerce, with focus on profitability, along with more consolidation.
After the second half of 2016, many funded startups have had massive layoffs, down-scaling, and the shutting of operations. Subsequently, the media started painting a gloomy picture for the ecosystem, regularly putting forth forecasts of doom for startups. But it looks like the beginning of spring now.
Icebreaker for investors
Six startup founders with whom YourStory spoke to said they have been asked by investors to wait till the return of heavyweight investors like Tiger Global, Softbank, Tencent et al. Startups who were seeking Series A and B investments have been told to wait and watch till curtain rises on funding for the heavyweights, including Flipkart and Snapdeal.
Says the founder of a logistics startup on condition of anonymity: “I have been talking to multiple VCs for Series A financing for over three months. Most of these conversations have revolved around the prospect of a next round in Flipkart.” Now, after Flipkart’s mega round, he sees more chances of closing investment for his two-year-old startup.
Data also validates the concern of Series A and B investors last year. Seed funded startups are finding it hard to break the Series A bottleneck. According to YourStory’s data, during 2016, only 45 Series A deals were materialised, while Series B investments slowed down too, with only 29 deals.
In stark contrast, in 2015, things were flourishing, with about 81 Series A and 64 Series B deals getting closed. “More Series A and B deals materialised because of participation of heavyweight investors in Flipkart, Snapdeal, Oyo, and Grofers,” says the founder of a large last-mile transportation company, on condition of anonymity. The Gurgaon-based company has been trying to raise a Series B round for six-eight months now. Apparently, a couple of investors whom they had approached earlier are now interested in meeting – after news of the Flipkart funding.
Arjun Zacharia, Wooplr Co-founder and CEO, says, “Investors have been asking about the Flipkart situation, as the company has had a lot of negative PR. There was negative sentiment among investors even for smaller/early-stage startups. After all, the bell ringer of Indian e-commerce being in trouble is a cause of concern for them – they would be worried about whether their investment was safe.” Arjun believes that that question will stop now, and it will help push smaller cheques in pre-Series A.
Flipkart is the benchmark for the startup ecosystem in the country, from an investment perspective. Ankur Warikoo, Founder and CEO, Nearbuy, says, “No one denies that India is a long term story. What people are jittery about is whether now is the right time to enter. Having Tencent, eBay, and Microsoft backing them up is definitely going…