Not just the biggies: E-commerce start-ups attract funds, talent | business | Hindustan Times
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Not just the biggies: E-commerce start-ups attract funds, talent

business Updated: Aug 14, 2014 01:24 IST
Manu P Toms

It isn’t only the big boys of Indian e-commerce, such as Flipkart and Snapdeal, that are attracting millions and, in the case of India’s largest e-commerce firm Flipkart, billions, of dollars from across the world.

Much smaller players are also getting crores of rupees from Indian and overseas investors.

Emerging online startups in sectors as varied as taxi, real estate, education, healthcare and home décor are the flavour of the season.

And they’re attracting talent from top schools such as the IITs, IIMs and the Indian School of Business. What drawing youngsters is the stock options these companies offer and the possibility of cashing out with a fat windfall in the event of a listing or a buyout.

In July alone, for instance, online car rental company OLA Cabs and e-commerce furniture company Urban Ladder got $41 million (about Rs 250 crore) and $20 million (Rs 120 crore), respectively, from Steadview Capital and Sequoia Capital, and Steadview, SAIF Partners and Kalaari Capital.

Online real estate advisorsy firm PropTiger and e-healthcare company Practo are in talks with investors to raise about $20 million each.

The surge of investor interest in Indian e-commerce start-ups has raised fears that at least some of them may be overvalued. Kunal Bahl, founder of Flipkart rival Snapdeal said as much soon after Flipkart raised $1 billion (Rs 6,000 crore).

“The Flipkart valuation does not make any sense,” agreed Mahesh Murthy, managing partner of early stage investor Seedfund, which held RedBus, Afaqs and Carwale in its portfoloio, adding that many others, however, remain value buys.

“We are bullish about Indian consumer-focussed internet and e-commerce companies as long as they stay out of the shadow of American companies and do not try to replicate their business models,” he said.

Prashanth Prakash, a partner at Accel Partners refuted suggestions that India’s largest e-commerce company is overvalued.

“Tech valuations are always a function of two things – the quality of leadership and size of the market opportunity. Investors are giving those valuations as they see a fundamental change in the buying behaviour in this country,” he said. Venture capital fund Accel manages $9 billion (Rs 54,000 crore) globally, and has investments in Facebook, Groupon, Dropbox and Flipkart, among hundreds of others.

Rajiv Srivatsa, co-founder of Urban Ladder, said the company received funding even before it had fully utilised the $5 million (Rs 30 crore) it had raised eight months ago. In its second year of operations, Urban Ladder has crossed Rs 100 crore in revenues, and plans to triple its team size to 450 this year. Srivatsa believes the company will cross the Rs 500-crore turnover mark in three years. That will make it comparable to the big brands in India’s widely scattered home furniture market.

Most of the 30-member team of Toppr are IITians. OLA Cabs, with 550 staff, has around 50 from IITs or IIMs, while 12% of PropTiger’s 500 employees are from IIT, IIM or ISB.

A shakeout is inevitable. But for now, there’s no sure way of differentiating winners from also rans.