Nikhil Pahwa and NT Balanarayan
Update: Yebhi has mailed us to clarify that its current investors still have the right to board seat and are likely to appoint directors soon. It also said that all its current investors will definitely participate in the new round of funding. Please do note that we did not in any part of the story mention that the investing firms have given up their rights to appoint board members. Also, we did not write that the investors will not be part of the next round, the story only states that they will not be leading the round.
Earlier: Online fashion and lifestyle portal Yebhi is looking to raise $30 million in the coming months, it’s co-founder and CEO Manmohan Agarwal told MediaNama, though two of its investors – Fidelity and Nexus Venture Partners are not going to participate. In fact, two of its board members Raul Rai, MD of FGPI and Suvir Sujan co-founder of Nexus Venture Partners quit from the board of directors 0f BigShoeBazaar Pvt Ltd in September. “The financing environment in e-commerce is tough. Most of these guys are early stage small investors and feel that they can’t take lead any further in investing and take the company forward. In this situation they feel it’s not their moral right to sit on the board if they are not financing their investors; so they are only waiting and watching,” Agarwal said.
Sujan declined to comment on his departure from BigShoeBazaar’s board, or on whether Nexus VP had written off its investment in the company. However on his blog, while talking about “me too” business ideas, he raised these questions to e-commerce startups in India, “Is there brand loyalty while shopping online in India or are consumers price sensitive? How does one pay in a largely cash dominated society in India?”
Agarwal doesn’t think the investors have written down the investments, and pointed out that the company has two other investors (Catamaran Ventures and Qualcomm) too who have entitlement of a board seat but never sat on it. “The investors haven’t appointed anyone else to the board, but they still have the right to and can appoint at any time,” he added.
Yebhi is the consumer facing brand of BigShoeBazaar, which began as a B2B portal for shoes.
BigShoeBazaar had registered a loss of Rs 65.63 crore at the end of FY-13 up from a loss of Rs 47.16 crore at the end of FY-12, on revenues of Rs 88.62 crore in FY-13, up from Rs 47.1 crore in FY-12. Agarwal however said that the company has GMV of Rs 250 crore. In the last four months, Agarwal said, the company has brought down its cash burn to around half from last year, and “we are still sustaining our business,” Agarawal said, also suggesting that Yebhi has a cash burn of one-tenth or one-twentieth the cash burn of other e-commerce players.
On the tie-up with IRCTC
“Our association with IRCTIC is doing great. We have seen some rocking traction there in just the first 2 months of launch. The shopping site is drawing about half a million unique visitors everyday which more than a lot of standalone e-commerce sites,” Agarwal said. As part of the partnership with IRCTC, Yebhi is managing everything from customer experience on the website user interface to the final delivery of the product to the customer.
On the fund-raising environment
“We have never ever raised as much money as other e-commerce players right? As long as one knows how to conduct business judiciously and the market is growing, so one don’t need that kind of capital. For break-even in about a year’s time and for break even we don’t even need $30 million we need only 5-10 million, but to grow the business to an overall sizable topline we need 30 million,” Agarwal said. He also added the current situation is tough, but not a dooms day where there is no tomorrow.
Yebhi had raised $12 million as bridge round of funding from its existing investors, Fidelity Growth Partners India, Qualcomm Ventures, Nexus Venture Partners and Catamaran Ventures in April this year. Techcircle had reported then that the company plans to raise an additional $40 million then, but Agarwal told the publication that it was not looking for any additional investment.
Yebhi had raised Rs 150 crore apart from the bridge round. This includes Rs 100 crore Series C funding from Fidelity Growth Partners India and Qualcomm Incorporated and existing investors like Nexus Venture Partners and Infosys Chairman, Narayana Murthy’s Catamaran Ventures in July 2012, a Rs 40 crore Series B investment from Nexus Venture Partners and Catamaran Ventures in July 2011 and a Rs 10 crore Series A round from Nexus Venture Partners in February 2011.
The company’s competitor Flipkart raised $160 million in October this year, after raising $200 million in July. FabAlley had raised undisclosed amount of investment earlier this month, while Urban Ladder has finally closed its Series A investment round by raising $5 million. Meanwhile, Mynta is also in talks to raise $50 million, after raising $25 million from exiting investors in May and fashion e-retailerKoovs.com, is planning to go public in 2014 by listing itself on AIM, a sub-market of the London Stock Exchange.
On government regulations and policies
“We have been working on making the investment climate conducive for e-commerce and I’ve been meeting government officials consistently for the past one year. Once these regulatory issues are resolved there are bigger players (PEs) who will come and take this industry forward.
“In e-commerce all business are legit and as far as marketplaces are concerned and I don’t think there is any government paper that says marketplace e-commerce FDI is permitted. The government understands only two forms of e-commerce — one is B2B and the other is B2C and FDI is allowed 100% in B2B and zero in B2C. As far as the question of legitimity of e-commerce no one knows, it’s a billion dollar question.”
Note: Take a look at Medianama’s white paper on structuring of investments in eCommerce businesses In India.
Timeline of funding, mergers and shutdowns in fashion space in 2013
– May 21: KoolKart, Rock.in & Aporv Shut Shop