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The Funding Environment For E-Commerce In India – K Vaitheeswaran, IndiaPlaza

There were rumors that IndiaPlaza, an e-commerce marketplace, and one of the oldest e-commerce ventures in India, was laying off people. K Vaitheeswaran, Founder and CEO of IndiaPlaza, denied that the company is laying off people, but said that they’ve frozen hiring, and people are leaving on their own accord. The company is currently looking to raise funds, and Vaitheeswaran tells us what investors are saying about funding e-commerce in India right now. Excerpts from our conversation:

MediaNama: We’ve heard that you’re laying off people…
Vaitheeswaran: We’ve not asked people to leave, but people realize that follow on capital is challenge right now. We haven’t called people and asked them to leave. We’re raising funds and right now, fund raising for e-commerce companies is a challenging task.

MediaNama: How much funding are you looking for?
Vaitheeswaran: We’re looking for funding in the region of $5 million, and till that is done, we are trying to do what is needed to sustain the operations, so that when we conclude the fund raising, we can scale up operations.

MediaNama: How is the business doing?
Vaitheeswaran: Business is tough because if you run into operational issues in terms of lack of capital, business gets impacted, and the focus shifts to maintenance instead of growth. It is a phase, and these phases come and go. It has happened before, and it will continue to happen in a business and an industry is not profitable.

MediaNama: Has there been a decline in consumer traction? Are people still buying online, or has there been a decline?
Vaitheeswaran: Consumers who were shopping online so far were doing so because products were available on websites at deep discounts, and consumers are always looking for a good deal. As e-commerce businesses run into funding issues, prices go up, and there is a natural inclination for orders to drop. The overall macroeconomic environment and the inflationary pressures are reducing consumer demand, not just in e-commerce but also at an overall level. E-commerce growth is coming down, but it certainly continues to grow. There are millions of people who have given the endorsement that they love shopping online, and some (companies) will pass through this phase and some will struggle.

MediaNama: What’s been the impact of the ruling on FDI in e-commerce? What are investors saying?
Vaitheeswaran: FDI was never available for B2C in e-commerce, at least for the last 10 years. It’s not a new law. It was always the law. There are models like ours where we don’t do invoicing and warehousing. There are others who do warehouseing, and some companies are being investigated for alleged violations of the FDI laws that prevail. Because of the outcome of these investigations, overall investors want to stay away. Even though we have a model which is above board, we are struggling to convince investors because many investors are saying that they want to see how the investigations play out before they start writing cheques. Most companies are not getting follow on capital for growth, and there is collateral damage.

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