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Facebook and Sequoia pour millions into Indian ecommerce startup

India’s internet revolution is attracting VC heavyweights from around the world. With a new round of funding, ecommerce business Meesho is the latest startup to get in on the action.

India’s ongoing internet revolution and its potential to help grow startups in a country with a population of more than 1.3 billion is continuing to attract VC heavyweights from around the world like bees to honey.

The latest example is ecommerce startup Meesho, which announced Monday that it has raised $125 million in a Series D round led by Naspers Ventures. Facebook and existing investors including SAIF, Sequoia, Shunwei Capital, RPS and Venture Highway also participated in the funding, which will be used in part to help the company expand geographically and serve customers in remote regions.

Based in Bengaluru and operating in more than 5,000 towns across India, Meesho is the developer of a reselling platform that helps small businesses and individuals promote their products, all while managing operations via social platforms like Instagram, Facebook and WhatsApp. The startup’s services are used by homemakers, students, teachers, boutique owners and others to sell items such as clothing, cosmetics and travel packages.

Co-founded in 2015 by Vidit Aatrey and Sanjeev Barnwal, Meesho was part of the Summer 2016 cohort at Y Combinator. The company was valued at an estimated $225 million last November.

So how does the business set itself apart from free platforms like Facebook Marketplace? According to a blog post published by Y Combinator, Aatrey thinks that customers who use Facebook and WhatsApp to buy and sell items are “getting like 150 notifications per merchant on a daily basis. ... They’re getting spammed and all these images take up too much memory. We figured we could solve this with technology.”

Meesho’s platform simplifies the reselling process by creating an online store that can be managed from the app directly. It also allows resellers to process payments and keeps the conversation open for bargaining, a practice that is quite common in India and often results in better deals for both parties.

Increased investor interest in ecommerce

Venture capitalists from around the world have funneled millions of dollars into Indian web-based businesses over the past decade, per PitchBook data. One of the reasons for VC interest in the country could be India’s burgeoning ecommerce market, which is expected to grow to $200 billion by 2026, up from $38.5 billion as of 2017, according to a recent report by the India Brand Equity Foundation, a trust established by the Indian government.

The country has also seen interest from a variety of investors. Walmart agreed to acquire India-based Flipkart for $16 billion in one of the most high-profile ecommerce acquisitions in 2018. South African internet and entertainment investor Naspers led a $1 billion round for Bengaluru-based food delivery startup Swiggy in December. And Palo Alto-based Accel, which has previously invested in both Swiggy and Flipkart, is one of the most active investors in India. The firm’s portfolio contains a few noteworthy Indian transportation startups, including ridehailing business Ola, freight marketplace provider Blackbuck and scooter rental startup Bounce.

Tiger Global has gotten in on the action, too. The New York-based firm created history in 2018 when it raised a massive $3.75 billion fund, which was at the time the biggest VC vehicle in the world during the last decade, per PitchBook data. Tiger Global reportedly plans to use the capital to invest in several tech sub-sectors; the funds will also be used to back direct-to-consumer companies located in India, the US and China. The firm has reportedly already invested in several Indian startups this year, including produce supply-chain business Ninjacart and Grofers, the provider of a grocery delivery platform.

Featured image via rupixen on Unsplash.

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    Written by Priyamvada Mathur
    Priyamvada Mathur writes about venture capital at PitchBook.

    She is an Indian chartered accountant and has studied economics and journalism.
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