Meesho, an e-commerce platform, founded by Sanjeev Barnwal and Vidit Aatrey in 2015, is on the brink of securing a significant investment of $300 million from prominent global investors like Tiger Global and SoftBank.
Given that both companies have refrained from making investments in India for the previous 18 months, this represents a significant change in the country's investment environment, with moving towards the end of ‘Funding Winter.’
According to the sources, Tiger Global and Peak XV Partners are leading the most recent investment round with a combined $150 million in contributions. As per further reports Peak XV and a few of its limited partners (LPs) are expected to invest about $70 million.
The Return of Tiger
With this fundraising round, Tiger Global is set to make a comeback in India for the first time since Scott Shleifer (cofounder of Tiger Global Management's private equity), left in November. This round will be among the few significant investments Meesho has received in the last 12 months, which is unusual given the present state of funding.
Loyal Peak XV
The company confirmed that loyal investors such as Peak XV Partners will also participate in the funding round. Peak XV, an early supporter, first invested in the firm in 2018.
“While Tiger Global is a new addition to our investor roster, we are pleased to continue our partnership with Peak XV, who first backed us in 2018,” said Meesho co-founder and CTO, Sanjeev Barnwal.
Softbank and others
Think Ventures in the UK, Mars Growth Capital in Singapore, and other new investors will fund the remaining $150 million, with SoftBank, an existing investor, providing $30 million. While Mars and Think will be sponsoring Meesho for the first time, SoftBank is aiming to maintain it's stake in the company.
“At Meesho, we are thrilled to have the support of such esteemed investors like Tiger Global, SoftBank, and others. This funding round underscores their confidence in our vision and ability to disrupt the e-commerce landscape in India,” said Meesho CEO, Vidit Aatrey.
Meesho's $300 million funding round will primarily involve primary capital, with a small portion allocated to secondaries to buy out early investors. According to sources, Meesho's early backers include Venture Highway, Meta (formerly Facebook), and Y Combinator, as reported.
As per reports, Meesho is currently transitioning its base back to India from Delaware. A significant portion of the new capital raised will be allocated to cover the applicable taxes in preparation for its planned IPO.
Is this the end of Funding Winter?
With this Infusion, Investment Climate in India is likely to change, as these giants are about to make a comeback in Indian investment marking an end to the ‘Funding Winter’ that has persisted in recent times.
A Funding winter: what is it? If defined, "Funding Winter" is a prolonged period of time when there is a decrease in capital inflows for startups. Basically Investors become Picky while funding, resulting in fewer investment deals and lower startup funding amounts.
The factors causing ‘Funding winter’ includes economic downturns, market volatility, geopolitical unrest, and rising capital costs, have an impact on this decline in funding availability. And, the impacts? Layoffs, lower marketing spending, restrictions on business model pivoting, decline in the number of unicorns or startups achieving high valuations etc.
Investment because Meesho is Profitable?
Meesho, along with MobiKwik and Oyo, is among the startups that have achieved profitability in the fiscal year 2024. According to CFO Dhiresh Bansal, Meesho reported a profit of Rs 4-5 crore in July 2023 and has continued to be profitable ever since.
The company attributes its success to a strategic focus on profitable growth, leveraging cost optimization initiatives and operational efficiencies, as highlighted in a recent blog post.Given its recent Profitability, Meesho's requirement for new capital to meet tax-related liabilities makes sense rather than increasing its cash runway.
This reversal occurred after the business demonstrated growth in FY23, cutting its losses in half from Rs 3,251 crore to Rs 1,675 crore. Simultaneously, Meesho's operational revenue surged by 77%, from Rs 3,232 crore in FY22 to Rs 5,735 crore in FY23, thanks to a rise in transactions from current clients and effective monetization strategies.
Despite raising a significant amount, Meesho's current valuation is $3.9 billion, marking a 20% decrease from its previous valuation of $4.9 billion in 2021. This adjustment follows a valuation cut by Fidelity to $3 billion.
Meesho raises Funds akin to rivals Flipkart and Amazon?
Meesho's fundraising occurs amidst significant investments in the e-commerce sector, with rival Flipkart securing $600 million from parent company Walmart as part of a larger $1 billion round.
Moreover, US-based Amazon injected $100 million into its India entity in February 2024, reflecting the competition's efforts to capture a larger share of the e-commerce market.
(Inputs from Agencies)
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