For the second quarter this year, the number of deals stood at 111 with VC investments of $583 million while in January-March quarter this year, 126 deals took place and investments worth at $1.402 billion were done.

1. wwww.etailingindiaexpo.com
An Observation On Funding Ecosystem
eTailing India Thought Corner
For the second quarter this year, the number of deals stood at 111 with VC investments of $583
million while in January-March quarter this year, 126 deals took place and investments worth at
$1.402 billion were done.
 Top Funding- Q2 2016- Oyo Rooms $100 million; MobiKwik $ 52 million; Lendingkart $
32 million
 Top Funding- Q1 2016- Snapdeal $ 200 million; MakeMyTrip $ 180 million; BigBasket $
150 million
Funding slowdown:
After a period where investors invested heavily in internet business, they have been waiting for
this business to evolve and develop so that they can put next round of money.

2. wwww.etailingindiaexpo.com
Key reasons for drop in funding:
 Investors are looking for business proposal which has a scope to generate revenue from
multiple sources.
 Global uncertainties such as Brexit made the investors cautious and more patient to go
after investing.
 Nevertheless, it could also mean that there is a point of inflection happening in the way
of trading in these sectors.
Let’s see what’s happening in the current funding scenario.
1. Attention on Unit economics
Unit economics figures are expressed on a per unit basis. Once the unit is determined, it is time
to identify the exact unit economics of the business. A startup irrelevant of any sector has two
basic components – Cost per Acquisition and Customer Lifetime Value or LTV.
To the extent that LTV exceeds CPA, business is happening. The direct expenditure you incur in
your business should not be higher than direct revenue earned, on a per-unit basis. It is a
positive indication that investors are no longer content with just the overall projection and
valuation of a business. They have also started paying attention to the investment core, and
focusing on unit economics, with startups having to pass strict due diligence investigation.
This, in turn, has led to an increased awareness among startups. They are driven to put across
practical projections and realistic figures.
2. Business proposition

3. wwww.etailingindiaexpo.com
After investing into unicorn companies which were valued exorbitantly high, investors have
turned attention to startups that are bootstrapped or can survive a downturn with strong
business models and sound bases.
3. Mergers or acquisitions in same or allied sector
Mergers of startups operating in the same or allied segment have become more frequent. This
helps the investors to create a more common investment portfolio which is more centralized. It
helps in curtailing competition and leads to efficient utilization of the available market from the
investor’s perspective. The acquisition of Flipkart owned Myntra and Jabong and hyperlocal
logistics player Roadrunnr and food ordering platform TinyOwl in an all-stock deal are the most
famous examples of it.
4. Undervaluation
A down round is a funding round where investors further invest at a lower valuation than the
quoted valuation of the company. A positive sign is this, startups are now being pushed towards
stretching their limits in building world-class products or providing world-class services with due
regards to concept of propriety. Due consideration is given to make best use of their resources
and enhance their profitability.
India vs. China
According to a report by financial times, that Chinese deals tend toward Series A and B
companies, while the US and India see a high proportion of deals to seed/angel companies,
with India seeing 53% of deals going to companies at that stage (compared to only 7% in China).
With amendments in FDI norms for 100% FDI in marketplaces, greater flexibility and access to
the market lures global investments in remunerative e-commerce industry of India.

4. wwww.etailingindiaexpo.com
China’s e-commerce policies are more favoured for its domestic marketplaces. For instance, in
January of 2015, the Ministry of Industry and Information Technology (MIIT) announced that
foreign investors are now allowed to set-up wholly foreign-owned e-commerce companies in
the Shanghai Free Trade Zone. Whereas Indian Government has aggressively pitched for ‘Make
in India’ campaign, urging global investors for investments in India.
So India is favoured ahead of China for e-commerce investment opportunities.
Conclusion:
The attention on Indian tech startups is also due to the maturing of the ecosystem in the last
few years. Consequently, the number of deals and valuations will likely increase.