SoftBank-led funding turns small-business platform Meesho into a unicorn
NEW DELHI, NNA - India’s Meesho Inc. has become the first social commerce startup to join the country’s fast-growing unicorn club after its valuation soared to over $2 billion due to fresh funding led by Japan's SoftBank Group.
In the Series E round, the six-year-old startup raised $300 million from a group of investors led by SoftBank Vision Fund 2, which is managed by SoftBank Investment Advisers.
The funding also saw the participation of existing investors such as Prosus Ventures, Facebook, Shunwei Capital, Venture Highway and Knollwood Investment.
Having raised a total of about $490 million, it will expand further and enable many more offline small businesses to seize opportunities in the country’s booming e-commerce market which saw accelerated growth when the coronavirus pandemic struck last year.
With the latest round of investment, Meesho’s valuation has gone up to $2.1 billion, said the company on its website. It was reportedly valued between $600 million and $700 million when an earlier funding took place in 2019.
On its big vision with the extra funds, Meesho said, "India has nearly 60 million micro, small and medium enterprises (MSMEs) and Meesho’s immediate goal is to enable 100 million businesses including individual entrepreneurs to pave their paths of success online across India."
These small businesses, including individual ventures, are often run by women entrepreneurs and 'homepreneurs', who managed to become financially independent and successful over the years through Meesho, it added.
Meesho has enabled over 13 million individual entrepreneurs to start their own online businesses with zero investment, bringing e-commerce to more than 45 million customers across India, said the company.
Founder and CEO of Meesho, Vidit Aatrey, who has seen the growth of Meesho in the last few years, noted how the pandemic gave further impetus to e-commerce. He said, "In the last one year, we have seen tremendous growth across small businesses and entrepreneurs seeking to move their businesses online."
In a TV interview, Aatrey said, “Over 90 percent of commerce happens through small businesses across the country, which are still offline.”
On its achievements, Meesho said, "Till date the company has delivered orders from 100,000 plus registered suppliers to over 26,000 pin codes in more than 4,800 cities, generating over 5 billion rupees in income for individual entrepreneurs and serving customers in more than 4,500 Tier 2 plus cities."
Most of the products are low-cost women clothing including traditional wear as well as kids wear.
This concurs with consultancy firm EY's findings. Its March report on India’s e-commerce and consumer internet sector said fashion is the most popular category, followed by beauty and personal care, and food and grocery.
Sumer Juneja, partner at SoftBank Investment Advisers, said the firm, which has been monitoring Meesho in the last 18 months, is impressed with its growth and daily engagement metrics, besides other strengths.
"We believe Meesho provides an efficient platform for SME suppliers and social resellers to onboard the e-commerce revolution in India and help them provide personalized experience to consumers,” said Juneja.
On supporting start-ups like Meesho, Munish Varma, managing partner at SoftBank Investment Advisers, said, “Globally, SoftBank has always been excited to back founders that provide unique solutions for the local market. By using the power of artificial intelligence and machine learning, Meesho has created a platform for many small business owners to sell to the next cohort of internet users."
Social commerce platforms like Meesho offer a marketplace for small businesses and resellers who reach out to consumers through social media such as WhatsApp, Facebook and Instagram.
These platforms, which operate as free apps, usually target housewives and students to be their resellers as they are keen to make some money by selling listed products to their contacts via social media after adding a margin to the price.
The EY report noted that while social commerce is taking off in the mass market and mainly in non-urban areas, it is not popular with the more affluent and urban consumers.
Ankur Pahwa, e-commerce and consumer internet leader at EY India, said social commerce apps, which help all kinds of business owners to manage orders, payments and last-mile delivery, have proven to be a major game changer in the Indian market because they enable just about anyone to start an e-commerce business.
In a country where only 23 percent of women are in the formal workforce, becoming a social reseller is an attractive option for a large number of housewives and women not having full-time jobs, he said.
“The added household income and the increased sense of self- worth are strong motivators for becoming a social reseller,” he said.
EY said the rising adoption of smartphones and internet access has brought millions of Indians online in recent years, turning social platforms into powerful distribution channels for many businesses.
A joint report by venture capital company Sequoia India and consultancy firm Bain & Company said social commerce in India is still at a nascent stage worth $1.5-$2 billion in gross merchandise value (GMV) as of FY19-20, but it has the potential to balloon to $16-$20 billion by 2025, and then to $60-$70 billion by 2030.
“Digitally connected Indians spend an average of three hours per day online, of which more than two hours are consumed by messaging, social media networking and watching videos,” said the report.
By leveraging a variety of formats, from conversational commerce on chat platforms to video-led commerce to a vibrant social reseller community, millions of small retailers are finding innovative ways to sell to consumers through social networks and social media, said the report.
It noted that WhatsApp and Facebook platforms are popular with such consumers in India.
According to India’s ministry of information and broadcasting, WhatsApp has the largest user base of 530 million people, followed by YouTube which has 448 million users in the country. Facebook and Instagram have 410 million and 210 million users, respectively.
Experts say the COVID-19 outbreak has further hastened digital adoption in India. This has significantly benefited the e-commerce sector, among others, and enabled it to emerge as the darling of global investors.
A March 2021 report by EY-IVCA (Indian Private Equity & Venture Capital Association) said one-third of India’s 38 unicorns came from the e-commerce sector alone in 2020.
The report said the combined valuation of these Indian unicorns is easily in excess of $90 billion.
According to a recent study by the country’s information technology (IT) service industry lobby group Nasscom, India will have more than 50 unicorns before 2021, and more than 100 by 2025.
“Already, as of April 6 this year, Meesho became the fifth Indian startup to join the unicorn club,” Arun Natarajan, managing director of Venture Intelligence, a firm that tracks private equity investments, told NNA.
With foreign investors continuing to be bullish on Indian tech startups, the competition in the e-commerce sector has been heating up with global giants like Amazon and Walmart-backed Flipkart and homegrown Reliance Industries’ Jio Platforms trying to gain traction aggressively.
EY projects India’s e-commerce market to hit $220 billion by 2025.