This morning, LimeRoad announced $15M in new financing to further their mission of building a social discovery and buying platform in the lifestyle vertical. This is a significant raise for a young company and provides additional validation of their differentiated approach to addressing the large and growing online buying opportunity in India. For those that aren’t familiar with the company, LimeRoad aggregates lifestyle products from a network of brands and stores and provides its community of users tools to create and curate lifestyle content as well as to easily discover and buy unique and delightful products.
Here are some brief thoughts on why we originally invested in Limeroad and have continued to support the company in subsequent financings:
- A truly exceptional team that refuses to take short-cuts and instead focuses on finding scalable, long-term solutions to difficult problems. Suchi and Prashant have been deeply involved in architecting and building consumer products of significant scale at companies like Skype, eBay and Facebook and bring similar aspirations to LimeRoad, along with an understanding of what it takes. Every time there is a choice between an ‘easy fix’ or finding a less obvious, long-term solution to a core challenge, they choose the latter, even though that inevitably means stepping into the unknown and facing a higher probability of (short-term) failure. It takes guts to choose the path less traveled, but we believe that this path maximizes the likelihood of substantial value creation.
- An early and intense focus on achieving product market fit. Here are some charts on user growth, supply growth, community activity (scrapbook creation) and marketing expense. We like it when growth and engagement charts are up and to the right while marketing is flat. It tells us that something is working without significant external stimulation (or discounting). (Footnote 1)
- A belief that differentiation will be increasingly driven by front-end experience. Fast shipping, real-time visibility into inventory and responsive customer service are now table-stakes, not a strategy to differentiate. Pricing-led ‘differentiation’ (heavy discounting) is a questionable long-term strategy and can become a dangerous addiction for management teams who ignore quality of growth. Instead, we believe that visual and social experiences that enable discovery and delight (especially relevant in the lifestyle category) will define the next wave of market-leading online companies.
- Visual and social experiences are perfect for mobile. We all know what’s happening on mobile but the question is which types of businesses will benefit more than others. We believe that products that are inherently social and visual will benefit disproportionately from smartphone growth. LimeRoad sits squarely in this category.
- A large profit pool. At the end of the day, valuable companies must all have attractive economic characteristics and the margin pool in the online lifestyle category is perhaps the most attractive in Indian online commerce.
There is a lot more work to be done – and problems to be solved – but the LimeRoad team has already disproved many accepted notions in the world of Indian e-commerce – for example that it is not possible to grow without offering heavy discounts or that Indian users aren’t savvy enough to embrace deeper social activities like scrapbooking, curating collections or sharing. We expect them to disprove many more and wish them all the best in the next phase of their journey.
Footnote 1: In order to preserve confidentiality of company data, absolute scale is not provided in the graphs above. Base scale is sufficiently large that the above data is a representative indication of product-market fit, in our opinion.