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[Published on YourStory.com]
This week Craftsvilla announced a Rs 110 Cr round led by Sequoia and supported by existing investors Lightspeed and Nexus and new investor Global Founders Capital. This is an important milestone for a company that has quietly been building out India’s largest marketplace for ethnic apparel and products.
In our view, Craftsvilla stands out from the majority of e-commerce companies for a few reasons:
– It has broken into the top-5 ecommerce companies in India by GMV scale
– Has grown 4x in scale in the last six months (and continues that trajectory)
– It turned the corner on cash flow breakeven while achieving such scale and growth
All this, on the $1.5M that the company cumulatively raised from Lightspeed and Nexus across its seed and Series-A rounds in 2011 and 2012. This performance is exceptional by all standards and is driven in essence by two key factors:
A. A fundamentally strong business model: Craftsvilla is going after the massive ($30B) market of ethnic apparel and products in India. This market is highly fragmented across a very large supplier base and thus needs a specialized vertical player to go after it. Since the supplier base is fragmented, it takes longer to build liquidity on the platform but once the critical mass of buyers and sellers are live on the platform, then the margins are attractive and entry barriers are very high. ETSY solved a similar problem for the US market and is currently valued at $2.8B post its recent IPO. Craftsvilla has gone through the hard part of getting the platform to scale and the quality of the current business is reflected in several metrics:
- Marketing spend has stayed below 10% of sales while revenue has grown 4x in last six months
- Organic sources contribute two-thirds of the total traffic
- An active seller base of 12K artisans who by themselves upload and manage an inventory base of 2M SKUs on the platform
- High fragmentation within the seller base: Median contribution of top-10 sellers to GMV is 1.5% and beyond top-10 no seller contributes more than 1% of sales.
B. Extraordinary perseverance and focus of the founders: There has been a frenzy of ecommerce funding in India. Instead of going down the path of driving GMV through discounting and at the cost of margins, Manoj and Monica went through the harder path of building the core of the business – bringing thousands of suppliers across the country on to the platform and helping them sell online. To continue to do this for multiple years while the industry was rewarding a capital led growth path needs strong founders with deep conviction. It is always helpful to look back at certain ‘forks in the road’ and learn from the experience. The team made a number of critical decisions with crystal clear conviction that, in hindsight, worked well for the company. These include the following:
- A clear commitment to being a marketplace vs. a retailer (or mix of the two)
- With this clarity, focused aggressively on aggregating sellers and building strong technology-led capabilities to on-board sellers and allow them to sell through the Craftsvilla platform
- Letting the diversity of supply drive demand instead of using a discount led approach
- Kept the team lean and fixed cost burden low: Manoj and Monica gave it everything they had and built a young and highly motivated team around them – a team of 15 people till a couple of months back! Conventional wisdom might have argued for a seasoned and pedigreed team that allows for accessing capital faster.
When Lightspeed, along with our partners at Nexus, made the seed investment in Craftsvilla back in 2011, we were struck by the founding team’s passion for, and understanding of, the market opportunity as well as more measurable factors such as market size, the potential for attractive unit economics and the scope to build a differentiated company that the horizontal e-commerce platforms would not be able to easily replicate. We also believed that this was a powerful opportunity to leverage the internet to unlock new markets within India and globally for artisans and vendors who, until then, were only able to serve their local customer base.
As the company looks forward, there remains much work to do – from iterating on product to building company leadership and replicating the platform in similar markets globally. They can do this with the very strong foundation of capital efficiency and product-market fit that has already been built. We are fortunate to be associated with the company and look forward to being a part of this journey with Manoj and Monica.
Also read Manoj’s post on how the Craftsvilla team created this magic.
The technology world has become a little bit flatter over the last ten years; the US monopoly on producing technology startups with impact outcomes has been broken. We have all seen impact product companies coming out of Europe, Israel, and China over the past decade.
These startups are leveraging new platforms and customer behaviors that were non-existent ten years ago, including platforms such as app stores, SaaS app marketplaces, smartphones, tablets, content marketing channels, social media, and embedded payment options; and new user behaviors such as self-service on-boarding, bottoms-up technology adoption in SMBs/enterprises, use of open source technologies, and search as a primary way to find new applications/technologies.
We believe it is now the right time for Indian product startups to step up to the global plate, especially in mobile applications, developer tools/enabling technologies, and SaaS for SMBs. There are already several examples of such companies, including Browserstack, Freshdesk, Helpshift, InMobi, Kayako, Nimbuzz, Simplify360, Webengage, Wingify and Zoho.
Investing with this theme, we are excited to partner with Chandan and Vaibhav at Phone Warrior to take mobile communications to the next level. What Wikipedia did to encylopedias and Waze did to radio road traffic reports and paper maps, namely disrupting existing businesses with community, real-time and mobile, Phone Warrior is doing to plain old phone calls and messaging. Phone Warrior’s user growth, retention and engagement in countries around the world over the past six months gives us confidence that they are well on their way to finding product-market fit.
Phone Warrior (incubated at 91Springboard) is building a globally-relevant cloud-based platform to crowd-source mobile phone numbers and turbo-charge the value of this data through big data techniques, graph search and machine learning. Through this platform, Phone Warrior powers an essential set of services that has grown rapidly over the past year and could get onto every mobile device in the world across all forms of communication including phone calls, text messaging and over-the-top IP-based messaging. Their product is currently visible on mobile devices through services such as caller-ID, spam blocking and call-blocking.
There is much more to come that leverages this core platform. We look forward to exciting times ahead with the Phone Warrior team.
Post Authors: @dkhare and @anshoo
Here’s Ashish Thusoo, CEO & founder of big-data-as-a-service company Qubole, speaking with GigaOm:
Meena Ganesh, founder of Lightspeed-backed TutorVista spoke at the 2012 Grace Hopper Celebration of Women in Computing India. Here’s the video!
Mr Venkat R Chary, IAS (Retd), Chairman of Lightspeed-backed Indian Energy Exchange Ltd delivered a speech at the CII Southern Regional Power Conference in December 2012. Here’s the video!
Lightspeed India MD Bejul Somaia was interviewed by Paramita Chatterjee of the Economic Times newspaper about Lightspeed India’s experience with incubating both OneAssist and LimeRoad. Here’s the link to the article.
We are actively looking to incubate companies in these spaces, as well as back established companies and startups in these areas.
Our experience has been very positive:
“We were involved in incubating two companies in the last 12 months – OneAssist and LimeRoad – and have been very pleased with the results so far. Being able to work closely with teams during the incubation period really helps set the right foundation and strategy for the business. The incubation approach is very time-intensive, with no certainty of a successful outcome. But we will build on our positive experience by catalysing new companies in an organised manner.”
What sectors are Lightspeed looking to invest in?
“Education technology, financial technology, healthcare services, internet, mobile, software and software-as-a-service.”
Suchi Mukherjee, founder & CEO of Lightspeed-backed LimeRoad, spoke at the Women’s Forum on stepping into entrepreneurship. Here’s the video:
Gagan Maini and Subrat Pani, founders of Lightspeed-backed OneAssist, as well as Lightspeed’s Bejul Somaia, were interviewed on CNBC’s Awaaz Entrepreneur program in September 2012. Here’s the video!