More early stage deals in e-com as mkt improves

Sumant Kasliwal, founder and chief executive officer of 20 Dresses, a women-focused fashion portal, is a relieved man. Kasliwal, who has been running the portal for the past three years, managed to raise angel funding worth $1 million (Rs 6.2 crore) last month. A former private equity fund manager at ICICI Venture, he believes the situation in raising money has improved. He expects to raise Series-A funding soon.

Last month, 20 Dresses had raised $1 million from a group of angel investors such as Srinivas Aluri, managing director of Morgan Stanley.

According to data by VCCEdge, Series-A funding has seen an improvement in 2015. Compared to $9.1 million Series-A funding in five companies in 2014, this year has seen $10 million funding in two companies. From 11 deals worth $43.5 million in 2012, it dropped 80 per cent in 2013 where $8.7 million Series-A funding was raised by 11 companies.

While seed or angel rounds primarily happen at the ideation stage or within one year of formation of the company, Series-A takes place after 24-36 months of company operations. Hence, Series-A funding factors in many measurable parameters such as business model, top line, profitability, team and potential to scale.

People believe the size of Series-A has gone up, compared to previous years.

"The absolute value is high due to jump in scale and quantum of monies now invested in Series-A, which is around $10 million, compared to $2-5 million in previous years. We had seen a lot of action in the angel and seed stage funding over the past two years and there are many companies looking to go for a Series-A round," said Kasliwal.

According to venture capital (VC) fund managers, 5-15 per cent of e-commerce start-ups are getting serious funding in India.

Avnish Bajaj, co-founder of Matrix Partners India, said: "In any sector, VCs fund 5-15 per cent, where five per cent are funded in a bad cycle and 15 per cent in a good cycle. The case is similar in e-commerce. Compared to two years ago, when only high-quality companies were funded, investment horizon is getting widened as marginal quality companies are getting funded."

Competition among venture capital investors also cause an increase in Series A and B funding in average-quality companies.

Sasha Mirchandani, founder and managing director at Kae Capital, said: "We are witnessing larger rounds of investments , good quality entrepreneurs coming out and mainly, more competition taking place between VC firms. More new funds such as GSF India are also looking at Series-A, along with global investors."

Vardhan Koshal, co-founder of carpooling venture RidingO, said: "The factors responsible for Series A funding are much more calculated and require a more solid performance foundation from the start-up. These translate into numbers such as revenue, signups, active users, churn, etc. Therefore, it's only logical to have a narrow funnel from Angel to Series-A."