Web business, the new VC favourite

Snapdeal, the online shopping portal, has lived up to its name. In the past six months, it has snapped up two investment deals for itself, as it raised as much as $52 million (Rs 230 crore). This is probably one of the largest funds raised by an early-stage firm, barely after a year of operations. A few days before, it raised $40 mn, led by Bessemer Venture Partners, along with existing investors Nexus Venture Partners and IndoUS Venture Partners.

Another shopping website, Bigshoebazaar.com, also raised a second round of funding recently. Catamaran Ventures, along with Nexus, invested $9 mn (Rs 40 crore) in July. Late last year, the firm raised $2.2 mn (Rs 9.6 crore) from Nexus Venture partners.

These are some examples of a visible trend of an increased frequency with which web portals have been able to raise money, especially from venture capital (VC) funds. Since January, there were 16 such deals, with a total investment of $103 mn (Rs 450 crore), according to data from Venture Intelligence.

These deals have raised the total VC investment in the first half of the year to near $500 million (Rs 2,195 crore), almost twice as much as the investment in the same period last year, of $293 mn (Rs 1,290 crore).

“Yes, there has been a lot of activity on the e-commerce front, with the increase in internet usage fuelled by a jump in accessing the internet via smart phones. We see several plans every day. The e-commerce space is moving very quickly from the early stage to the growth stage, requiring several rounds of funding in a short span. This has certainly raised valuations,” said Sandeep Singhal, co-founder and managing director, Nexus Venture Partners.

This interest in e-commerce and the internet space seems to be growing for obvious reasons. The internet user base in India has touched 100 million. And, by the end of 2010, 330 million wireless subscribers subscribed to data services.

Agrees Kunal Bahl, founder and CEO, Snapdeal.com: “There is more to do on the internet now than a few years before. Besides, with travel agencies really evangelising the e-commerce segment, users are much more comfortable to use payment models online. More important, the younger generation is much more internet savvy,” said Bahl.