A slight request: Please read the title again in a Bhojpuri accent. Thank you!
Moving on to business.
Think you know the bossiest person on the face of the earth? Well, it’s time to change your perception and make you meet a venture capitalist. Internet memes will tell you that a venture capitalist is the person you just won’t be able to convince to invest in your business. To put it aptly,
AND
You might have guessed that today’s post is about venture capitalist firms and how they’ve supported the dot-com revolution. I hope it’s an informative read!
To begin with, let’s technically understand what venture capital is. According to Google (thank you, Larry Page & Sergey Brin!), venture capital is financial capital provided to nascent, high-potential, startup companies. The venture capital fund earns money by owning equity in the companies it invests in, which usually have a novel technology or business model.
WHY E-COMMERCE?
In the case of e-commerce, the necessity of a traditional brick-and-mortar business set-up is rendered nonexistent, which could increase profit margins because of no costs related to inventory and real estate. This leads to an increased interest in this industry by venture capitalist firms. The e-commerce industry is increasingly becoming a safe haven for venture capitalists for this very reason. As the company profits, so do the venture capitalists. To put it simply, there is a direct correlation between the growth of a firm and the investments it is bound to receive.
Also, e-commerce industries penetrate the retail markets very quickly, simply because of the convenience of buying online. Sit snugly on your couch, switch on your laptop and surf through a few websites that spoil you with abundant choice, place your order, and ta-da!; your shopping is done! All you have to do is wait for your order to be delivered, which usually doesn’t take more than a week. This series of events doesn’t take more than 45 minutes, while shopping at the mall wouldn’t have taken less than 2 hours. Online shopping is primarily convenient for people who can’t spend too much time fighting cantankerous customers over a simple t-shirt. And with modern lifestyle making people too busy for their own good, online shopping seems like the only way ahead. Venture capitalist firms took this global increase in demand for online shopping into account and invested big bucks in e-commerce.
Another very obvious reason for increased investment is market penetration through price competition. We are cognizant of the extremely low prices (1st blog post on this topic; read, read!) charged by e-tailers, which instantaneously sway consumer preference towards online shopping and thus make e-commerce firms sound investments.
TIME TO BRING IN THE NUMBERS!
According to a report by the Economic Times, there are about a 100 VCs operating in India, but there are 7 that are more active in their operations than the others. These 7 firms account for around 60% of the total private investment in Indian e-commerce since 2007. These are Accel Partners, Helion Ventures, Nexus Ventures, Tiger Global, IDG Ventures, SAIF and Kalaari Capital.
More on how venture capital works in the next post!
Till then, Hakuna Matata!
– Arushi Kotecha
(D)e-coding E-commerce 