Wednesday 30 March 2016

Investors’ sell stakes in Snapdeal; start-up markdown crisis continues

We hope you didn’t miss Flipkart’s Sachin Bansal and Snapdeal’s Kunal Bahltwitter spat.
Keeping aside the sarcastic tone of the twitter exchange, is there some truth to what Bansal said? Is Snapdeal turning out to be a bad investment for its investors?

Investors pulling out of Snapdeal by selling stakes

A news report revealed that Bangalore-based Saama Capital India Advisors sold its stake in Snapdeal to Ontario Teachers’ Pension Plan (OTPP) in November last year. It is not the first ones though. Others are:
  • Kenneth Glass sold its Snapdeal shares to RNT Associates in September 2014
  • Kalaari Capital sold its Snapdeal shares to Softbank in February 2015
  • Sequoia sold its Snapdeal shares to Ontario Teachers’ Pension Plan in January 2016
Snapdeal’s valuation is growing, then why pull out right now? Perfect timing and great offer are the two reasons.
Ash Lilani, Managing Partner and Co-Founder of Saama Capital explains, “Snapdeal will grow bigger, and its value will potentially grow over time. There’s no doubt on that front. The obvious question is: if it’s going to grow, why not stay invested? The opportunity for exit or liquidity is always unknown. Fund managers have to make a call on what timing is best for them and their investors (limited partners).”
Lilani added, “Snapdeal was three years into our fund (Saama Capital II), when the OTPP offer came along. Who knows how long it would be before another opportunity like that came along.”

Trouble in startup paradise

From stake sales to devaluation, it’s quite clear that days of free-flowing funds and exaggerated valuation figures of ecommerce companies (leaders & startups both) is gone.
Companies are finding it hard to raise funds, particularly in the online foodindustry. Besides Snapdeal, investors have sold their shares/stakes in eBay, Quikr and Flipkart to other firms.
Mahesh Murthy, co-founder of Seedfund said, “There have been steep de-valuations of heavily-funded businesses around the world due to drying up of future funding as well as bleak prospects of IPOs. Any prudent investor with a public face like Morgan Stanley has a legal responsibility to offer prudent guidance.”
However, there is nothing to be alarmed by startup markdowns. It merely indicates that investors want ecommerce players to get more practical, accountable and organized before they put in their money. The online industry is getting realistic and thus the companies with not-so strong foundation and backing are bowing out.

No comments:

Post a Comment