Along with all the cash burn and strikingly impressive valuations, early investors in India’s rapidly growing e-commerce sector have started to reserve profits in advance. According to recent report generated by the Times of India, Bengaluru-based venture fund Kalaari Capital is likely to execute a secondary sale of shares worth $100 million (Rs 610 crore) in Delhi-based Snapdeal.
The report also revealed that Flipkart that happens to be the e-tailer’s bigger rival saw an almost similar secondary transaction a few months back. Companies like Accel Partners part that backed the country’s largest e-commerce player have sold their shares in a $150 million (Rs 910 crore) round.
Talking about the secondary sale that happens when an existing investor sells shares to a new one or the supporter at the company’s current valuation, they don’t bring money to the company’s coffers. Although, venture capitalists are rarely interested in secondary deals but then it is found to be quite common among the private equity funds in India.
According to the report, Accel, which is one of the first investors in Flipkart back in 2009, had invested a million dollars in the company, an investment valued at over $10 billion at present. At the sametime, Kalaari, which in the beginning invested in Snapdeal as IndoUS Ventures, has altogether invested $25 million (Rs 150 crore) in the e-tailer in last five years and holds around 14% stake in the e-commerce company.
“Exits of early investors via secondary transactions is a very healthy trend and fills the last mile of the investing ecosystem. Exits are the lifeblood of venture capital and have been an issue in India. So this is an encouraging development and shows maturation of the process,” said Avnish Bajaj, MD at early-stage VC fund Matrix Partners India.[useful_banner_manager banners=30 count=1]
However, it is yet not ascertained as to what are the identity of the buyers and the exact size of these secondary deals at Snapdeal, Flipkart and Myntra. Silicon Valley fund Bessemer Venture Partners, which is another early investor in Snapdeal, part liquidated its shareholding in the company and booked gains on its investment during the SoftBank round itself.
Learn from real practitioners not just trainers.