Founded in 2009 by Quasar Media founder Hitesh Dhingra and Amanpreet Bajaj, Letsbuy raised $6 million in Series A funding early last year from Helion Venture Partners, Accel Partners and Tiger Global. The company, says sources in the venture capital industry, has been in the market for a second round of funding for some months. This, however, could not be officially confirmed. It  is likely (though not clear yet) that Letsbuy’s venture capital investors have acquired stakes in Flipkart in exchange for their stakes in Letsbuy. Executives at Helion, one of the investors in Letsbuy, declined to comment on the deal.

Incidentally, Tiger Global is a common investor in Flipkart and Letsbuy. It entered Flipkart in 2010 with a $10 million investment and followed up with a $20 million round last year. An unconfirmed January report by Mint suggests that Tiger Global and Accel (which invested $1 million in 2009) have invested $150 million in the company as part of its fourth round of funding, which values Flipkart at $850 million. It may be recalled that during the latter part of 2011, various media reports suggested that Flipkart was in talks with private equity investor General Atlantic for a similar-sized investment but at a valuation of over $1 billion.

The acquisition announced today indicates that venture capital investors, who poured nearly $400 million into the ecommerce sector in 2011, have also reacted to the Junglee entry. In setting up a platform that essentially aggregates deals from smaller ecommerce sites in India, Amazon now has an inside track on ecommerce in India without the attendant risks. While Junglee drives up its online traffic, the costs of customer acquisition, an area of concern for most local players, delivery of goods and payments (cash-on-delivery requires significant investments in logistics) will be borne by its partners. Junglee’s entry, though a soft launch of sorts for Amazon, potentially turns the ecommerce business in India on its head. Consolidation through mergers and acquisition, or even the shutting down of weaker local players, could dominate ecommerce in 2012. Larger players like Flipkart, on the other hand, will seek to buff up by buying assets. In effect, it will set up the playing field nicely for Amazon when it does make a full-fledged entry.

That makes 2012 a make-or-break year for Flipkart. The Letsbuy acquisition allows it to deepen its presence in electronics, a category it entered last year. Books, the category with which founders Sachin Bansal and Binny Bansal started the company in 2007, now account for less than half of the company’s revenues ($11.2 million for the financial year ended March last year). The company has projected nearly $100 million in revenues for the current financial year. Letsbuy is the Bangalore-based e-tailer’s third acquisition so far. It bought digital content platform Mime360 las year and on-demand publishing firm weRead.com in 2010.

Read our previous posts on Flipkart

• Which way will Flipkart’s Bansals go?
• Is Accel eyeing a 25X partial exit from Flipkart?

Images Courtesy: Flipkart and Letsbuy

“We’re still on track to return the capital from Fund I. With some luck, a modest return is definitely on the cards,” said Vishal Mehta, co-founder and partner at Lok Capital. The microfinance portfolio includes companies such as Bhartiya Samrudhi Finance, also known as Basix, Spandana Sphoorty Financial and Ujjivan. “We’ve already exited three out of the nine companies,” says Mehta. The social venture capital firm’s Fund I is now fully invested.

New investments will be made from the firm’s recently launched $65 million second fund, dubbed Lok Fund II. The fund formally completed raising capital in December last year and has already made an investment — $3 million in Bangalore RuralShores, a BPO firm that employs rural citizens. A second deal, says Metha, is in the offing. “The overall focus will remain on social inclusion and bottom-of-the-pyramid, though we will now cover new sectors,” added Mehta. Lok Capital was launched in late 2000 with a grant from Rockefeller Foundation. Apart from Mehta, its founders include IDFC managing director and CEO Rajiv Lall and former Actis (South Asia) chief Donald Peck. Since its launch, the firm has attracted other institutional investors such as International Finance Corporation and KFW.

Mehta and his team started raising the second fund nearly two years ago, amidst the growing crisis in the microfinance sector. While the fate of the microfinance portfolio still hangs in the balance, the broader focus may now help ease investor concerns on returns. Investment ticket sizes from the new fund will be larger – between $2 million to $8 million per deal. One key advantage of larger deal sizes is that it will enable Lok Capital to pick up larger stakes in investee companies.

The 360-degree platform, powered by HTML5, has been work-in-progress at the company through most of last year. “The objective was to try and create something that would enable us to scale beyond being just a mobile-enabling site. An integrated solution differentiates us from the rest,” says co-founder and CEO Sharat Potharaju. A former investment banker with Merrill Lynch in New York, Potharaju and school buddy Ravi Pratap M teamed up in 2010 to start MobStac. Pratap, the company’s chief technology officer, earlier worked at US-based technology startup Hillcrest Labs and with Morgan Stanley’s technology group in New York.

One of the key business model changes, following the new platform, is that the basic MobStac version will no longer be available free. The basic plan is typically used by blogs and other small digital publishers. Such users will now be charged $5 per month. The company is currently offering a 30-day free trial on the basic plan and the founders are hopeful that most users will migrate to the paid plan. “We’d be happy to see 200 paid users by the end of the quarter. It would validate that we are on the right path,” says Potharaju.

The company also plans to expand more aggressively into overseas markets such as continental Europe and Latin America. It intends to set up an office in New York this summer. The fresh funding it plans to raise in June will chiefly aid these expansion plans. The Series B could be as small as $1 million or larger. “We really don’t know at this point,” says Potharaju. In November last year, MobStac raised its Series A round from Accel Partners and Mumbai Angels. The amount was not disclosed, though sources close to the deal say that it was in the region of $500,000.

Disclosure: StartupCentral’s mobile site is powered by MobStac

By the time they called it a day the next morning, the site, which merchandises affordable lifestyle products, had 1,300 transactions to show for its first outing in the ecommerce market.

A week later, when we visited the Pepperfry office deep inside Mumbai’s central suburbs, the eight-month old startup was literally bursting at the seams. The 54-odd employees who make up the Mumbai operations jostled in a space that had clearly become too small. On the far right corner of the office, a wall had been smashed in to make way into the adjoining office. “We’re occupying that space next week,” grinned Murty, who quit his job as eBay India’s country manager last June. With the extended quarters, Pepperfry’s Mumbai operations will be spread over 8,000 square feet.

Since our visit, in the last 20 days, the company has crossed 150,000 visitors and 1.5 million page views. It is in the process of hiring more people in Mumbai and at Gurgaon and Jodhpur, where the sourcing and logistics operations are based. In a few months, the company expects to double its headcount from the current 90. Though it started off with 25,000 products across categories on day one, it continues to add new products every four days. Variety and depth are the essence of the company. For instance, it currently offers 150 varieties of tables and about 90 varieties of beds. Future expansion plans also include expanding into categories such as children’s health and building out storage and logistics in other countries (it also delivers to overseas markets).

As a relatively late entrant into the ecommerce segment, Pepperfry’s frenetic pace of growth is not difficult to understand. In its category, it is up against players such as SnapDeal, Yebhi and Myntra, which have a lead of over 12 months in terms of market presence. All three represent fast-track ecommerce startups that have recently raked in venture capital investments. Given the capital-intensive nature of the business, being funded is a good thing. However, it also brings along the pressure to show rapid growth in order to keep up the valuations expected by investors.

Between January 2011 and now, venture capitalists have poured an unprecedented $400 million-plus into the Indian ecommerce sector. Pepperfry will be no exception when it comes to keeping investor valuations on track. In December, the startup raised $5 million in Series A funding from Norwest Venture Partners, which is also an investor in Dealsandyou and Fashionandyou. Prior to the funding, Shah and Murty bootstrapped the company with their personal savings. “We were barely ten days away from running out of money when the funding came in,” says Shah, half in jest. He quit as head of social shopping and business at eBay Motors India to join Murty and is now the COO of the company.

Given its current pace of growth, Pepperfry will probably need to hit the market for another round of funding soon. Fortunately, in Norwest, it does have an investor that can write large cheques for a long time.

Image Courtesy: Pepperfry

Related Posts

• Ecommerce startup Pepperfry raises $5 million from Norwest
• Q&A with Pepperfry co-founder Ambareesh Murty

The 25 entrepreneurs, dubbed Unreasoanable Fellows, are chosen from a list of 46 finalists. The cost of attending the six-week programme  is $10,000. But instead of having the entrepreneurs pick up the tab, the Unreasonable Marketplace gives them an opportunity to raise the money through donations within 50 days.

This year, six companies from Asia are among the 46 finalists who are competing to become Unreasonable Fellows. Out of these, four are from India. At StartupCentral, we’re putting our money (yes, we are making a donation) behind Poop2Power — we love the fact that the idea is so simple. More power to Poop2Power.

Meet the six Asian finalists:

Poop2Power | Sanitation & Clean Energy | India

Swapnil Chaturvedi, the serial entrepreneur behind this unique company designates himself chief poop collector. It’s appropriate because Poop2Power, the company he founded in 2010, collects human faeces every day and converts it into biogas. The gas is used to generate electricity, which is then used by rural consumers to charge batteries and power light bulbs and mobile phones. Poop2Power has a tie-up with a manufacturer for toilets, which it maintains and charges for on a pay-per-use basis. It has completed a pilot with 50 toilet users and 15 electricity customers. So far, it has achieved a 90 per cent retention rate with toilet users and a 100 per cent rate with electricity users. The team also includes Shiv Chaturvedi and Tania Ganguly and has a  $100,000 grant from the Gates Foundation.

Vote for them here.

(Image Courtesy: Poop2Power)

Ja Bru Rigs | Traditional Crafts | China

Founded by former marketing manager Ellen Li, the company makes products such as bags, boxes and notebooks using traditional Chinese embroidery. The products are made available to consumers and companies and the company ensures that the artisans get fair prices for their work. The company released its first product – embroidered boxes – in 2009 and currently retails out of 13 stores in China and one in the Netherlands. The company puts five per cent of every purchase into a social development fund for the craftsmen. The team, apart from Li, includes Luo Xu, a graduate of the Beijing Institute of Fashion Technology who heads design, and Sun Feng Xia who manages production.

Vote for them here.

(Image Courtesy: Ja Bru Rigs)

The Tipping Point | Fair Trade Cotton Farming | India

Ashoka Fellow and Netherlands native Gijs Spoor started The Tipping Point to help cotton farmers in India to connect with the end consumer. Farmer groups feed information about their production activities into the TiP database and the TiP track-and-trace system enables the information to travel through the value chain to the consumer. At the retail end, if consumers see and like the social and environmental impact of the product they intend to buy, they can leave a tip at the store which goes to the farmer groups. The objective is to encourage responsible shopping and build a direct relationship between consumers and producers.

Vote for them here.

(Image Courtesy: The Tipping Point)

Milk Path for Women | Dairy Services | Sri Lanka

Founded by dairy technologist Samanthi Ratnayake, the company empowers rural women with a weekly cash flow of $15 in exchange for dairy products. It organizes for the milking of cows and attends to animal health and allied services. The long-term objective is to produce 8.6 metric tonne of cheese annually at villages, yield revenues of $850,000 and generate a household cash flow of $518,400 in for 500 families. The company produced 1,200 kilogramme of cheese in its first year and generate $10,000 in revenues.

Vote for them here.

Green Basics | Agriculture | India

Srikakulam, Andhra Pradesh-based Green Basics uses a hub and spoke nursery model to enable paddy cultivators to use less resources for maintaining and cultivating paddy before it is transplanted. It provides seedlings for transplant, which reduces the use of seeds by half and fertilizers by 20 per cent. The company provides ready-to-plant seedlings and machinery for a charge. Founded by Tata Institute of Social Sciences graduate Ramana Killi, has raised Rs 2.8 million in funding, partly from angel investors. It has provided skills training to 2,500 farmers in seed multiplication, generated employment for 20 people and distributed Rs 5 lakh salary.

Vote for them here.

(Image Courtesy: Green Basics)

Rural Development and Marketing | Vermicompost & Bamboo Incense | India

The company uses natural resources such as bamboo and biomass available in Bihar to generate products that can help rural citizens improve their income levels. It processes bamboo into incense sticks, using both mechanical and manual processes. It also processes biomass waste such as cowdung into vermicompost using earthworms. Founded five years ago by Ravi Chandra, also the  founder of Bihar Development Trust, the company has established incense production under the trust. RDM markets the incense. Sales for bamboo sticks, rolled sticks and scented sticks stood at more than $60,000 in fiscal 2011. The company has also established a network of 5,000 retailers to sell the sticks in Patna and Bhagalpur. In addition, the company has access to farmers for the production of vermicompost. It has sold 400 tonne of vermicompost, worth $40,000 in fiscal 2011.

Vote for them here.

(Image Courtesy: Rural Development and Marketing)

Seedfund’s latest ecommerce bet positions itself as a destination for affordable fashion apparel. The company has a team of stylists that keeps tabs on fashion trends and ensures that the site offers products in line with those trends. It claims to retail over 60 brands online, including Lee, Puma, Spykar and Wrangler. The site offers offers members the facility of placing orders over telephone (apart from online) and trials before purchase. It also has a 30-day return policy and the mandatory cash-on-delivery payment option.

Founded in February 2011, the people behind HandsPick are a seasoned team of professionals. The team is led by Amarinder Dhaliwal, former vice president of ecommerce at Bennett, Coleman & Co-owned Times Internet. The other two co-founders are Vijay Misra, earlier director-brands at TCNS Clothing Co, and Vijesh Sharma, who was earlier product head-ecommerce at Times Internet.

The investment by Seedfund is from its $54 million Fund II, which was raised last February. It closed calendar year 2011 with 10 deals and an investment commitment of $20 million. The last deal that it had announced was a $1 million investment in Mumbai-based financial information and analytics startup Heckyl Technologies. The firm’s only ecommerce investment last year was men’s fashion site Fetise, in which it invested $5 million.

Image Courtesy: Stuart Miles / FreeDigitalPhotos.net

MangoStreet, says Rahul Yadav, went live on December 25 last year and expects to close January with at least 1,500 orders. About 35 per cent of orders at present are in the school uniforms category. “We hope to become official partners for 2,000 schools by the end of the year,” he says. The company has set up an 800 square feet warehouse in Delhi and has a tie-up with BlueDart for order deliveries. It offers free delivery to 4,000 pincodes, out of which 2,600 pincodes can avail of the cash-on-delivery payment option. It also has a 365-day returns policy.

The founders have kept their previous tee-shirt design business, which retailed through Scopial.com (launched in 2008), on hold for the time being. The decision to focus on kidswear followed the seed funding round in October last year. “We had raised the funds for Scopial but soon realized that kidswear was an under-penetrated and potentially huge market. We worked on the idea for 3-4 months and launched MangoStreet in December,” says Yadav. At the time, Scopial.com was averaging 30-40 sales per day online and was also retailing offline through tie-ups with large retail chains such as Shoppers’ Stop and Westside. With the launch of MangoStreet, the brothers, who are natives of Jaipur, also decided to shift base to Delhi, partly because they found the costs of running operations in Mumbai too high. Scopial Fashions is now the holding company for MangoStreet.

Over the next 12 months, MangoStreet aims to become a one-stop shop for branded kidswear online, going across categories from uniforms to accessories to footwear. The company’s eight-member team is also working on rolling out its own label soon, for which it will undertake design and manufacturing. It is yet to come up with a name for the label.

Image Courtesy: MangoStreet

In India, the firm has emerged as a significant investor over the past couple of years since it set up direct investment operations here in 2006. It has invested over $150 million here so far, which has come primarily from the $650 million eighth fund. “In Canaan VIII, we have committed about $100 million to companies in India,” Alok Mittal, managing director at Canaan Partners India told StartupCentral via email. Last year, the firm invested approximately $40-50 million, including new and follow-on deals. Its largest deal from the year was a $45 million Series A round in Bangalore-based software services outsourcing firm Happiest Minds, alongside Intel Capital. In all, the firm has invested in 13-odd companies including ecommerce startups Naaptol and MotorExchange and microfinance company Equitas Micro Finance India. With respect to Canaan IX, while the firm does not make specific allocations to any geography, investments in India are expected to continue at its current pace here, says Mittal.

Globally, two-thirds of the new fund will be allocated to investments in digital media, consumer Internet, enterprise, mobile and communications companies in the US, India and Israel. One-third is being earmarked for investments in biopharmaceutical, medical devices and healthcare infrastructure companies, said the release.

Compared to most venture capital investors in India, Canaan’s deal run in India has conformed to a slower pace at 2-3 deals per year. In terms of specific sector themes for investment in the current year, the firm is looking at consumer Internet services, ecommerce, software products and offshore services.

During this period we will not be able to update the section with new entries. However, the Submit Startup form will continue to function and we request startups to send us their details. We will post those details when the reformatted section is live.

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While investments in the sector are up globally, 2011 has been a less favourable year for IPO-led exits. The sector reported 51 IPOs worth $9.59 billion, down over 41 per cent from 2010. There are, however, signs of consolidation in the sector with mergers and acquisitions worth $41.2 billion, a growth of 153 per cent (disclosed value of 119 deals out a total of 391).

China has had a particularly good year. At $534 million in funds raised, it ranks second after North America, which raised $6.81 billion over 470 deals. In terms of number of deals, China with 43 deals ranks third after the United Kingdom which closed 59 deals. The largest IPO in the sector came from China – state owned hydro power company Sinohydro raised $2.12 billion on the Shanghai Stock Exchange.

The top three investors in terms of rounds of funding were Kleiner Perkins Caulfied & Byers, DFJ Global Network and New Enterprise Associates. Solar was the highest funded sector, netting $1.81 billion across 111 deals.