This week Craftsvilla announced a Rs 110 Cr round led by Sequoia Capital and supported by existing investors Lightspeed and Nexus and new investor Global Founders Capital. This is an important milestone for a company that has quietly been building out India’s largest marketplace for ethnic apparel and products.
In our view, Craftsvilla stands out from the majority of e-commerce companies for a few reasons:
All this, on the $1.5M that the company cumulatively raised from Lightspeed and Nexus across its seed and Series-A rounds in 2011 and 2012.
This performance is exceptional by all standards and is driven in essence by two key factors:
A. A fundamentally strong business model:
Craftsvilla is going after the massive ($30B) market of ethnic apparel and products in India. This market is highly fragmented across a very large supplier base and thus needs a specialized vertical player to go after it. Since the supplier base is fragmented, it takes longer to build liquidity on the platform but once the critical mass of buyers and sellers are live on the platform, then the margins are attractive and entry barriers are very high. ETSY solved a similar problem for the US market and is currently valued at $2.8B post its recent IPO.
Craftsvilla has gone through the hard part of getting the platform to scale and the quality of the current business is reflected in several metrics:
B. Extraordinary perseverance and focus of the founders:
There has been a frenzy of ecommerce funding in India. Instead of going down the path of driving GMV through discounting and at the cost of margins, Manoj and Monica went through the harder path of building the core of the business – bringing thousands of suppliers across the country on to the platform and helping them sell online. To continue to do this for multiple years while the industry was rewarding a capital led growth path needs strong founders with deep conviction.
It is always helpful to look back at certain ‘forks in the road’ and learn from the experience. The team made a number of critical decisions with crystal clear conviction that, in hindsight, worked well for the company. These include the following:
When Lightspeed, along with our partners at Nexus, made the seed investment in Craftsvilla back in 2011, we were struck by the founding team’s passion for, and understanding of, the market opportunity as well as more measurable factors such as market size, the potential for attractive unit economics and the scope to build a differentiated company that the horizontal e-commerce platforms would not be able to easily replicate. We also believed that this was a powerful opportunity to leverage the internet to unlock new markets within India and globally for artisans and vendors who, until then, were only able to serve their local customer base.
As the company looks forward, there remains much work to do – from iterating on product to building company leadership and replicating the platform in similar markets globally. They can do this with the very strong foundation of capital efficiency and product-market fit that has already been built. We are fortunate to be associated with the company and look forward to being a part of this journey with Manoj and Monica.