Five years after Series A, Instamojo finally closes $7 million Series B round; on track to raise Series C this year

Fintech player Instamojo will use the new funds to introduce new products, build a mobile platform, add business productivity tools for MSMEs, and create a social community platform.

Instamojo, the digital payments, and services platform for small businesses, on Wednesday, announced that it had closed its Series B funding round of Rs 50 crore ($7 million) led by Japanese payments firm AnyPay. This is a continuation of the pre-Series B round where the company picked up close to $4 million from AnyPay in August, last year.

The round also saw participation from Japan-based Gunosy Capital, a first-time investor, and existing investors Beenext, Rashmi Kwatra, and Kalaari Capital (who invested the remaining amount). Post this round, Kalaari Capital continues to be the largest investor shareholder in the company, after the founder and employees, who hold a 50 percent stake.

The funding comes as a breather for the firm, which was struggling to raise more funds from investors and was teetering on the edge of a shutdown. Before the AnyPay funding round in August last year, the company raised its last equity round in November 2014.

The money raised from the current funding round will be invested heavily in building the company’s mobile platform, adding business productivity tools for MSMEs, and creating a social community platform to connect MSMEs on Instamojo.

In an interaction with YourStory, Co-founder and CEO Sampad Swain stated that Instamojo was also in the process of closing their Series C round in the next six months; however, he refused to divulge information on the investors.

Speaking about the direction the company would now take, Sampad said,

“In the last 12 months, in spite of the adversity of funds, we have grown 3x and also turned profitable. With funds coming in now, we will prioritise towards pushing newer horizons, focus on growing our ancillary businesses (of commerce and lending), and try to build the mobile and community platform for MSMEs on our platform.”

Instamojo is expected to double its staff this calendar year, from 120, hiring individuals for its ancillary business functions, including lending and logistics, and other support functions.

Founded in 2012, by Sampad Swain, Akash Gehani, and Aditya Sengupta, Instamojo started as a payment platform for MSMEs to accept all kinds of payments and transfers. After August last year, the company revamped itself into an active financial services player, diversifying into providing logistics and lending products for MSMEs, named MojoXpress and MojoCapital, respectively.

Commenting on the fund-raise, Taka Inoue, CEO of AnyPay, said,

“Our association with Instamojo started in August 2017 and now Instamojo is all set to evolve from just being a payments company to a full-stack service provider that supports logistics and short-terms loans to empower Indian MSMEs. We are confident that Instamojo will be soon become indispensable for all entrepreneurs in India. AnyPay joined this round as a continuation from the previous round and I will be joining the Instamojo team as a board member.”

The company is also enabling MSMEs to build online stores, helping them to go digital. The platform has, till now, helped create more than 11,000 online stores.

Sampad termed this is an early version of Canada-based Shopify, which helps merchants set up online stores on its platform to sell their goods. When asked if they would build a platform to bring all these stores together, Sampad said: “Eventually that is the vision. However, we won’t be focusing on it this year, since we are gunning to increase traction for our core and other ancillary business.”

In just three months of launch, the founder stated that logistics, lending, and commerce were already contributing to almost 10 percent of their overall revenues.

Also read: Instamojo now diversifies product portfolio, brings logistics and lending onto its platform 

Bringing the ‘mojo’ to capital

To fulfil the growth and credit-related financial requirements of MSMEs, MojoCapital was launched with two loan products: Next Day Payout and Instant Payout. The products allow merchants to receive their payments a day after the payment was made or get an instant payout after the customer pays for the product and services. These are given with a service fee of 25 basis points and one percent.

Sampad stated that the loan portfolio, for the quarter ending December, had reached an annualised run rate of Rs 100 crore. As of December 2018, the company deployed close to Rs 8.5 crore in loans, witnessing a 20 percent growth on a monthly basis. Instamojo at present works with 12 NBFCs and financial partners to provide this credit. By the end of fiscal year 2020, the company estimated that it would have disbursed more than $150 million (Rs 1,000 crore+) in loans. 

Instamojo, which has completed 50,000 credit transactions, plans to use the current funding to add three new credit products. The first one will aim to provide working capital finance for MSMEs, with an average ticket size of Rs 5 lakh to Rs 7 lakh. The other products may involve invoice-based lending, but Sampad did not divulge further details.

Diversifying logistics

Instamojo’s logistics service, MojoXpress, has performed close to 1,000 transactions until now, with delivery partners FedX and Delhivery. The service allows pick-up of sold items from Instamojo merchants and delivers them to their customers.

Constrained to only air freight until now, the company will partner with newer players to add road and intracity logistics in the coming days.

More firepower to merchants

With the latest funding, Instamojo also plans to double down on mobile, empowering merchants with the same capabilities as their desktop platform.

Sampad said:

“The mobile platform is only about sending payment links to customers. We want to grow that by bringing features already on the desktop platform to mobile.”

Apart from enabling features like “request a payment” and “virtual account numbers” for merchant payments on mobile, the company plans to add secondary features like invoicing, QR payments, business card, missed call marketing, branding, advertisement, and analytics tools to the platform.

Sampad said Instamojo may not necessarily build all these tools; it might partner with players who already have these existing capabilities.

Funding crunch and missed targets  

At present, Instamojo claims to have a network of 600,000 registered merchants, of which Sampad said 150,000 were active. Considering its current growth rate, the company plans to take the total number of registered MSMEs on the platform to 800,000 by end of FY19. It aims to have close to 1.5 million registered MSMEs on the platform by the end of financial year 2020.

But the non-availability of funds in the past might cause Instamojo to miss its projected targets for this fiscal year.

As per a company blog post in April last year, Instamojo was aiming to reach more than 1 million registered sellers on the platform by end of FY19. However, it is expected to fall short of this projection by 200,000 sellers. The company, at present, claims to have an annualised GMV run rate of Rs 2,000 crores, quite lower than the projected Rs 6,000 crore GMV run rate it was aiming to achieve by end of March 2019.

However, it has followed up successfully on the product portfolio, with the launch of promised features, including Smart Links (payments), Instant Payouts (lending), and integrated logistics services (shipping and delivery).

And with the new round of funding, things are only looking up. “We will continue to grow 3x in the coming year. At present, we have touched only 2 percent of the market, so the potential is massive,” Sampad said.