eBay today made a huge investment in Snapdeal, India’s largest online marketplace that was launched in February 2010. eBay, along with existing investors (though eBay put up the bulk), invested $134MM into the Company, which is on top of the $202MM raised in previous rounds. Other existing investors also participated, including Softbank, Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital. The Wall Street Journal had reported last month that the Company was in the process of raising $100MM at a valuation of $750MM to $1Bn.
According to Snapdeal CEO Kunal Bahl in an interview earlier this month, the Company is forecasting $500MM in revenue this fiscal year. Snapdeal takes a 5%-30% fee of each transaction, depending on the type of good, with an average in the low teen percentage. Bahl says the Company is preparing for a US IPO within the next 24 months or sooner and had this to say to investors,
“We are the market leading company in the largest growing space in India. People who didn’t invest in Alibaba won’t want to miss the one in India.”
For eBay, the investment seems like a good bet on a growing international market. The Marketplaces division has seen it’s contribution to eBay decline over the years as the US market matures and Payments has become increasingly valuable. Therefore, international is a key growth driver. We wouldn’t be surprised if eBay tries to make an acquisition of the Company before it goes public and becomes more expensive. Devin Wenig, President of eBay Marketplaces, told Re/code in an interview this week,
“When we make an investment and are cooperating with a third-party like Snapdeal, we hope to be successful and hope eventually we can take the next step. We have a history of making minority investments where at times it works well and we take the next step and end up acquiring the target.”
Our guess is eBay wanted to buy Snapdeal in this round but Bahl seems to want to grow the business more and test the IPO market. That’s a smart move since a dual track, M&A while pursuing an IPO, can lead to some great outcomes for a company like Snapdeal.
Other recent, big India e-commerce investments have included Flipkart ($160MM) and Myntra ($50MM). Note that Amazon recently launched an India site while eBay’s own subsidiary, eBay India, could be viewed as a competitor.