Feb 22, 2017 12:53 PM IST | Source: Moneycontrol.com

Snapdeal crisis: A look at SoftBank's startup empire in India

Twice in last six months, SoftBank has written off its investments in Ola and Snapdeal by USD 555 million in November 2016 and USD 475 million in Februray 2017. Collectively about a billion dollars have just vanished from SoftBank's India investments thus it has suffered a notional loss than gain in book value of these firms.

Snapdeal crisis: A look at SoftBank's startup empire in India

Priyanka Sahay & Harsimran Julka
Moneycontrol Bureau

Even as SoftBank’s prime e-commerce bet in India – Snapdeal is undergoing tumultuous times and lagging behind leaders Flipkart and Amazon, it is also planning a large number of layoffs.

Multiple other investments of SoftBank in India have also been flailing with some even have undergone devaluations in its own books. Softbank's journey in India started in 2007 with its first investment in Instacoll, a virtual collaboration startup that has since shutdown. 

Literally, a lot has happened, both at SoftBank, the Japanese internet and telecom firm and its portfolio companies in India, especially in the last couple of years.

The Japanese major has invested about USD 3.18 billion across 24 deals, as per data by research firm Tracxn.

The fund created a new unit of SoftBank -- SoftBank Internet and Media, Inc. (SIMI) and hired former key executive of Google, Nikesh Arora to lead investments in the internet space in India in month of October in 2014.

In the next little less than two years, Arora was seen spearheading about USD 2 billion during his tenure across companies such as online grocery delivery firm Grofers, budget hotel accommodation aggregator Oyo Rooms and real estate startup Housing.com, among others.

SoftBank Group, which has a large shareholding in Chinese e-commerce firm Alibaba Group Holdings Ltd, announced USD 837 million of investment across e-commerce firm Snapdeal and taxi hailing firm Ola in 2014. It had also pledged USD 10 billion investment over a decade in the country.

Going forward, hyperlocal delivery and grocery delivery as a sector struggled with the issue of unit economics, Oyo was delisted by the online travel agencies like MakeMyTrip and GoIbibo who went ahead to launch their own budget hotel categories.

Housing.com which last month got merged with rival PropTiger, created a lot of news when its founder Rahul Yadav got into a verbal spat with its investors.

Arora’s choice of startups was questioned. He also faced scrutiny, after a group of investors in SoftBank Group Corp called on the board to investigate Arora questioning his track record and qualifications as president.

SoftBank panel however cleared him of any misconduct in June, 2016.

To everyone’s surprise, Arora, soon exited the firm, triggering a trail of speculation of what could have happened behind the curtain.

He was the heir apparent to the post of SoftBank President which founder Masayoshi Son decided to retain for bit longer, making Arora resign.

Twice in last six months, SoftBank has written off its investments in Ola and Snapdeal by USD 555 million in November 2016 and USD 475 million in Februray 2017. Collectively about a billion dollars have just vanished from SoftBank's India investments thus it has suffered a notional loss than gain in book value of these firms.

Here’s a list of the key investments made by SoftBank in the Indian internet space in the last few years and how they are faring now:

1) Snapdeal

The company has come down to a distant third position following global rival Amazon’s quick escalation in the Indian e-commerce market. It is currently in news for its target to downsize headcount in order to drive growth.

The firm no doubt is struggling to sustain the business amidst cut throat competition from Amazon and domestic rival Flipkart. So much so that the company is also reported to be in conversation with SoftBank to raise a round at a lower valuation. The company has pivoted thrice in the past and it will be interesting to see if it plans any further pivot to create a differentiation and survive - merge - or sell itself out in future.

Snapdeal almost doubled its losses to Rs 2,960 crore during the financial year ending March 31, 2016.

Funding raised: USD 1.76 billion

2) Ola

The ride hailing firm is fighting a tough battle for survival with US-headquartered rival Uber. Periodic regulatory reminders from government ranging from one issue to another is another common struggle for the cab aggregation industry which has cascaded the growth in the sector. Recently, the Karnataka government impounded over 30 vehicles on both Ola and its rival Uber for not abiding by the law. The government had restricted the companies from allowing ride sharing in the state.



The company is also in a tight spot following the ongoing protests by the drivers due to reduction in incentives, as it aimed to rationalise the cost incurred. The Indian unicorn faces rough time ahead, considering it is competing with Uber which is known as the start-up with the highest valuation, globally. Valued at over USD 60 billion, Uber last year exited China and is now completely targeting to focus on the India market.

Funding raised: USD 1.35 billion

3) OYO Rooms

Oyo is a marketplace of branded budget hotels with standardized stay experience. Broadly the rooms are not owned by Oyo. They are aggregated and then offered to customers for booking. However in the last one year, it has also been experimenting with a flagship model where it is leasing the entire property and then offering it to customers. It has business spread across 250 cities with over 70,000 rooms and plans to add 25-50 more cities across leisure and pilgrim destinations by the year end and targets the room number to reach at least 100,000.

The company killed its smaller rival by acquiring and dissolving the brand even as the deal got stuck in a deadlock.

However, it is likely to face tough competition from the online travel agency sector especially post the merger of MakeMyTrip and GoIbibo. It last raised around USD 62 million all coming from SoftBank in August, besides raising an undisclosed amount from debt fund Innoven Capital.

Funding raised: USD 192.65 million 

4) Grofers

The grocery delivery firm saw a difficult time in 2016. The segment witnessed massive amount of cash burn followed by multiple start-ups shutting shops. Grofers too had to shut operations across multiple cities citing lack of order volume. It also received brickbats after it declined jobs offered to students at the last minute.

The company however has thereafter maintained a low profile trying to revive the business. Founder Albinder Dhindsa told Moneycontrol, it has restarted operations in Ludhiana and plans to start operations in two more Tier II cities. It has also shifted focus from express delivery and is trying to rely on next day shipments with an aim to rationalise the unit economics. The company got a bit of boost due to cashless payments started post ban on high currency notes in India last year.

Funding raised: USD 166.5 million

5) Housing.com

Last month, Housing.com got merged with rival PropTiger. It will be fair to say that the company got more publicity for the controversies associated with it than the problems it aimed to solve. Whether it was the unceremonious exit of the founder and chief executive Rahul Yadav from the company following verbal spat with the investors or the massive cash burn that the company did post funding from SoftBank on marketing campaigns, it never failed to make headlines.

Post Yadav’s exit, Jason Kothari was brought in the company who went on to restructure the firm. He stabilised the the firm and cut headcount by huge numbers preparing it for a sell off. All this while, over half a dozen other co-founders of the company exited. It currently has just two founders left -- Snehil Buxy and Neeraj Bhunwal.

Housing is expected to soon move into a single legal entity with PropTiger, however, the two entities will retain their brand names.

Funding raised: USD 141.5 million

6) Hike Messenger

In August last year, Hike Messenger, announced a Series D financing of over USD 175 Million in a new funding round led by Tencent Holdings Limited and Foxconn Technology Group valuing the company close to USD 1.4 Billion.

Existing investors Tiger, Bharti and the SoftBank Group also participated in this round. The company claims that about 95 percent of its users are based in India and 90 percent of them are below the age of 30. However, the market is dominated by Whatsapp and Facebook Messenger both controlled by Mark Zuckerberg. The company’s recent valuation of over a billion dollars was put into question by market analysts and leaders even as the company is yet to make even USD 50 million in revenues.

Funding raised: USD 261 million

7) InMobi

Bangalore-based InMobi is a global mobile ad network which enables advertisers to launch personalized mobile and website ad campaigns using targeted data analytics for consumer life map, behavior, social connections, demography etc. InMobi engages 1.75 billion consumers across 169 countries with 23 billion ad impressions per month.



The company was said to be in talks with major investors for another large round. However nothing has materialised so far, even as the company has reported losses for last few years. The company competes with bigwigs in mobile ad networks space including Google, Facebook and others. 

Funding raised: USD 220.6M

(Data Source for funding: Tracxn)

Sections
Follow us on
Available On