While complying SaleBhai with the laws, he said that it took them 3-4 months to comply with laws.
Ahmedabad based e-commerce platform for regional goods and delicacies SaleBhai opted for an IPO and filed a draft prospectus (DP) with the BSE's SME platform to raise around Rs 24 crore.
In an interaction with Moneycontrol, co-founder Vishwavijay Singh shares the challenges faced by a 3-year-old company for an IPO.
The company invested around Rs 11.7 crores and in order to grow it needed funds. "We realised that we have to grow in the space and so we had two options--VC or IPO. One of our investors suggested an IPO route and at that time we were not aware of BSE starting IPO for SMEs," said Singh.
Singh feels opting for an IPO is far more difficult than raising funds from VCs because there are set procedures for it. It takes time and first and foremost to get the company compliance with the law.
"And a lot of startups are not complying with the law. In an IPO, compliance with law and audit requirements are huge," he said.
SaleBhai took nearly 3-4 months to comply with laws, he noted.
"The second struggle in an IPO is that the company will need a good merchant banker and sell the story to him. The time when I told him that we are making losses for three years and he said that it is not possible and we will not be able to raise funds," Singh said.
He added, "It is difficult to get good merchant banker because it is not just about his fee but under BSE SME IPO it should be 100 percent underwritten. So tomorrow there is no chance of our IPO getting less subscribed."
There are challenges for an IPO and Singh said he chose IPO over VCs because he thought to opt for an IPO will have resonance with investors.
He added, "It was not about getting money from the VCs but losing the stake in your own company and losing the power of decision making.
By this financial year, we are targeting to reach dispatch of 1 lakh unit per month from current 8-9 thousands."
He also talked about how foreign companies like Amazon, Alibaba and others were making it difficult for smaller e-tailers in the domestic market. "Startups are shifting to B2B is because of these three giants coming in the country and any kind of e-commerce is now over. We were lucky to get into the ecosystem in 2014. Now there will be only exits. The entry door for e-commerce in India is now closed. It is difficult because now these guys are going to expand aggressively.""For its IPO, SaleBhai is issuing 22,59,600 equity shares, offering 26.58 percent of the company's equity in the market, and will be listed on the Bombay Stock Exchange's (BSE) SME Platform. It is looking to raise Rs 23.73 crores," SaleBhai said in a statement.