Social commerce startup Meesho raises $570 mn, valuation doubles to $4.9 bn

India's unorganised retail sector, worth an estimated $792 billion, is set for the next wave of growth

Social e-commerce start-up Meesho on Thursday said it has raised $570 million, led by Fidelity Management & Research Company and B Capital Group, a venture capital firm co-founded by Facebook Co-Founder Eduardo Luiz Saverin. Existing investors Prosus Ventures (formerly Naspers Ventures), SoftBank Vision Fund 2, and Facebook also participated in this round. Other new investors include Footpath Ventures, Trifecta Capital, Good Capital, and others. Following the fund-raise, the company’s valuation more than doubled to $4.9 billion in less than five months.

In April this year, Meesho became the latest start-up to enter the hallowed unicorn club after raising $300 million in a fresh funding round led by SoftBank Vision Fund 2, valuing the firm at $2.1 billion.

Meesho aims to reach 100 million monthly transacting users by December 2022. It expects to utilise the fresh round of funding to grow its technology and product talent 2.5x, increase its roster to over 50 million products, and become the platform of choice for customers, entrepreneurs, and sellers from all corners of India.

Meesho is also looking to expand its groceries and fast-moving consumer goods offerings with Farmiso (Meesho Grocery), its community group buying (CGB) business to over 200 cities. By making online grocery shopping affordable for first-time users across India’s tier II markets, the company is enabling them to shop from a wide selection of groceries at ticket sizes as low as $1-2.

“The next wave of growth in India’s digital consumerism will undoubtedly come from Bharat. We’ve always focused our efforts on enabling entrepreneurs from tier II-plus markets to expand their business and, in turn, uplift small economic pockets in the country,” said Vidit Aatrey, founder and chief executive officer, Meesho, adding, “The new round brings us a step closer to realising our mission to democratise internet commerce for all, increase regional participation in the digital economy, and add momentum to local businesses.”

India’s unorganised retail sector, estimated to be $792 billion, is set for the next wave of growth, with digitisation enabling rapid expansion and greater reach across the country. With a vision to enable 100 million small and medium-sized businesses (SMBs), including individual entrepreneurs, to succeed online, Meesho is democratising internet commerce by bringing a range of products and new customers online. What started as a reseller-focused platform enabling millions to sell online, has now become a single ecosystem connecting sellers to consumers and entrepreneurs.

In just five months since the last round of funding, Meesho recorded 2.5x growth in order volume and added a range of new product categories to its roster, including sports and fitness, pet supplies, and automotive accessories. The company intends to go deeper into India’s underserved markets, becoming the preferred e-commerce destination for the next billion users in the country.

“We have evaluated e-commerce opportunities across emerging markets and are excited about Meesho’s focus on strong unit economics and a consumer-first approach,” said Kabir Narang, founding general partner at B Capital Group, adding, "Meesho’s business model has an incredibly compelling value proposition with entrepreneurs, end-customers, and suppliers consolidating on one platform. It has rapidly emerged a leading player in this space.”

Narang said Meesho is now enabling 100 million SMBs across tier II-plus cities, empowering them to sell online, leveraging its digital commerce platform. The company is invested in providing entrepreneurs and consumers equity in e-commerce by reducing entry barriers, improving logistical infrastructure for tier II-plus markets, and fuelling the discoverability of hyperlocal businesses and products. With industry-first initiatives like zero-per cent commission, the company said sellers can now earn better profit margins and grow their business, while providing individual entrepreneurs and consumers access to locally sourced products at the lowest prices.

“A testament to our skyrocketing pace of growth - our monthly transacting users steadily grew 2.8x, while monthly orders rose 2.5x since our last fund-raise,” said Aatrey in a tweet thread on Thursday morning.

He said 40 per cent of Meesho’s new users from the same period were also first-time e-commerce users. Today, 5 per cent of Indian households shop with it every day, with 75 per cent of them from tier II-plus cities. “Our application (app) is sized at just 12 megabytes and compatible with low-end devices and low internet bandwidth, making e-commerce accessible to millions.”

Facebook had invested around $25 million in Meesho in 2019, which provides resellers, who largely comprise housewives and small businesses, with a platform to sell their products across social networks like WhatsApp and Facebook.

E-commerce — powered by cheap data, supply-side innovations, and digitally savvy customers — has become a $30-billion industry in India in 2019-20. More than 100 million of India’s estimated 572 million Internet users purchase products online. And the next frontier is social, according to a report titled The Future of Commerce in India – The Rise of Social Commerce by Bain & Company, in partnership with Sequoia India. The report expects social commerce, which is a $1.5-2 billion market today, to be worth as much as $20 billion in just five years —and will likely hit nearly $70 billion by 2030. In short, India’s social commerce sector will be twice the size of the current e-commerce market within 10 years.

Meesho is competing with other social e-commerce firms and start-ups, such as DealShare, BulBul, GlowRoad, Mall91, and simsim. E-commerce firm Flipkart is also betting big on social commerce, which is the use of social network communities to drive e-commerce sales. The firm recently launched Shopsy, an app that enables Indians to start their online businesses without any investment. With the ability to influence their local network and fulfil their aspirations, users of Shopsy are able to share catalogues of a wide selection of 150 million products offered by Flipkart sellers.

In July this year, DealShare, a start-up that has built an e-commerce platform for middle- and lower-income groups of consumers in India, raised $144 million in its latest funding round, led by Tiger Global. The firm is known for pioneering the CGB model in India. The funding has taken the valuation of the firm to $455 million.