According to HexGn research, the total funding in E-commerce startups was $26 billion in 2019 compared to $49 billion 2018.
The lack of funding interest in this sector can be made out by the fact that last year this was the third largest sector in terms of funding and this year the sector was the fifth largest in terms of funding.
According to E-commerce, Startups Funding Report-2019 by HexGn, the sector attracted $26 billion worth of funding in 2019 compared to $49 billion US dollars in 2018, a drop of 48%. The number of deals also saw a drop of 25% with the total dropping from 2714 to 2036. The disparity between the change in the number of deals and funding meant that the average deal size went down from $24 million to $18 million.
However, this change in the funding scale and the number of deals is a reflection of saturation in industry with E-Tail, Marketplaces & Portals having been one of the earliest movers in the new technological era. With many large existing players like Amazon and Alibaba the sector failed to produce enough niche and innovative areas for expansion. Innovation could be seen in specialization rather than full format offerings.
According to E-commerce, Startups Funding Report-2019 by HexGn, the region which saw the most funding in 2019 was Asia, which garnered a total of $12 billion compared to $33 billion in 2018, a fall of 64%. The number of deals only fell by about 17% which meant that the average deal size fell from $63 million to 27 million dollars. It is to be noted that the average in size in Asia is way above the global average.
However, the gap seems to be narrowing, in 2018 the average deal size was two ad a half times that of the global average, in 2019 it dropped to one and half times the global average.
E-commerce, Startups Funding Report-2019 by HexGn, funding also fell in North America, in 2019 total funding was $6 billion, this is a fall of 48% compared to 2018 when the sector attracted $12 billion the number of deals too fell by 30% and the average deal size dropped from $14 million to $12 million. It is worthwhile to point out that in North America E-Tail, Marketplaces & Portals sector was the ninth largest in terms of funding.
E-commerce, Startups Funding Report-2019 by HexGn, Europe saw a different scenario with funding increasing by 94% to reach $6 billion compared to $3 billion in 2018. The total number of deals dropped by 28%, which shot up the average deal size $18 million from $6 million a year ago. Europe saw a few large fund raises by a few companies despite a fall in the number of deals which led to funding surge despite a drop in deals.
The grouping comprising Oceania, South America and Africa saw a funding of $1.4 billion in 2019 compared to $1 billion in 2018. This is an increase of 41% over the previous year.
However, the number of deals in this grouping decreased by 22%. Here too the average deal size went up to $17 million from $8 million.
While in North America and Asia this sector has a number of incumbents and therefore saw a drop in funding, in the case of Europe and the group consisting of ocean in South America and Africa, the emergence of local players was the key takeaway. We should see an increase in Mergers and acquisitions in the near future in Europe and the rest of the regions as the big global players look to enter these markets and it might be easier to buy your way in rather than spend years building the business.
For simplicity we have categorized deals with average size less than $3 million as going into startup formation and validation of business ideas or Seed/Angel funding.
Categories falling between $3 million and $30 million are categorized as early stage funding and we have surmised goes into growth and customer acquisition. Any category above where the average deal size exceeds $30 million is categorized as late stage and is for market expansion or Pre-IPO preparations. While there are exceptions in each category, the purpose is to provide trends rather than hard numbers for reporting.
E-commerce, Startups Funding Report-2019 by HexGn, funding and deals across all stages fell in 2019, the fall in Seed/Angel stage was 6%, the early stage funding fell by 26% and late stage funding fell by 56%. The number of deals in the stages said by 21% 29% and 30% respectively.
In terms of the absolute value, Seed/Angel funding reduced by $62 million, early stage funding decreased by $3 billion and late stage funding cell by $21 Billion. Seed/Angel stage attracted approximately $1.1 billion in both 2018 and 2019, early stages saw funding to the tune of $9 billion invested in 2019 compared to $12 billion in 2018.
Late stage deals saw funding drop to $16 billion from a high of $37 billion. The only notable change in different categories of the funding was a sharp increase in debt financing debt financing, where the amount grew by $1.6 billion to reach $2.3 billion in 2019 an increase of 213%.
E-commerce, Startups Funding Report-2019 by HexGn, whether expected or not the drastic change in funding for the E-Tail, Marketplaces & Portals sector points to a definite saturation in the sector, enabled by massive investment in the previous years.
The emergence of many strong players in each market and very little differentiation available to new entrants meant a lack of investor confidence in growth of new companies. The only space available was in niche and specialized categories.
We do not foresee any change in this trend for this sector as it is difficult for new entrants to raise enough funds to compete with established players. We will continue to see varying levels of interest in unexplored and underserved markets.
The e-tail, marketplaces, & portals startup industry has witnessed the maximum slump in investments in 2019. Although on its own $26 billion is an impressive figure for investments, but compared to 2018, this amount has come down considerably – by 50%. At a country-wise level too, the investments fell through for even the top nations. Based on the investments picked up by countries in 2019, the top five nations for the e-tail, marketplaces & portals segments for 2019 were China, United States, United Kingdom, India, and Colombia. The top two countries had a stark difference in the funding in 2018 but in 2019 the investment amount has come down to a level where there is not much difference. The same also goes for the UK and India, the third and fourth ranking nations whose funding in the segment are quite close.
The presence of e-commerce stalwart like Alibaba warrants China a place among the top countries for e-commerce companies. This particular segment has witnessed an impressive journey also because of the successful startups like Alibab investing back into the industry. China raised $6.45 billion last year, falling by almost 70%, compared to its funding figures in 2018.
The highest funded startup in the segment globally is from China. Chehaoduo is a car trading platform startup that raised $1.5 billion in funding 2019. Another startup whose funding round is worth mentioning is Aihuishou, offering a platform for selling second-hand electronic items, that raised $500 million.
The investments in every stage of funding dropped in China with the minimum being in the seed stage round where the fall was of 1% and the maximum dip in the ICO & crowdfunding stage where there was no funding in 2019.
China is followed closely by the US at the second position with $5 billion in funding. For the American e-tail, marketplaces, & portals segment, the investments fell by 57%. US has been ranking second in terms of startup funding in this particular segment for two years in a row now.
The top startup in the US that raised the highest funding last year was Wish, a shopping application, which completed its Series H round raising $300 million in 2019. This was closely followed by e-commerce portfolio company, Rue Guilt Group which raised $280 million in a corporate round. Other notable startup funding rounds were of e-commerce portal company Grove Collaborative which raised $150 million.
Private equity and debt funding stage rounds saw the investments grow lesser by over 70% last year. The stage which felt the least decline was early stage venture rounds where the investments were down by 10%.
The United Kingdom seems to have bucked the trend in the global e-tail, marketplaces, & portal segment in 2019 with a growth in the investments compared to the previous years. E-commerce and related startups in the UK raised $3.6 billion in funding and grew five times their investments in 2018. This is an impressive feat and has helped in cementing its position in the top five nations in 2019.
The Hut Group, an online retailing platform, closed two funding rounds of one billion dollar each in 2019. These two rounds accounts for more than 50% of the funding raised by e-commerce startups in all of UK. These were just two of the many funding deals The Hut Group closed in 2019. Online delivery platform Deliveroo too made it to the top five funded startups with its Series G round in which it raised $575 million.
Investments in the early stage, late stage, and private equity stages showed an unparalleled growth in the money raises with the funding in the late stage and private equity rounds growing by over five times, as compared to the figures of 2018.
India’s e-tail, marketplace & portals segment has been in the news even more ever since Walmart’s acquisition of Flipkart in 2018. However, despite all that attention to what the Indian segment has to offer, the investments seemed to have dropped, by 10%. India’s total investments in the e-tail, marketplace, & portals segment was $3 billion, quite close to UK’s total investments in the same year.
The top funding deal in the Indian e-commerce startup segment was of Udaan, a B2B trade platform. The venture picked up $885 million in its Series D round last year. The second-highest funding raised in a single round was by Lenskart, an Indian e-commerce brand for eyewear which raised $275 million in the Series G round.
A look at the patterns according to the funding stage showed that among all the funding stages in which investments grew, the maximum growth was in the seed stage rounds where funding grew more than two times. In the last two years, ICO & crowdfunding stage deals were recorded only in 2019.
Investments raised by e-tail, marketplace & portals startups in Colombia grew by more than 300% in 2019, as compared to 2018. The total investments grew from $341 million in 2018 to cross over a billion dollars last year. The boost in the investments in this segment goes well with the narrative of Colombia’s booming economy in the last five years, making it a top startup nation in America.
It is interesting to see that of the $1.02 billion funding that can be attributed to this booming Latin American nation, a majority share of this amount is by only one startup – Rappi. The venture raised $1 billion in its Series E round to become one of the highest funded startups in Bogota, not just in the e-tail, marketplace & portal segments, but across industries. The startup has single-handedly helped in increasing the funding of Colombia, putting both the country and the city of Bogota on the startup world map.
In the last two years, 2019 was the only year where the segment recorded seed funding. While late stage venture stage funding grew by 7 times, the private equity stage rounds made a disappearing act in 2019 with zero investments happening at that stage.