Venture Capital Funding in E-Commerce Firms in India

Abstract

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Venture capital funding is the prime source of finance for high potential startup firms. The e-commerce marketplace is one such entity, which is highly dependent on venture capital funding to fulfill the requirement of capital. Corporate venture capital has long been seen as the strongest kind of finance, but it is also the least likely to be available to entrepreneurs. Each of these funding approaches is likely to foster a distinct company culture, which might have an influence on the e-commerce venture’s long-term success. The paper tries to understand the factors influencing venture capitalists to invest in these types of firms and analyses how firms are consolidating their positions in the market to increase their valuation to obtain more funding from venture capitals. The methodology used is the case study of four top online marketplaces in the Indian e-commerce market, namely Amazon, Flipkart, Snapdeal, and Paytm Mall. The study is analytical and data are collected from secondary sources from the year 2014-2019 for the purpose. The study found that Angel investors and equity finance are two of the most important sources of startup funding. The study contributes two points. First, the identification of factors that influence the valuation of the firm. Second, how these factors motivate a venture capitalist to fund particular e-commerce platforms.

Keywords: E-Commerce, Marketplace, Venture Capital Funding, Valuation

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