How E-com Firm Infibeam Is Managing Without External Funding

Four-year-old general e-commerce firm Infibeam has much in common with Flipkart. But while Flipkart has reportedly raised its fourth round of funding in what could be the biggest private investment in Indian online retail industry, Ahmedabad-based Infibeam.com is yet to raise any external funding. Infibeam is almost entirely funded by the founder's money, with maximum skin in the game!

Certainly, Flipkart has leveraged the money it raised and scaled up quickly. It is also eyeing revenues of over Rs 500 crore for the current financial year. In fact, almost every second e-commerce firm in India seems to be getting a financial backer and some of them are getting VC backing even before they launch operations.

But where does that leave Infibeam? Techcircle.in has caught up with Vishal Mehta, founder & CEO of Infibeam.com, to get a lowdown on the self-funding model and its future roadmap.

Fund Raising & Revenues

As of now, the entire capital invested in the company comes from internal funding infused by Mehta, his family and friends besides the revenues generated from Build A Bazaar (Infibeam's e-com platform that enables anyone to build an online store and also feature Infibeam's products under its banner).

Mehta  who comes from a fairly well to do business family having car dealerships in Gujarat, says he purposely didn't go for external equity funding as that would have led to various covenants.

"We managed with bank finance as that was straighter funding for running the operations. One of the key reasons is that unlike a bank that wants its 13-15 per cent interest, the equity investor looks to have much more in returns," he said.

But the traction from its Build A Bazaar platform also allowed the firm to carry on without equity dilution. "This platform allows us to continuously invest back in the company and in the process help both us and the entrepreneurs that set up their respective online stores with the help of the platform," He added that because of this platform Infibeam's total burn rate in the past was only half a million dollars per month, whereas other companies were burning tens of millions of dollars.

There are already more than 4,800 stores which have opened using the Infibeam platform and some of the big names include www.hidesign.com, www.crossword.in, www.prestigesmartkitchen.com, http://shop.vipbags.com and www.vijaysales.com, among others. The fact that the same platform also powers Infibeam.com has also worked in the company's favour since the technology and the quality have constantly improved, thus attracting new players.

Users can choose to set-up a free of cost basic online store with Build A Bazaar, but there is a limitation of 100 SKUs that can be added by the user and listing of Infibeam's SKUs is mandatory. Then there is silver and a gold online store that costs Rs 1,000 and Rs 2,500 per month and finally a platinum online store which doesn't have any limit on SKUs and the pricing is provided on request basis. This format brings a lot of recurring monthly revenues in the form of monthly fees and seller commission and transaction fees.

But this doesn't mean that the company is not looking to raise funds. Mehta has confirmed that the company will be raising funds very soon and although he hasn't disclosed the exact amount, it should be in tens of millions of dollars.

Financial details of the firm are not in the public domain but in an earlier interview, Mehta had mentioned that the company wanted to rake in 'hundreds of crore' in revenues in this fiscal year (which means the year ending March 2012). Even during this interview, he has confirmed that the company is on the right track and will try to achieve that goal. Like most e-com firms, the company is not profitable as of now.

Mehta says books and electronics are the best-selling products on Infibeam.com, although there is a surge in the sale of lifestyle products whenever the festive seasons arrive.

Scaling Up & Market Insight

The company has made new hires and its employee strength is up from 400 last August to around 600 as of January 2012 (excluding the recruitment done for the last-mile logistics). Meanwhile, Infibeam Logistics' (an in-house last-mile logistics delivery system) delivery capabilities have been expanded to Ahmedabad and it will further expand to Chennai and Kolkata by March this year.

The company already has its own logistics operations in Delhi, Gurgaon and Noida besides the recently added Bangalore and Mumbai centres. It is now planning to expand to around 25 cities by the end of 2012.

The company has recently tied up with erupee, a network of retail touch points which will provide Infibeam Vouchers, redeemable against any purchase on Infibeam.com.

Mehta believes that there has been an increase in momentum in the Indian e-commerce space during the past couple of months which is good from customers' standpoint.

"Customers today have the option of comparing offline store prices with those of online stores. They can also purchase products online which are, at times, not available in brick-and-mortar retail stores. Also, there have been a lot of investments in the e-com sector which is a good thing as more investments mean more innovation," he says.

Mehta has also pointed out that there are quite a few companies who have not done too well and exited since. "But overall, there is a lot of positive sentiment here and the e-commerce sector will continue to grow in the coming years," he concludes.