Funding in the Ecommerce Enablers sector peaked during 2015, where a total $982M was invested in 136 deals
Few sources reveal that the Global e-commerce software and services spending market is predicted to grow at a CAGR of 13% over the period 2014 – 2019. This forecast has certainly made the Ecommerce Enabler space bullish for investors, which is evident from the funding trend seen over the last few years.
According to the Tracxn Report on the Ecommerce Enablers space, over $3.4B has been invested in the sector in the last 6 years, out of which $2.4B was raised in the last three years alone.
Funding in the sector peaked during 2015, where a total $982M was invested in 136 deals. While there has been a substantial increase in the total funding amount over the last year, the number of deals has dropped, leading to an increase in the average funding size. The average funding ticket per deal was maximum in 2015, at $7M per deal, indicating that the sector is now in a stage where big companies are attracting large funding amounts.
Notable examples of this would be Ecomm Express’s all-time high raise of $133M, from a PE fund led by Warburg Pincus. Delhivery also saw a substantially large raise of $85M in its Series D round led by Tiger Global Management.
With large companies now raising the majority of the funding contributing a vast portion of the funding, it is no surprise that the number of late-stage deals has been relatively high over the last three years.
But at the same time, this means that the number of early stage rounds has been decreasing, and with 2015 also seeing a large number of smaller size rounds, the average deal size for early stage rounds during the year has also decreased. This sentiment, wherein early stage rounds are beginning to dry out has certainly been felt by startups, and this is evident from the decreasing number of new startups entering the space.
The 2011-2013 timeframe, on the other hand, seemed a lucrative time for startups to enter the market, as the period witnessed an upward trend in the number of early-stage deals taking place at that point. Due to this, the period witnessed a high number of companies being founded, seeing spikes in 2011 (58%) and 2013 (42%). Since 2010, we have also seen an increase of companies using technology and tools around E-commerce.
On similar lines, out of the 956 companies covered in this report, close to a quarter emerged from the Storefront sector for SMBs and retailers. Backend and marketing services for e-commerce have the second most number of companies.
Funding activity within the segments tells a different tale. In terms of dollars invested, startups in the Marketing space have raised the most, at $1.3B. This can be attributed to the year 2013, where the segment drew in $218M. In 2015, the highest number of funded companies belonged to Marketing – Personalization and Automation. In Personalization, Qubit raised $40M Series C, BloomReach raised $56M Series D. In Marketing Automation, Bluecore secured $21M Series B.
The storefront segment, though raising the second highest volume of funding, is consolidated, with none of the new companies founded in 2015 receiving funding. This may change in the coming years as the traditional boundaries of B2B commerce are now being completely remodeled, with marketplaces being at the centre of this transformation. This means that B2B e-commerce will account for a growing part of e-commerce technology spending, with many manufacturers, wholesalers and distributors going for B2B storefronts and services/technologies around it.
Of Startups which are fast growing, we need to really keep a close eye on the Backend space, which has been seeing an increasing year-over-year growth, with $369M invested in 2015. Delhivery and Ecomm Express both fall into this category.
In terms of upcoming verticals, Technology – Fitting, AI- Based and Backend – Fulfillment has seen the most number of early stage deals and will be seen at with keen interest. Augmented reality applications for e-commerce of furniture, gadgets etc are booming, and Intelligence platform, i.e machine learning-based search engines, for fashion and lifestyle e-commerce are also upcoming.
Another area which has so far seen major funding activity is the Fraud & Risk Management space, which indicates the e-commerce industry’s need for a fraud prevention platform that uncovers new revenue opportunities. According to ACI Worldwide, e-commerce fraud attempts registered a 30% increase in 2015 and hence is a key investable segment in the next few years.
Today, companies are looking to provide a consistent shopping experience and the quick fulfillment across all platforms. This is an important point for retailers to address as 85% of transactions which are initiated in one device are often completed on another. Due to this, for B2C and B2B companies are investing in order management systems to enabling complex fulfilment processes and flexibility to handle order orders from anywhere. Investments are also being made toward technologies around reverse logistics, that can solve the issue of mismanaged returns and high distribution costs.
Note: This report covers companies that help in delivering all elements of e-commerce through their platforms. E-commerce platforms include shopping cart features, inventory management tools, online transaction processing, internet marketing, and other resources to help users build and maintain an online store. Apart from e-commerce platform providing these services, we have
also included companies primarily providing marketing solutions, inventory management, order management, payment services, technology, fraud & risk management for e-commerce. We have excluded companies providing solutions for B2B sectors like Hybris, Netsuite, IBM etc.
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