While finalizing the to infuse capital in online retailer Snapdeal and taxi aggregator Ola last month, Japanese telecommunications and Internet corporation SoftBank Corp had also made an offer to buyout shares of angels and some early venture-capital investors in both companies, reports the Economic Times, citing multiple sources.
According to the report, most of the investors in the companies refused the offer, as some of these early investors are sitting on returns of 100 times their investment on paper. And they see the value multiplying even further.
"I haven't sold any shares so far. If someone is offering a valuation which I expect the company to reach in the next one-two years, then I can think about it," People Group Founder Anupam Mittal, one of the early backers of Ola, told the Economic Times. Investments like Ola come once in a lifetime, he added.
Now days, it has become the norm, for early capital investors to hold on to their winners in the risk capital business where returns come from a few portfolio companies.
Indian e-commerce and online businesses have seen 694 investments totaling $5.56 billion since 2011, according to data from financial research platform VCCEdge. However, there have only been 45 exits worth $295 million in that time.
Ola, which is competing with global giant Uber and others in India, has seen its valuation increasing more than 10 times in the last 12 months, with the latest investment from SoftBank giving the company a post money valuation of nearly $650 million.
Also according to the Economic Times report, early VC investors in Snapdeal are sitting on at least 8-10 times returns on the capital invested. These investors see potential for the company's valuation reaching $5-10 billion in the coming years.
While none of the investors in Snapdeal is completely exiting, Bessemer Venture Partners, who invested in the company three years ago, has made a partial exit in this round. The VC firm sold less than a third of its holding. In 2011, Bessemer had invested in the company at a valuation of $170-180 million and could make a profit of around five-six times the investment, reports the Economic Times, citing a source. The report also mentioned that, while making a deal SoftBank typically looks to buy 30-35% in a startup, and usually makes a secondary offer after an initial investment to meet the target.
"Kunal (Bahl, Snapdeal co-founder) made a request to all the existing shareholders to sell some part of their shares to help Soft-Bank meet their shareholding requirement," a Snapdeal investor told the Economic Times. Some of the largest shareholders like Kalaari Capital are holding on to their investment.
According to documents filed by the company with the MCA, venture capital firm Kalaari Capital held a 21.1% stake in Snapdeal as of September, making it the largest institutional investor in the company, prior to Japanese telecom and internet conglomerate SoftBank sealing the latest round of funding last month.
Others, such as, Nexus Venture Partners, through two investment vehicles, held between 18.5% and 19% in the company, while the founders, Kunal Bahl and Rohit Bansal controlled about 14% of Snapdeal, which also includes the founder stock option pool.
Related Tags:online retailer Snapdeal, Internet corporation SoftBank, Japanese telecommunications, Anupam Mittal