After witnessing a groundbreaking success, its time for homegrown ecommerce firms to move on another level and put their terms before investors. In a similar move, as suggested by a recent report; India’s leading online marketplace, Flipkart has demanded exclusivity from potential investors and asked them to enter non-compete agreements before they decide to pour money in the company.
The move comes at a time when the homegrown ecommerce firm is planning to go public and raise around $5 Bn via IPO. This kind of courtship will curb investors to infuse money in rivals including Snapdeal and protects the company from disclosing confidential information and financial details to outsiders.
The non-disclosure agreement generally prohibits potential investors from-
- Holding funding-related discussions with other ecommerce/rival companies for a specific period.
- investors cannot put money into Snapdeal and other rivals for at least six months and, in some cases, for more than a year, irrespective of the deal with Flipkart.
- Usually a non-compete agreement kicks in at a stage when an investor is ready to sign the term-sheet (investment document)
The reports suggests that new investors are negotiating with Flipkart on not just the timelines of the non-compete agreement but also on who all should be included as competition, given these large funds would like to hold talks with several players before making their bets.
The Bangalore-based Flipkart was valued at nearly $11.5 Bn in December when it raised $700 Mn. It is backed by global VC/investment firms and such as Qatar Investment Authority and Steadview Capital, Tiger Global Management, GIC Pte. Ltd, Naspers and Morgan Stanley.
It had raised nearly $2 Bn in capital in 2014 alone, Flipkart directly competes with firms like Snapdeal and Shopclues. Snapdeal has also raised about $1 Bn last year and looking forward to raise more capital from several new investors. Earlier in January this year, ShopClues had also raised around $100 Mn from Tiger Global, Helion Venture Partners and Nexus Venture Partners.
Looking at the trends, it seems that the leading marketplaces has earned the luxury of being able to choose investors rather than the other way round lately. Going forward, this new investor-company courtship scenario will bring a lot of change in the way global investors put capital in Indian firms.