Exclusive: IL&FS Investment-backed B2B e-commerce platform mSupply goes out of business
mSupply, a B2B marketplace for construction materials, may have shuttered operations following unsuccessful bids to raise more capital. The online platform, which was backed by investors such as IL&FS Investment Managers and Artiman Ventures, has been inactive since March this year.
Bengaluru-based mSupply Ecommerce India Pvt. Ltd, the company that owns the platform, has been unable to attract investors for its Series C round, several people privy to developments at the company told TechCircle on the condition of anonymity.
It last raised capital in April 2018 when IL&FS Investment Managers, the private equity arm of Infrastructure Leasing and Financial Services Group, invested $4 million.
In December last year, the company had offered employees a severance package and an opportunity to mutually terminate their employment, said one of the people cited earlier. Subsequently, after exploring the M&A (merger and acquisition) route with some of its peers, it was able to find a buyer. Further details on the M&A deal were not available at the time of publishing this story. However, the shutting down of operations was part of the acquisition process, said a second person.
TGC Prasad, founder and CEO of mSupply, declined to respond to queries from TechCircle.
Prasad founded mSupply in early 2015 as a marketplace for construction materials, pipes, machinery, electronics products, paints and home and interior products. The platform also offered services such as requisition management, procurement, logistics and fulfilment, receivables and payables management, and analytics. Further, it helped customers to secure credit through its supplier network or from banks and non-banking financial companies, depending on their needs.
B2B e-commerce startups face headwinds
The overall B2B ecommerce segment has lately seen a number of startups come up with offerings for specific verticals. However, players focused on selling business staples to SMEs (small and medium enterprises) continue to grapple with thin margins because most SMEs operate on credit and small ticket sizes.
mSupply isn’t the only player to run into a rough patch. Last year, B2B ecommerce marketplace Industrybuying was forced to reduce its workforce to 300, less than half its headcount a year ago. After a significant gap between funding rounds, the company raised Rs 12 crore ($2 million) in venture debt from BlackSoil Capital Pvt. Ltd in April last year. Up until December 2016, it had raised $18.8 million equity funding in three rounds from SAIF Partners, Kalaari Capital, Beenext and family members of the Murugappa Group and the TVS Group, according to VCCEdge (www.vccedge.com), the research platform of Mosaic Digital, the company that owns TechCircle. In January 2016, it raised $2.12 million debt from Trifecta Capital.
Tolexo, a similar marketplace promoted by Noida-based wholesale B2B platform IndiaMART, wound up operations in 2017. Its sales had fallen drastically on the back of the government’s demonetisation exercise.
The problems faced by B2B e-commerce startups have led some players to completely change their business models.
In 2016, Gurugram-based OFB Tech Pvt. Ltd, which owns and operates OfBusiness, pivoted from a business supplies marketplace soon after it raised a Series A round led by Matrix Partners. In its new avatar, the firm switched sides and sought to tackle an issue that was hurting its business -- credit. OfBusiness now offers financing products to SMEs for the procurement of raw materials. In addition, it offers sourcing of raw materials as a service. The firm received a non-banking financial company (NBFC) licence in 2017 to strengthen its new stream of business. The pivot has resonated with investors as OfBusiness went on to raise Rs 200 crore ($29 million) from private equity firm Creation Investments and hedge fund Falcon Edge Capital.
Read: Should B2B marketplaces look beyond SMEs to stay in business?
In one of the significant deals in the online construction material commerce space, B2B industrial goods marketplace Moglix raised $23 million (Rs 164 crore then) in its Series C round led by existing investors Accel, Jungle Ventures and International Finance Corporation (IFC), the World Bank’s investment arm, in December last year.
In April 2018, Temasek’s venture debt arm InnoVen Capital committed another Rs 40 crore ($6.16 million) to online buying hub for small and medium enterprises Power2SME. It previously raised an additional $26 million in its Series E round from existing investors last September 2017.