Fashnear Technologies, the startup that owns social commerce platform Meesho, courted SoftBank Group Corp for over a year before closing the $300 million funding round it announced on Monday. The round was led by SoftBank Vision Fund 2 and saw the participation of returning investors Prosus Ventures and Shunwei Capital among others.
Meesho, founded in 2015 by Vidit Aatrey and Sanjeev Kumar Barnwal, enables individuals to source fashion, lifestyle, home and kitchen products and resell them to their networks on WhatsApp or Facebook at a margin. The platform also allows small businesses to sell on their platforms. It makes money by collecting commissions from small businesses and a share of the margins of individual resellers.
For financial year 2019-2020 (FY20), Meesho widened its losses to Rs 315.41 crore from Rs 100.4 crore in FY19, while revenues stood at Rs 341.61 crore.
In an interview with TechCircle, CEO Aatrey spoke about how the startup survived the pandemic, new revenues streams and solving local problems.
How long did it take to get SoftBank on board?
We had been speaking to the SoftBank team for the last year and half. They saw what we did, how we reacted during the pandemic, how we came out of it. They saw our vision, the execution and the team we were building. It took some as everyone (investors) was waiting. By now everyone has clarity on who has come out of it (the pandemic) stronger or weaker than before. The fact that two large, deep-pocketed global investors, SoftBank and Prosus, are a part of our cap table is a vote of confidence in itself.
What did Meesho do differently during the pandemic to sustain business?
Most of our users are women. They run their shops online and a lot of their spouses were impacted during COVID-19 as they lost their jobs. Ecommerce was banned and only essentials were allowed. Most of the categories on our platform are non-essentials, mainly, fashion and lifestyle. So, we were stuck.
We started with a plan that before we figure out what categories can we add to start selling as part of essentials, can we give users small-ticket and short-term loans from our balance sheet. The second thing we came up with was that during the first two months (of the pandemic) there was a need for lot of masks for frontline workers. We told the women (on our platform) to make masks from old clothes which we would buy from them and donate it to frontline workers.
We also started new categories – groceries, pure digital first categories -- to see if it worked. Some of them worked out, some didn’t.
These measures ensured they (resellers) stayed engaged with us. As soon as the lockdown lifted, the engagement with the app went through the roof. No one knew if the lockdown was going to happen again, and they wanted to sell a lot more to help out their families financially.
Are the new categories gaining momentum now?
We want to go deeper and give an opportunity to more women to start fashion boutiques on social platforms. Through our new business of Farmiso, we are trying to bring grocery shops online. We are trying to get kiranas... the approach is category by category. There will be innovations in category and format. we are not limited to a category because of the margin profile. For us, enabling every small business to come online is the primary goal.
What additional revenue streams have you introduced?
We have added an advertising revenue stream in the last two quarters. Our suppliers and small businesses can now pay for more visibility and discovery on the platform. It is a very high margin revenue stream for us and we are very bullish.
What sets you apart from horizontal ecommerce players?
India is primarily a small business economy in the offline world where 90% of the business is captured by small businesses. But that does not happen in the online world where the majority of business is done by larger players. The reason for that is no one has been able to build the right tools and platform for small businesses to be successful. That is what inspires us. We will figure out margin and monetisation over time.
We are one of the few technology companies which have found an Indian solution to an Indian problem, instead of being a version of a global company.