InnoVen Capital invests in Shop Clues

Online marketplace Shop Clues has raised Rs 50 crores in venture debt from InnoVen Capital, in a rare instance of a home-grown unicorn opting for venture debt. The debt has been raised primarily for day-to-day business activities. Start-ups typically raise debt when they are running short of cash, for working capital and to fund acquisitions, among others.

Shop Clues is profitable on a contribution margin level, but needs to achieve a scale where it can cover its fixed costs. Its burn is reducing consistently. Hence, the debt so that it can scale up rapidly and reach profitability. Contribution margin is the selling price minus variable costs, a metric that assesses whether companies can meet the variable cost with revenue.

Shop Clues clocked revenues of Rs 179 crores for the year ended March, 31, 2016, while losses stood at Rs 383 crores. India’s e-commerce market nearly stagnated at $14.5 billion in 2016 compared with $13 billion the year before. In a market that will grow at a much lower rate than earlier thought, there is a feeling horizontal online retailers such as Shop Clues will struggle to prove they are viable. However, Shop Clues is not running the same race as Flipkart or Amazon. The firm is focused on taking unstructured categories online and has a largely different customer base from the two giants.