Until 2011, the overwhelming majority of funding dollars into eCommerce was to United States-based companies. That year, financing to international markets jumped ahead. As international giants such as China-based Alibaba prep for what could be the biggest Tech IPO ever, and eCommerce companies like Rocket Internet-backed Zalando and Tiger Global-backed Takealot raising triple-digit rounds of financing, the internationalization of eCommerce is accelerating.
Post 2008 recession, the funding picture to ecommerce companies has been strong with 2013 see a high for financing deals. Funding in 2013 was also quite strong albeit not as high as 2011 when Groupon-mania had taken hold and lemming investors were rushing in head first into the daily deals space.
In 2009 Internet eCommerce companies raised a total of $865M worldwide, with $627M of that being pumped into US-based companies, a 73% share of funding versus their international peers. The following year (2010) that funding share decreased to 62% despite a $500M series D financing for Chicago-based Groupon in December 2010. In 2011 the worldwide diversification continued when Chinese online retailer JingDong raised a massive $1.5b round of financing from Digital Sky Technologies, Tiger Global, and Walmart, pushing the US Internet eCommerce funding share to just 50%.
The JingDong financing marked the start of a trend of companies in eCommerce coming out China, among other countries. This trend has continued over the past few years and eventually led to US Internet eCommerce companies hitting an all-time funding share low of 37% in 2013, an almost complete reversal from just 4 years prior. The trend has been aided by some notable financiers and operators including the aforementioned Rocket Internet and Tiger Global investing significantly in international markets as well as the likes of South Africa-based Naspers.
When diving deeper into financing, the shift to international is not just on absolute dollars of investor funding. 2013 marked the first year where deals (# of investment deals) into international Internet eCommerce companies outnumbered those in the United States. 2013 saw 386 deals taking place outside of the US with only 337 financing to US-based companies. The blue line in the graph below illustrates the pace at which deal activity internationally has accelerated.
India is Driving International Markets
While both the United States and China have seen a decrease in worldwide funding share, India has seen the largest increase when comparing the past two years (2012-2013) with the same time period two years prior (2010-2011). Flipkart, India’s largest eCommerce company and the firm with the best shot at being India’s Amazon, has been a key driver of that growth. Since its founding in 2007 it has raised over 5 rounds of venture capital, totaling $740M since 2011. Its financing includes a $210M Series F announced on May 27th, 2014. Notable investors include Tiger Global Management, Accel Partners, Digital Sky Technologies, and Iconiq Capital.
As seen in the chart below, from 2010-2011, the United States and China had a dominant share of funding in Internet eCommerce with 86% of all dollars headed across just the two giants.
In the past two years, Internet eCommerce companies from all over the world have been attracting investors’ attention, with 13 countries raising over $100M versus just eight in the prior two year period. With the previously-mentioned South African eCommerce titan Takealot announcing they have raised $100M from Tiger Global in May, the likelihood of further geographic diversification in the eCommerce space remains high.
