Dropshop Raises INR 9.3 Cr In Pre-Series A Funding Led By Inflection Point Ventures The funds raised will be utilized in strengthening the product and scaling up of operations to increase the capability to handle more brands and enter new cities

By Prabhjeet Bhatla

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Fast-moving consumer goods (FMCG) distribution platform Dropshop on Monday announced to have raised INR 9.3 crore in a Pre-Series A round led by Inflection Point Ventures (IPV). Existing investors Axilor Ventures and The Chennai Angels also participated in the round with 42.vc joining the round via AngelList.

Funds raised will be used for strengthening the product and scaling up operations for handling more FMCG brands and enter new markets such as Chennai and Hyderabad.

"FMCG companies are often faced with a critical issue of increasing margins without burdening their customers. Traditionally, they have adopted the approach of building distribution and last-mile networks in-house. Given the geography of India, it is not viable business-wise to create an expensive distribution network across the country. This is a completely untapped opportunity that Dropshop has identified and they are working aggressively to scale up. This is a newly emerging area where we expect more startups to enter making it an attractive sector to invest in," said Mitesh Shah, co-founder, IPV.

Dropshop is a full-stack platform for FMCG companies to digitize their last-mile distribution - sales, logistics, and credit to retailers. With this, the brands get real-time visibility into demand and supply gaps, fulfillment ratios, and drive targeted growth. Dropshop has been able to demonstrate 30-100 per cent high sales and fulfillment than traditional distributors for its FMCG customers. At the same time, it has enabled simple credit for thousands of underserved retailers who typically cannot avail formal credit due to lack of credit history and incomplete documentation, and have to rely on informal channels. With their in-house credit decisioning models and low KYC, they have enabled embedded credit of over INR 40 crore to more than 10,000 retailers in Bangalore over the last 15 months and are currently exploring partnerships with NBFCs and fintech players to expand this service to small retailers.

"For FMCG companies, setting up their own distribution network across the country could be an expensive affair and this is where Dropshop comes into play. With the help of technology, they are able to cover 90 per cent of the region compared to 60 to 70 per cent which is covered by the traditional distributors. This helps in optimizing distribution costs and increase in sales for their customers. The whole idea of tapping into FMCG distribution and logistics segment got us interested in leading this round," stated Jignesh Kenia, lead investor, IPV.

Dropshop recently also launched 25takaTM, an Android app for small retailers to discover high quality and high margin products and earn two-threefold more profits. Millions of kirana owners struggle to find trusted brands that yield higher margins to them and are economical for their customers. While there are 1000s of such brands all over the country but with limited sales and distribution networks, they remain localized and are unable to scale fast enough. 25taka is bridging this gap for the retailers and enabling these brands to grow their retailer and customer footprint.

Currently, Dropshop Network reaches over 10,000 retailers in Bangalore. It works with 5 of the top 10 FMCG companies in India including ITC, Marico, Reckitt Benckiser, and Godrej Consumer Products, and over 40 small and localized brands.

Dropshop clocks over 15,000 orders per month with INR 4 crore GMV per month.

"As one of the largest sectors in India, FMCG is still run over the backs of thousands of traditional distributors. We have been working with several large and small FMCG companies in streamlining their last-mile distribution with technology for over a year now and enabling them to reach their market potential. We believe that the time is ripe for FMCG distribution to consolidate and evolve into retail execution where all stakeholders benefit from data and technology. This round of funding will allow us to build over our existing products to grow our brand portfolio as well as retailer base. Our immediate focus is to strengthen our team, product, and processes for the next phase of growth, and we are delighted for the continued support of our existing investors and excited to have IP Ventures and 42.vc joining us on this journey," added Udit Dhawan, founder and chief executive officer, Dropshop.

As per the analysis of the FMCG industry done by Technova and Modor Intelligence, the FMCG industry in India is close to $100 billion, growing at 14 per cent CAGR. 30 per cent of the FMCG market is concentrated in the top 7 cities. Even the largest brands in the country see retailer coverage of 50-60 per cent in urban areas. 15-20 per cent market potential is lost post demand capture due to inefficiencies in the last-mile supply chain and less than 50 percent of retailers have access to some form of working capital. Thousands of small brands remain localized and sub-scale due to poor distribution networks.

Prabhjeet Bhatla

Former Staff

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