The Shopclues paradox

Shopclues is one of those start-ups that the Indian market throws up every now and then
that’s interesting for all the wrong reasons

Radhika Aggarwal (right) and Sanjay Sethi, founders of Shopclues. The e-commerce firm is
in the news for being a potential acquisition target for Chinese e-commerce giant Alibaba.

Gurgaon-based Shopclues is one of India’s rising home-grown e-commerce stars. It is valued

at over $1 billion. That makes it a member of the coveted unicorn club. Unicorn is the
fanciful term used by venture capitalists for technology start-ups privately valued at a billion
dollars or more. Shopclues is in the news for being a potential acquisition target for Chinese
e-commerce giant Alibaba.

A Times of India report, which cites unnamed people familiar with the matter, says that
Alibaba wants to merge New Delhi-based Paytm’s marketplace with Shopclues. The Chinese
firm owns a stake in Paytm. A deal may or may not be on the table. But now is as good a time
as any to recall Shopclues’s incredible journey from the proverbial garage start-up to the
ninth unicorn to come out of India’s bustling start-up market.

It all started much the way any garage start-up does. Back in 2011, Sandeep Aggarwal quit
his job as an analyst with Caris & Co. in the San Francisco Bay Area to start Shopclues, an e-
commerce marketplace. His co-founders were his wife Radhika Aggarwal, and former eBay
Inc. executive Sanjay Sethi.

The founders, their friends and family pooled together $250,000 and a few high-net-worth
individuals—among them Siddharth Talwar, co-founder of Mumbai-based venture capital
firm Lightbox Ventures—brought in another $2 million to complete the seed funding round.

The following year, Mumbai-based venture capital firm Nexus Venture Partners led a $4
million Series A funding round in the company and Shopclues was in business.

Then, in July 2013, just months after it had raised a fresh $10 million round of funds from
Nexus and Helion Venture Partners, the US Federal Bureau of Investigation arrested Sandeep
Aggarwal on insider trading charges.

Aggarwal subsequently pleaded guilty to the charges. He admitted passing inside information
on a pending Yahoo-Microsoft deal in 2009 to a former fund manager at hedge fund SAC
Capital Advisors while he was a research analyst with Collins Stewart Llc. Aggarwal stepped
down as CEO of Shopclues soon after his arrest. His co-founders Radhika Aggarwal and
Sanjay Sethi took over the reins of the company. Sandeep Aggarwal remains a shareholder.

None of these events seem to have rattled Shopclues’s investors. About a year after
Aggarwal’s arrest, Nexus Venture Partners and Helion Venture Partners pumped fresh capital
—an undisclosed sum—into the company as part of a Series C funding round. They had
earlier invested $10 million in March 2013.

Then, early last year, the company landed $100 million in a Series D funding round led by
New York-based hedge fund Tiger Global Management. Helion and Nexus participated in the
round. With Tiger, an early backer of Bengaluru-based Flipkart, on board, Shopclues had
arrived in the e-commerce market and the past no longer mattered. This year, Singapore’s
sovereign wealth fund GIC led a reported $100-150 million funding round in the company at
a valuation of more than $1 billion.

Aggarwal, meanwhile, has also rebuilt his life remarkably well. After putting the whole
insider trading affair behind him, he launched a new venture in April 2014—Droom, a
marketplace for used cars. And investors are in love with it. In July last year, it raised a $16
million Series A round of funds from Lightbox and Japanese e-commerce company Beenos.
Two months ago, it raised an undisclosed sum in a fresh round of funds from Beenext, Digital
Garage and its existing investors.

Shopclues is one of those start-ups that the Indian market throws up every now and then
that’s interesting for all the wrong reasons. Credit is due, of course, for how well it has been
able to distance itself from its errant founder’s past and emerge a strong contender, at least in
terms of valuations, in India’s e-commerce sweepstakes. It’s a great outcome for investors, on
paper.

Whether it’s as great an outcome for the start-up ecosystem is up for debate.