Homevista Decor and Furnishing Pvt. Ltd, the online furniture and design company that operates Homelane.com, is in advanced talks to raise $20 million, according to two people directly involved in the transaction.
The round would be led by new investors along with existing investors, said Srikanth Iyer, co-founder. He declined to comment on the amount and the time frame of the fundraising.
The company raised $4.5 million in its Series A funding from Sequoia Capital and Arin Capital in February. It had also raised an early stage (seed) round from serial entrepreneurs Meena and K. Ganesh.
The company, founded in 2014 by Iyer and Rama Harinath, is looking to raise funds to deploy in advertising and marketing initiatives.
“We are looking at investing in creating a brand,” he added. The other areas of spending include hiring technology teams and development of software and solutions.
The Indian furniture market is expected to grow at an annual rate of 13% between 2013 and 2018, according to a report by Ken Research Pvt. Ltd. This sector employs more than 4.11 million people. That is expected to almost triple to 11.29 million by 2022.
“There are a number of challenges that such businesses would face. The time taken for delivery is about 15 days. Consumers expect faster delivery since online shopping is impulsive buying, companies would have to reduce their delivery time,” said Vishal Pereira, director at CreedCap Asia Advisors. “The business models would have to pivot to offer a hybrid of online and offline presence. In the category of furniture which is bought for a time frame of 4-5 years, users like to see and feel the products before buying,” he added.
Start-ups in this space have been raising funds from private equity and venture capital investors. In 2015, Livspace (run by Home Interior Design E-commerce Pvt. Ltd) raised $8 million, Pepperfry (Trendsutra Platform Services Pvt. Ltd) raised $100 million in a round led by Goldman Sachs; and Spacewood Furnishers Pvt. Ltd raised $13-15 million (for a 26% stake) from Japan’s firm Sumitomo Forestry Co. Ltd.
Pereira said that for business models such as Homelane, the margins are 45-60% as compared to aggregators that operate in the 25-30% range.
Homelane provides its services in six cities, including Delhi, Mumbai, Pune and Hyderabad. “We don’t have any plans to expand to new cities but to grow deeper in the existing ones,” said Iyer over the phone. The company has served more than 600 customers since its inception. The average value of a transaction is Rs.6 lakh and it clocks revenue of Rs.7.5 crore each month.
This article was first published on Livemint.com