“Trrrrring!” rang a bell in Purplle’s head office in Mumbai that Wednesday morning in December 2019. The office erupted in celebration. The bell meant one thing—the online beauty platform had hit a milestone.

Purplle closed the year with a $30-million fundraise from Goldman Sachs—one of the largest private equity investors in the world—and other existing investors. And it began 2020 with another ring of the bell, announcing an $8 million fund infusion from Verlinvest, a Belgium-based investment firm. 

Purplle’s story is that of an underdog, a company many people forgot was part of India’s online beauty retail race. It has struggled, even as its competitor Nykaa, currently India’s largest online beauty platform, captured the lion’s share of funding for the sector. 

Purplle was founded in 2011, a year before its bete noire, Nykaa. However, while it was first to the fundraising market, Nykaa out-raised Purplle with every round of funding it received. Often, twice as much. Given its founder Falguni Nayar’s illustrious investment banking background, there was always more money chasing Nykaa. Its last quoted valuation stood at Rs 5,000 crore ($724 million) after a $14-million funding round in March 2019, led by TPG Growth. It is touted to be a “soonicorn”. The largest funded player in the space, Nykaa has raised Rs 350 crore ($49.1 million) in total, and also counts TVS Capital, Sharrp Ventures, and Lighthouse Ventures among its investors.

Despite both of Purplle’s co-founders Manish Taneja and Rahul Dash being graduates from one of India’s top schools—Indian Institute of Technology Delhi and Indian Institute of Management Ahmedabad— they found funding a lot harder to come by. 

Most investors had only two questions for the duo. “How will you scale 2X, 3X?”, “How will you beat Amazon?”. Taneja and Dash had no plans to scale rapidly just for capital. But the question of e-commerce giants Amazon and Flipkart remained. Understandably so. Beauty is one of the fastest-growing areas for both platforms, and together, they retail more than 40,000 brands.

With Nykaa now the runaway leader in the segment and the e-commerce titans circling ominously, Purplle’s funding resurgence seems something of an oddity. Until you consider its financials. 

Purplle still showed a loss of Rs 4 crore ($561,000) on revenues of Rs 101.48 crore ($14.2 million) for the year ended 2019. This, however, represented 3X revenue growth from Rs 31.4 crore ($4.40 million) in the previous financial year. Losses, too, were down 70% from Rs 14 crore ($1.96 million).

Underpriced

One of the reasons investors were attracted to Purplle was because it was available at an interesting valuation. “If you look at some of the deals in vertical e-commerce, these have come at 4 times of the GMV multiple, while in Purplle’s case, it wouldn’t be more than 1.5-2 times,” says an investment banker who’s worked on deals in the beauty sector


Taneja, though, claims Purplle is already profitable.

AUTHOR

Vandana

Vandana is based in Delhi. She covers vertically focussed startups in consumer internet space and also writes on travel tech and smartphones for The Ken. She has spent 13 years in journalism covering a wide range of subjects- equity markets, mutual funds to education and skilling, working at organisations such as Business Standard, CNBC TV18 and The Week in the past.

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