E-commerce firms see largest share of venture-backed exits in 2013

Demonstrating the vibrancy of the sector and demand for successful retailers, e-commerce firms made up the largest proportion of technology exits in 2013. In part, this is down to the easier path of returns offered by e-commerce platforms, as opposed to cleantech or media start-ups for example. Business transfer agents are likely seeing greater demand for their e-commerce clients. We are certainly aware of this trend, having used our software track record and cross-border M&A experience to secure the business sale of Intelligent Retail to Australian-based 3Q Holdings in 2013.

Internet retailing companies amounted to 16.0% of the total number of 450 global venture-backed exits last year. This demonstrates the maturity of the e-commerce market, with more firms in the industry feeling confident in turning to IPOs or attracting buyers. Indeed, having seen the rapid expansion of majors such as Amazon and Groupon, investors are feeling especially confident in the success of online retailers. A major influence on the high proportion of e-commerce exits was down to the active acquisitions by retailing giants, especially in Asia where firms such as China-based Alibaba drove aggressive market expansion.

One exit that was particularly noteworthy last year and which illustrated the feeling of investors towards e-commerce was the IPO of Zulily, a daily deals site aimed at mothers, which collected some $2.6 billion from the public. The company’s market capitalisation as of April 2014 stood at $7.4 billion, justifying the optimism of investors to a large degree. If Alibaba goes public in 2014, as the Chinese company has already signalled it might, the IPO could offer a major barometer of both investor confidence in e-commerce and perhaps more importantly confidence in Chinese retailing potential.

Judging by the high activity in the first quarter of 2014, e-commerce firms are likely to represent the majority of exits this year as well. Internet retailing value is expected to continue expanding this year, driven by the growing Internet-user base in emerging economies, especially in rural areas, and the expanding uptake of mobile-optimised m-commerce platforms by smartphone users. E-commerce simply represents less of a gamble for investors than alternatives such as fad-driven trends in gaming, or consumer software and hardware products. The second-largest segment out of venture-backed exits in 2013 was advertising, sales and marketing, at 14%, while database, storage and document management was in third, at 10%.

Corporate finance portfolios are still heavily stocked with e-commerce investments and a continued flow of exits will be visible in 2014, especially as firms look to ride the positive wave of purchases in a dynamic first half of the year. Unless the tech bubble bursts spectacularly or the global economy is impacted heavily by a financial crisis, there is no reason to suspect a decline in e-commerce exit activity.

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