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5/7/2018 The winning pitch: How the ‘men with a plan’ raised $198 million for Pepperfry

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The winning pitch: How the ‘men with a plan’


raised $198 million for Pepperfry
Athira A Nair (/author/athira-nair)     posted on 5th May 2018 101
shares

Pepperfry’s founders, who signed their rst terms sheet with their investors at a
pub in Mumbai, speak about how to make an investment pitch: what to say and
what not to say.

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5/7/2018 The winning pitch: How the ‘men with a plan’ raised $198 million for Pepperfry

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An initiative that focuses on discovering


and facilitating ways to build solid
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When Ashish Shah and Ambareesh Murthy went for their rst investment pitch at
Norwest Venture Partners (NVP) in mid-2011, all they hadYes,
wasTake survey
a plan. now!
The idea of
an online furniture marketplace (/2018/03/online-furniture-platform-pepperfry-
won- scal- tness-trophy-fy2018/)was unheard of at the time. Ashish and
No Thanks
Ambareesh did not even have a website or proof of concept for their idea, which
was to become Pepperfry, now India’s market leader in the online furniture
segment.

Ambareesh and Ashish, both ex-Ebay executives, were connected to Niren Shah,
NVP’s India MD,  who was earlier in charge of Ebay’s worldwide strategy.

“We had heard of him while at Ebay; common friends connected us. For
the pitch, we went with just a PowerPoint presentation. Niren called us
‘men with a plan’,” Ambareesh recollects.

Soon, the duo formed Norwest terms sheet at the Dublin Pub at ITC Grand Central
in Mumbai. In their rst o ce, Pepperfry named a meeting room Dublin in memory
of this beginning.

Talking to YourStory about the initial days for his startup, Ambareesh says, “In mid-
2011, raising money was comparatively easy. We were lucky; we never faced
rejection. (/2018/04/the-winning-pitch-how-nestaway-got-tiger-global-and-yuri-
milner-to-invest/) All conversations (with investors) materialised into investment.”

Pepperfry has raised $198 million from six rounds. Ambareesh elaborated to
YourStory on how they hit the jackpot with investors.

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5/7/2018 The winning pitch: How the ‘men with a plan’ raised $198 million for Pepperfry

/)
Highlights of their pitch
Pepperfry highlights these four metrics in their presentations to investors:

GMV: it shows the sales and growth

Contribution margin: breakeven possibility increases with higher contribution margin

Overhead cost: the aim is to spend on growth and reduce overhead costs as the business
evolves

EBIDTA

Pepperfry shifted from being a marketplace for lifestyle (including fashion) in 2012
to furniture-only in 2013. “Even then, we had a great variety of more than 5,000
pieces in furniture. We always highlighted the variety in our products (to investors). 
We serve rst-time house owners as well as o er high-end brands,” Ambareesh
adds.

In 2012, at the pitch for investment from Bertelsmann India Investments,


Ambareesh highlighted their supply chain and private label portfolio, which they
had built themselves. He claims that Bertelsmann was convinced about the
investment (/2018/01/great-people-working-together-can-achieve-great-things-
says-pepperfry-ceo-ambareesh-murty/)after their rst presentation itself.

Towards the end of 2014, Pepperfry opened its rst studio.  So in 2015, during the
Series D pitch, the team highlighted their omni-channel network.

In the most recent pitch – one that got them Rs 250 crore (/2018/03/pepperfry-
raises-rs-250-cr-state-street-global-advisors/)– the duo talked about 25 percent
contribution margins on the product side (excluding discounts, operating costs,
payment gateway costs etc.)

“In two years, it will be closer to 35 percent, according to our projection, out of
which 4-5 percent will come from margin expansion (product margin and gross
margin), and 2-3 percent from economies of scale in supply chain. Our supply
chain investment has grown. Earlier, 19 percent of GMV was taken up by supply
chain; it has become 13 percent in one year. We will bring it below 10 percent in
the next couple of years,” he says.

What not to say

https://yourstory.com/2018/05/winning-pitch-men-plan-raised-198-million-pepperfry/ 3/10
5/7/2018 The winning pitch: How the ‘men with a plan’ raised $198 million for Pepperfry

/) Not that the online furniture sector is a crowded one, but Pepperfry keeps a
balance between themselves and the rest of the market in their investment pitch.

Ambareesh explains, “In our presentation, we use information available


in the public domain about our competition. But we focus more on what
we do well, rather than what competitors do, and about our market
share versus theirs.”

Often, startups compare the Indian market to that of the US, Europe, and China. In
their investment pitches, Pepperfry also does foreign market comparisons. But
with a di erence.

Ambareesh elaborates. “We focus on how the Indian market is evolving. Market
conditions di er across various geographies. It is important to give the context of
where India is. We do not do comparison with players in each market, because we
are a one-of-a-kind business. Even when we started we knew there was no
business to copy from.”

Choosing investors
Pepperfry’s investors include NVP, Bertelsmann, Zodius Capital, Goldman Sachs,
and State Street Global Investors. But Ambareesh says they have said “no” to quite
a few investors who approached them.

“This happened because they don’t know much about the industry and the
product-market t. There is a limit to the money we should have,” he stresses,
adding that Pepperfry has enough money now to go till pro tability and beyond.

While raising Series D in 2015, the team had planned for $50-70 million. But they
got $100 million instead, at great valuation, says Ambareesh. “It shows that the
investors like you, and want a higher stake to be more involved in the company,” he
says.

The most recent funding, of Rs 250 crore, (/2018/04/raising-37-million-pepperfry-


moves-beyond-furniture-pro t/) was done after the team charted out a business
plan for the next ve years. “We could estimate the money we needed for a
milestone like pro tability; we added a safety factor too as things can change in
the ecosystem.  We plan to be EBIDTA positive in 12-18 months,” Ambareesh
concludes.

Report an Issue (/support/winning-pitch-men-plan-raised-198-million-pepperfry)

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1 Comment Sort by Newest

Add a comment...

Nikhil Godbole · Head Customer Service at Cleartrip


Incomplete items with hopeless service support. Horrible experience for last 7 days and the saga still
continues. Founders not bothered. Ignorant.

https://twitter.com/riorover/status/991342702099869696?s=09
Like · Reply · 13h

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Athira A Nair
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