Why SPC Invested in Meesho

Why SPC Invested in Meesho
Image credit: Meesho

Submitted by Bala Chandrasekaran

Now that the SPC Fund has branched out into later-stage investing along with our regular early-stage motion, we thought it would be fun to publish some of our thinking on those investments. We’re excited to share this memo from fund chief of staff Bala Chandrasekaran on one of our first later-stage investments, Meesho.


At SPC, we spend a lot of time looking at opportunities in India. We think that while major players like Flipkart and Paytm have made a huge impact, there is a larger impact to be made in the non-affluent consumer population in India. With a population of 1.39B people, India currently ranks as the second-most populous country in the world, just behind China. Imagine a product that’s so fundamental to how you live that 5% of that population relies on the product everyday. That’s Meesho.

Meesho is a popular Indian social commerce company that enables SMBs and individuals to start online stores via social platforms (i.e. WhatsApp, Facebook, etc). Since its founding in late 2015, Meesho has evolved into the go-to destination for shoppers purchasing unorganized retail products in tier 3 / tier 4 Indian cities.

We believe that Meesho has enormous upside and were excited to support them in their latest round of funding. Below walks through our thought process as we evaluated the Meesho investment opportunity.

Market Overview

To understand Meesho you have to understand the Indian market. India currently has a population of 1.39B people and is home to over 560M internet users. Two major trends have set the stage for social commerce in India:

  1. Over 500M Indians are now WhatsApp users
  2. Jio made access to cellular data significantly cheaper and is enabling the next 500M Indians to come online

Meesho was built on the premise that the next wave of e-commerce growth in India will be driven by increased online penetration of unorganized retail via social commerce. Covid-19 further catalyzed e-commerce globally, accelerating selling on marketplaces/platforms like Pinduoduo, Shopify, Shopee, and Meesho.

Unlike the US market, India primarily shops in unorganized retail. In 2021, the unorganized retail TAM is $792B and is expected to grow to $994B by 2025. In 2025, India’s unorganized retail will contribute ~76% of overall retail in India. This dynamic is very similar to what we see in China, where unorganized retail makes up about 80% of the total. Pinduoduo was the primary beneficiary of unorganized retail in China moving online.

How we built conviction around Meesho’s moat

Meesho’s moat is one of the most impressive parts of the business and one of the primary reasons we got really excited about investing. The moat has two parts:

  1. Meesho accounts for a majority of logistics volume in India, giving them pricing power with their logistics providers because they can offer uniquely high utilization. They pass through these fulfillment savings to suppliers, which makes their marketplace significantly cheaper to sell on than alternatives and attracts additional suppliers.
  2. Meesho focuses on the unorganized retail market and has established itself as the best place for suppliers to showcase their unorganized retail products. A majority of supplier products are exclusive to Meesho’s platform. This is especially crucial when thinking about behemoths in adjacent spaces like Amazon and Flipkart. More on this in the next section.



Most eCommerce in the US, and as of late globally, has not had the privilege of saying Amazon is not a threat to their business — however, we believe this is the case with Meesho. Amazon poses less of a threat because it caters to a different socio-economic demographic in India than Meesho. While Amazon caters to T1/T2 cities, Meesho has established itself as the go-to destination for shoppers in T3/T4 cities. Not only do they operate in different geographic and socioeconomic groups, but Amazon is also not built in a way where they could easily set up logistics and distribution to compete with Meesho in these T3/T4 cities. Amazon relies on building out fulfillment centers while Meesho leverages 3PL networks across India. We were convinced Amazon wouldn’t try to expand into T3/T4 cities due to how difficult it would be.


When evaluating the Indian market, we need to call out the elephant in the room: Flipkart. Competition with Flipkart is a serious consideration for Meesho. Flipkart has significant mindshare in T2/T3 cities, and there is overlap in the customers that Flipkart and Meesho target. The key differentiator is that Meesho holds a significant market share in unorganized retail products, which is the main reason why customers come to Meesho.

Structurally, the difference between Flipkart and Meesho comes down to weighing convenience over price and vice versa. Flipkart, similar to Amazon, is biased towards serving their customers a high convenience experience in exchange for higher prices. Moreover, convenience-over-price businesses prioritize convenience over everything, charge commissions, focus on branded products, and have logistics built into their business (hence the guaranteed “X” day delivery). Conversely, Meesho focuses on price over convenience, similar to Pinduoduo, which means indexing on price over everything, focusing on unbranded products, and relying on 3PL. This last point is important because as mentioned previously, Meesho contributes to a majority of all 3PL logistics, which allows them to have the significant pricing power to drive their logistics prices down significantly compared to competitors. This allows Meesho to be supplier-friendly — an advantage that will only get stronger over time, making it harder for Flipkart to compete.

Meesho’s point of view here was strong and one that really struck with us. They believe that Flipkart catered well to the first 100M users but that their business model will not work for the next 1B users who are looking for long-tail products for cheap. This aligns with how we think about India at a high-level. The largest players to come out of India thus far have all been tailored to affluent consumers and there will be a new wave of players that target the larger markets in India that are still underserved. This is why we believe Meesho is well-positioned.


T4 City Purchasing Power

As mentioned, we believe Meesho does not have to worry much about Amazon because Amazon operates in the largest metros of India, whereas Meesho’s target audience lives in T3/T4 cities. Amazon’s target customers are the affluent, for whom purchasing power is less of a problem. However, the risk for Meesho is whether or not people who live in T4 cities have enough purchasing power. The question that we continue to consider moving forward is how much room there is to continue expanding.

3PL Networks

The 3PL networks that Meesho has established and gained purchasing power from are paramount to promising low prices for suppliers and customers. Disruption of this network would be problematic for Meesho. We saw nothing that made us believe this would happen; however, this isn’t a risk specific to Meesho but more of a structural risk any company that relies on 3PL would have to factor in.


Ultimately, we believed that Meesho was a compelling investment opportunity for SPC because:

  • The market opportunity is massive and Meesho is riding the wave of unorganized retail rapidly coming online
  • Meesho has strong moats (3PL pricing power due to utilization and supplier networks)
  • Meesho has a compelling point of view on how they are defensible against competitors like Flipkart and Amazon while not having many smaller startup competitors to worry about
  • The founders have a proven ability to execute quickly (Meesho was founded in Dec 2015 and was valued at $4.9B in our investment round)

Our overall bet can be reduced down to whether or not we think Vidit and Sanjeev can continue to execute well on this growth and continue distribution. From everything we know about them, we believe the answer is yes. In the years ahead we see Meesho becoming the one-stop-shop for unorganized retail across India’s T3/T4 cities, leading the pack as more consumers come online.