Power2SME, a group buying site for small businesses in India, raises $6 million

Power2SME, an Indian group buying site targeted at small and medium enterprises (SMEs), has raised $6 million in a Series B round of funding from its existing investors, led by Accel Partners with Kalaari Capital and Inventus Capital also participating.

The startup terms itself as a “buying club” for SMEs — it pools together orders from various SMEs and procures the products in bulk from manufacturers, therefore ensuring more competitive prices for raw material and access to a larger pool of suppliers. The raw material being supplied includes inks, steel, polymers, paints and chemicals and additives.

Power2SME will use the funds to scale its business by expanding its footprint to South India, increasing its business portfolio and expand its sourcing channels to include direct imports for SMEs. It will also invest in technology and marketing.

Within less than three quarters of starting its operations, the startup currently has quarterly revenues run rate of more than $2 million and 13,000 registered SME users.

Mahendran Balachandran of Accel Partners says that Power2SME’s business model is a unique one, and there is a demand for such a service given that the limited sizes of SMEs tend to hamper their ability to get optimum procurement prices. He explains:

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Buying Club for SMEs’ raw material is a unique concept and we have not found another similar business model so far. There are several similar concepts globally but they focus on services, not physical goods. The business model of Power2SME sustains the ability to grow and expand with the ability to cater SMEs across multiple sectors.

Power2SME’s business concept is a clear indication that even the B2B market in India is moving toward e-commerce, showing that it is not only the B2C market that has opportunities for such developments, though B2C has been getting eyeballs. Flipkart, India’s top online retail company, closed a Series E round worth $200 million earlier this month from a range of existing investors — in what is India’s largest investment in an e-commerce firm.

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