Last week, e-commerce marketplace Zilingo raised $225M, putting the company in touching distance of unicorn-dom.

Zilingo's rise from an office in Bangalore, in 2015, before the company moved to Bangkok and then Singapore, is intriguing. The company's founders, Ankiti Bose and Dhruv Kapoor, were both professionals in India who identified a significant opportunity to change e-commerce. 

That opportunity lay not in India, but South East Asia.

On a visit to Thailand, Ms. Bose observed the pattern of weekend shoppers coming to Bangkok's Chatuchak market to purchase goods. While these products and sellers were popular, they had little or no digital presence. Armed with this observation, Ms. Bose returned and left her job at a VC firm, to start Zilingo.

Zilingo would be the birth of a "Build in India, Sell to the World" story, with a twist. 

Most Indian entrepreneurs, going back to the times of Infosys, would build solutions and processes for the consumption of Western markets. The arbitrage would be the lower cost of tech talent in India, which could be viable to global firms. "Earn in dollars, and spend in rupees" was the mantra, and that fuelled most of the$150Bn IT boom.

Companies like Zoho moved the needle forward in terms of value addition. The company went head-on with Salesforce, as a quality product. The market, though, was still Western and the arbitrage still involved cost. 

Zilingo has flipped the paradigm, by aiming to build a fundamentally better product experience for South East Asian markets. 

No cost arbitrage, and no selling to the West, or even India.

With the technical team set up in Bangalore, the company began by setting up online storefronts for sellers. As an e-commerce marketplace in Thailand and Cambodia, it solved the classic marketplace problem. Sellers (namely small store owners) wanted more buyers (namely weekend shoppers), and buyers wanted a greater variety of well-priced products. These sellers, who sold in malls and offline, were "long tail" sellers who had no online presence. 

This market, though, would be worth $20Bn in the South East Asian region.

To tap into this market, which was disorganized and low ticket size, Zilingo's platform would allow these sellers to sell online. Like any other platform, the company would take a fee of 10-15% on each sale. With an inventory light model, the cost to Zilingo on every purchase would be the packaging and promotion cost. As early as within the first year, it claimed that it was "unit profitable" to the tune of 3-4%. 

The company on-boarded 2,000 sellers rapidly and it was clearly onto something.

While the e-commerce marketplace began to pick up rapidly, the company began testing a "feature" which would be providing sellers with the infrastructure to formalize their business. It is credit to the team for being perceptive in identifying that this "free" software-as-a-service was a significant pain point, which would also lock these sellers in onto the platform. 

Within a year, the company would 10x in revenue to ~$2MM and 4x in sellers, while raising $18MM.

One key achievement that most press releases have missed is the ability of the founding team to hire fantastic talent domestic to South East Asia, despite the founders having little or no background in these markets. With an expansion into Indonesia, the company demonstrated 85% monthly growth, a testament to its ability to hire quality teams that had ears on the ground.

With a strong, growing team, Zilingo was already shipping to 8 countries, with sellers in Thailand, Indonesia, Hong Kong, Korea, Vietnam and Cambodia. Leveraging the "free" software that the company had created, it set up a B2B platform, Asia Mall, that allowed sellers to buy from manufacturers. While this may seem like an extension of the original B2C business, this, in fact, opened up an entirely different market.

A market that accounted for 49% of the world's exports, worth $3Tn that originated in ASEAN and China.

What seemed like a "feature" turned out to be a full-blown strategy to backward integrate into the supply chain. Not only was Zilingo providing these sellers customers through Zilingo, but was also providing the sellers suppliers through Asia Mall. By being the back-end (supply) and the front-end (demand) of the sellers, the company was evolving into a "full-stack solution" for these sellers. 

While the B2C market heated up, and competitors like Zalora and Lazard stumbled, Zilingo's backward integration and B2B play put it closer to the source of products, and less reliant on B2C. Even if a seller did not utilize the B2C platform, the B2B sourcing would create value for the seller. 

This shift would ramp up the revenue by 10x again to $15MM in 2018, coupled with a $50MM fundraise.

By now, the company saw 60% of its revenue come from B2B. The slick design of the website saw traffic come through a slicker TV ad (that I don't understand, but like nonetheless). Indonesia was becoming a larger market, and Zilingo was deepening its customer (i.e. seller) relationship. Apart from helping the sellers organize their business, it began to upsell financial services, inventory management and data-driven product choices. 

From being a marketplace, the company had evolved into a supply chain enabler across SEA.

In the last year, the company has likely grown to ~$60MM of revenue ($1.2MM*12x*4x over 2 years), with 12K+ sellers on its platform in more than 10 countries. From an average seller, the company is thus generating revenue worth ~$5K, both through the B2C platform and B2B services.

Assuming the 40%-60% B2C/B2B split remains, each seller generates $2K from B2C and $3K from B2B for Zilingo. As per the Zilingo's earlier estimates, a 4% overall B2C margin, after promotions, puts B2C gross margin at 40% (4% overall margin/10% transaction fee). The B2B margins are likely to be Software-as-a-Service margins or 80%. The company, therefore, has a blended margin of 40*$2K + 80%*$3K = $3.2K. Assuming a seller stays for at least one year, the company can, therefore, spend ~$3.2K acquiring the seller (CAC)

The B2C GMV, assuming a 10% platform fee, is, therefore, close to $240MM ($60MM*0.4/0.1). For a market worth $20Bn, that is still 1% and room for expansion. On the B2B side, which is the bigger play, the company generates ~$36MM. This would likely be a drop in the ocean for the $1Tn+ sourcing market.

With its eyes set on expansion into the US, Philipines and Australia, the opportunity is immense. While the $1Bn valuation may seem rich for a $60MM revenue (15x), consider the company's demonstrated growth and market opportunity. If Zilingo is able to continue executing, and capture more of the market, the $1Bn valuation may begin to look cheap.

Zilingo quiet rise to unicorn-dom may just be the beginning of its path to a zillion.