We led Elchemy's $5.6 million Series A funding round to accelerate transformation of global specialty chemical industry
Indian SMEs contribute to 30% of our GDP, about 50% of exports and employ nearly 130M people. Their growth is crucial for India to climb the economic ladder. There are several tailwinds fuelling the SME growth, including the Government of India push through “Make in India”, shift in global supply chains post-COVID (China+1) and increasing investment in infrastructure (ports, roads, airports). However, to capitalize on these tailwinds, there are several things that SMEs need to solve including (a) global market access, (b) build trust and visibility in the supply chain, (c) improving product quality to global standards (d) working capital. These gaps create an opportunity for tech-led B2B marketplaces.
Since 2021, we at PrimeVP have been extensively analysing the B2B sector, engaging with over 100 companies. In 2022, B2B marketplaces gained significant momentum, attracting funding across various segments, from FMCG to automobile to fashion. However, we found most platforms face common challenges:
- Lack of clear value proposition resulting in low margins: most platforms are unable to add significant value to the supply chain and end up with single-digit margins
- High Working Capital Requirements: rely heavily on working capital to attract customers, which can lead to adverse selection and create a constant dependence on capital for business growth
In contrast, Elchemy stood out with a very clear value proposition. They operate in the highly fragmented Specialty Chemicals market, where international buyers struggle to find the right suppliers. Managing quality and logistics is also a nightmare. So, when Elchemy steps in to manage this complicated chain —from supplier discovery to quality assurance and cross-border fulfilment, the buyers are delighted, and Elchemy can naturally command high margins and secure favorable payment terms (low working capital)
We were pleasantly surprised by this and were thoroughly impressed by what the team had built. Here is why we are super excited about our investment in Elchemy:
1. Distribution first approach to secure demand
The Indian specialty chemicals market is large ($20B+) but extremely fragmented, with over 100,000 SKUs and 10,000 suppliers. The biggest issue for any international buyer is to navigate this haystack and discover the right set of suppliers.
Elchemy has adopted a distribution-first approach, where they secure demand and take ownership of end-to-end fulfilment, including quality checks, documentation, and logistics. This strategy has proven effective. Conversations with their buyers revealed high customer satisfaction due to Elchemy's consistent on-time, in-full deliveries.
We firmly believe that demand-side predictability is crucial for building strategic moats, as it enables Elchemy to selectively target the right buyers and geographies rather than merely striving for capacity utilization. In the long term, the team plans to achieve backward integration to secure supply and develop proprietary formulations, further strengthening their market position.
2. Thoughtfully designed technology platform which is a core differentiator
The role of tech in most B2B marketplaces is modest at best. The team has developed an internal application for chemicals, featuring industry mapping, a customer acquisition and lifecycle management engine, freight optimization, a documentation tool, customer dashboard and every other piece of tech necessary for efficient operations. When we saw this, we knew this was a clear differentiator.
This system enables Elchemy to deliver best-in-class customer service, all while maintaining meager operational costs. Post this round, the team will invest more in strengthening their product, which we believe will give them an edge in the long run.
L to R : Shivani Kulkarni, Shobhit Jain, Hardik Seth, Amit Somani
3. Exceptional team with a rare blend of business acumen and technology (“Dhanda” + “Tech”)
We first met Hardik and Shobhit in 2022, just after they had closed the Seed round. We kept in touch and saw them build the business grounds up. The ideal team for building a marketplace blends deep business acumen ("Dhanda") with excellent technology chops. Hardik and Shobhit epitomise this combination. Hardik, with his business family roots, excels at forging strong relationships across the value chain, while Shobhit is a rare technologist who fully grasps business needs.
What stood out the most was their ability to build and invest in the right team at the right time. Elchemy today has a very strong Supply Chain, Finance, and Risk team that works in tandem with the founders. Establishing these functions early—particularly in a cross-border business—has proven highly beneficial.
What next?
Elchemy is partnering with over 80 clients across multiple countries, with a strong presence in North America. Following their latest funding round, they plan to deepen their focus on the North American market by establishing a dedicated team in the U.S. to meet customer needs better. Additionally, they will bolster their technology leadership and invest in building a technology stack to deliver a great customer experience and further enhance visibility into the supply chain..
The fragmented and complex nature of the Chemicals supply chain bodes well for Elchemy to add value and command high margins. Given the tailwinds in the segment (China+1) and “Make in India”, we believe there is an opportunity to create a tech-led Brenntag ($8B market cap) / Azelis ($5B), and Elchemy is well positioned to do just that. We at Prime are thrilled to partner with Elchemy and are excited about the transformation of the Chemicals sector!
