Carousell’s early investors, employees cash out with big returns

Terence Lee co-reported this story.

Carousell is on a roll, and its founders aren’t the only ones cheering on the spate of investments pouring into the Singapore-headquartered classified ads player.

Following a series of acquisitions and investments, including a US$80 million injection by a consortium led by South Korea’s Naver Corporation last week, Carousell is now valued at around US$900 million.

Carousell co-founders Marcus Tan (L), Lucas Ngoo (M), and Quek Siu Rui (R) / Photo credit: Carousell

What’s significant about the deal isn’t just the valuation but also the behind-the-scenes secondary sale that saw seed and series A investors cash out a portion of their shares with sizable returns. These investors include firms like Sequoia Capital, Rakuten Capital, Golden Gate Ventures, Quest Ventures, 500 Durians, as well as angel investors like 99.co founder and CEO Darius Cheung.

Such exits are crucial in helping startup ecosystems thrive, giving investors a financial incentive to continue backing fledgling companies.

According to Carousell’s latest financial report, seed investors bought into the startup for as low as US$0.19. That means an investor who put in US$20,000 in 2013 and cashed out in the company’s latest round could see around US$1.3 million – or 67x – in returns.

Meanwhile, a series A investor like Sequoia Capital India – which first invested in Carousell at a share price of US$1.13, according to research firm VentureCap Insights – could make a 11x return. This investment yielded way more returns than betting on blue chip companies such as Apple, Microsoft, or Tencent in November 2014.

In the calculations below, we’re assuming that those shares were sold at a 20% discount of the series C4 share price of US$15.94.

VentureCap data also shows that a total of around 3.95 million shares, or 7.2% of all the shares issued to date, were transacted between Naver and existing shareholders in the secondary sale.  These shares could be worth around US$50 million.

Carousell’s secondary sale offering – its first, according to the company – also saw co-founders Siu Rui Quek, Marcus Tan, and Cheng Han Ngoo sell 1.37% of their shares, according to VentureCap. This means they banked around US$465,000 each.

It also gives Naver, which acquired the secondary shares, a more “meaningful” stake in the company, a Carousell spokesperson says.

Is there further upside?