For many direct-to-consumer (D2C) startups, an entry into the offline space has become key to scale. However, VS Kannan Sitaram, co-founder and partner at Fireside Ventures believes a few D2C brands in India will also scale into large companies without an offline expansion.
Fireside is one of the earliest backers of many D2C companies, including Mamaearth, boAt and Bombay Shaving Company.
“It is possible to build an online-only D2C business with a Rs 500 crore revenue in India,” Kannan told FE. He explained that the firm has already invested in one such D2C startup called Traya. Traya is a holistic haircare platform that raised $2.2 million in a pre-Series A funding round led by Fireside Ventures in January 2022.
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Traya is a `300-crore (approx.) online-only brand that recently raised another round of Rs 75 crore in equity funding from private equity fund Xponentia Capital. “When we invested in Traya two-and-a-half years ago, it was a Rs 7-crore business a year. The brand has scaled so much because of its unique model, which focuses on the efficacy of the solution and not just on selling products. The startup works purely based on its interactions with consumers and offers them personalised solutions for hair loss,” said Kannan.
For many brands, omnichannel is key, and so, Fireside also helps its portfolio firms make a seamless offline foray. Since its inception in 2017, it has invested in 45 brands, including boAt, Bombay Shaving Company, Design Café, Sweet Karam Coffee, Pilgrim and Samosa Singh, among others, many of which have expanded presence across multiple channels.
A key advice Kannan and his team share with the portfolio companies planning to go offline is to not start focus on onboarding new customers. “You can’t tell your brand story very easily in the offline space. So, initially, you need to do offline where there is a pool of consumers who already understand your brand. They have bought your products and now will buy them wherever they are shopping,” he said.
Kannan also advises them to go into stores with PIN codes where they are already selling products. And, then enable brand discovery inside the store. “The consumer doesn’t automatically know that you are there. So, you need to inform the consumer that the brand is available,” he said.
Kannan also believes when a startup reaches the `100-200-crore mark is when it should go offline. “That’s when you would have built a sufficiently large franchise with consumers for you to go offline,” he said.
He added that the second way to determine the right time is when the retailers start getting a pull from consumers asking for products and leaving the store if they are not available.
Fireside also believes the opportunity is huge in the retail space and there is space for many more consumer brands.
With the close of its Fund III, Fireside is currently managing Rs 3,000 crore of AUM (assets under management) with investments across consumer brands in sectors such as health and wellness, food and beverages, beauty and personal care, nutraceuticals, and others. It plans to ramp up its investment in the health segment.
“What we saw from Fund II is that FMCG and wellness worked well, so we continued to invest in them in Fund III as well. Additionally, we picked health as an area that we want to invest in a bit more…he said.
From: financialexpress
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