India’s consumer brands story is still an unexplored territory and there is a strong belief that given the size of the population, there is plenty of room for growth.
It is this unexplored space that Indian venture capital fund Roots Ventures wants to make its mark without the pressure to invest in ‘hot sectors’ or FOMO (Fear Of Missing Out).
Founded by Japan Vyas and Ravinder Vashisht in 2018, Roots Ventures believes in identifying trends early, and backing entrepreneurs, who will stay in the game for long.
One of its early spotting of trends — around health, wellness, and hygiene —seems to be playing out well in the current environment of COVID-19.
Roots Ventures Managing Partner Japan Vyas
In a conversation with YourStory, Japan says, “Last year, we identified themes around consumer brands of health, wellness, and hygiene. Here, we believe in products that are good for the individual and the environment.”
The two founders of Roots Ventures have past experience of investment with their previous organisations. They have been part of teams that bet on ventures like Paytm, RBL Bank, NSE, Trent Limited, etc.
Growth of consumer brands
Roots Ventures feels that health, wellness, and hygiene categories will grow faster than the overall consumption growth rate in the country. COVID-19 has brought about a perceptible shift among consumers to seek out such products.
“During COVID-19 and the ensuing lockdown, consumers have become more conscious about what they are consuming. There was appreciable growth for our brands before COVID-19, but now it has accelerated,” says Japan.
As a multi-stage and sector agnostic fund, Roots Ventures has invested in 11 ventures — all in the consumer brands space cutting across categories, such as health foods and drinks, personal care, pet care, etc.
Its portfolio includes Captain Zack, Coccoon, MishtFood, SupaFood, Smytten, Remitr, Teamonk, Plant Power, Just Herbs, Raaho, and Railofy.
Today, given the economic dynamics of the country where the per capita income is also on the rise, there is a direct correlation between the growth of brands and the increase in discretionary spends by consumers.
Japan says, “Historically, we have been a country, which has seen fewer brands in the consumer category, but things are changing.”
Room for more
India’s size and population provide enough scope for the presence and growth of consumer brands — national, regional or sub-regional.
As Japan points out, even a state like Uttar Pradesh — one of the most populous region in the country — is big enough for several consumer brands to thrive.
It is in this segment that Roots Ventures wants to create its mark. It believes that there are enough platforms available today where consumer brand startups can directly reach out to identifiable targets to launch their products, as well as get valuable feedback.
“From identifying trends early to betting on the right kind of founders, how we conduct ourselves has helped us differentiate ourselves [from other VCs],” says Japan.
Identifying early trends has helped Roots Ventures to place its bets on these new startups which are building strong niche brands. For example, Coccoon, a body care brand, manufactures its products without any chemicals and use natural ingredients.
Similarly, Captain Zack — which is into pet care — has developed products that are reaction free. Plant Power develops natural protein-based products.
These brands stand out in the marketplace as these are generally chemical-free and created out of natural products. According to the VC fund, there is a growing community of consumers who are keen to buy such products.
At the same time, Roots Ventures is very careful while identifying the founders behind such ventures. The fund primarily looks at how connected these founders are with their customer base and whether they are acting upon the feedback they receive for their products.
“There is a lot of co-creation of products along with the customers by our portfolio of companies. This is the trait we look at founders on whether they are looking at rewards for today or tomorrow,” says Japan.
Investment thesis
Roots Ventures plans to raise a Rs 200 crore fund with an additional Rs 100 crore as a greenshoe option. It has already raised half the amount and the founder says that if it wasn’t for COVID-19, it would have successfully closed the fund.
Roots Ventures largely invests in Pre-Series A, B, and partly late-stage rounds, and even listed entities. It also has a small portfolio for seed-stage investments.
Typically, it remains invested for a period of four to six years, though in some cases, it could be longer, depending on the venture.
Japan believes that collaborative efforts will help build the consumer segment in India. “There is a lot of work to be done, and it is early days for consumer-themed funds,” he says.
There are other consumer-themed venture funds in India, like Fireside Ventures, DSG Consumer Partners, and A91 Partners, and more.
Dealing with competition
In the consumer sector, there is formidable competition to be faced, especially from established FMCG companies.
Japan believes that competition for their brands comes in various forms but the critical issue is how an entrepreneur addresses these challenges.
“The key question for all these brands is whether they are getting the customer love and for this, founders need to be closely connected with their community,” says Japan.
At the same time, the technology platforms leveraged by these consumer startups and their ability to move faster gives them an advantage over established players.
Also, these startups are able to differentiate in their products, which are still niche with a new breed of consumers who are willing to pay a certain premium for better quality.
What lies ahead
No doubt that COVID-19 has brought in temporary blockages with most venture funds turning cautious about their investments. Japan feels that the investment momentum is likely to step up in the days to come.
He adds that the current environment is also an opportunity to find good quality entrepreneurs as ventures launched in the current state prove that they are there for the long haul.
This is just the start and there is hope that many more strong consumer brand startups will emerge.
“As a nation, we are becoming more and more confident in creating brands. Many of these can also become international,” says Japan.
(Edited by Saheli Sen Gupta)
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Link : https://yourstory.com/2020/08/vc-betting-building-niche-long-term-consumer-brands-india
Author :- Thimmaya Poojary ( )
August 17, 2020 at 05:05AM
YourStory