India is an ever-evolving marketplace for e-commerce businesses. Small businesses and startups sell products through e-commerce platforms and D2C channels backed by advanced technology and online sales and automation tools.
YourStory has launched the ‘500 Challenger Brands’ initiative to recognise and showcase insurgent D2C brands. In a release of its first batch of 100 brands during a virtual launch event, Abhiroop Medhekar, Co-founder and CEO, Velocity shared insights on funding options and growth opportunities under the Indian e-commerce ecosystem.
A paradigm shift
New-age startups are extremely tech-heavy and have some sort of valuations. Entrepreneurs are shifting to product-based ecosystems which also has changed investors' perceptions for investing in D2C brands.
Abhiroop confirmed a phenomenal shift in the D2C ecosystem. In his views, D2C brands are insurgent, built digitally first that are realising to own direct consumer relationships and build their online presence. Also, there are enablers, shipping services providers, payment gateways, etc making business operations independent in marketplaces. “We will see several brand creations in the coming years… Now, consumers are influenced by social media and prefer buying goods online. It’s a clear shift in the wave of D2C insurgent brands,” he said.
Building a D2C ecosystem
Chennai-based women’s fashion and apparel startup Fashor started in 2017, when there were huge opportunities for brands to scale up and capture the relevant market. Talking about the brand journey, Vikram Kankaria, CEO, Fashor, said, “We are at Rs 100 crore running rate and have seen success across our own story. Initially, we raised a small amount and did profitably, and will hopefully raise a series A round.”.
Speaking about various aspects of women's life-cycle, Richa Pendake, Founder and CEO, Nurtrizoe, discussed what inspired her to introduce healthy options [nutrition-based] for women. Nurtizoe launched India's first lactation eating bars that was accepted widely across doctors, hospitals, and new mothers. The company recently completed its first round of seed funding and is set to launch a few products in the coming days.
Apeksha Jain, Founder and Chief Confiturier, The Gourmet Jar, expressed how her passion for cooking and a banana jam she tasted in France kicked off her entrepreneurial venture 10 years ago. The Gourmet Jar offers premium condiments that preserve honey, mustard, pasta, sauces, pesto, spreads, and dips. Apeksha claims all these products are made up of natural ingredients and are available across multiple food stores.
When and why to accept funds
An investment banker, Fashor’s Vikram explained various opportunities to assess before accepting capital. A business must ensure enough capital is in place [say for the next 12-14 months] to be used for brand building and working capital. He believes having more capital creates value, recruits talents, and supports other processes. A business becomes much more worthy if it has adequate capital.
Richa proposed two buckets of fundraising – market expansion and shared growth, and for conservative, organic growth and profitability. Nutrizoe was established in 2020 where funds were deployed in brand creation, operational setup, working processes, etc. “We saw a strong client engagement and consistent growth, and were willing to launch more products, that was the high time to expand so the large requirement of funds,” she added. When a business sees enhancement, consistent growth, brand advocacy, the physical presence of brands, and more, it’s a good time for fundraising as we did.
Apeksha talked about her organic brand growth and cited reasons to raise funds for cementing their position in the condiment space scalably. “We were strongly positioned offline, but a bit weak when it comes to D2C. And, we don’t have access to our own customer data while selling products offline,” she said. A business can raise funds to strengthen its position in the D2C space and customer acquisition.
Being a strategic investor who focuses on revenue-based financing, Velocity’s Abhiroop spoke about efficient ways to fund D2C brands, for instance, he gives capital for the businesses’ working capital that can be paid back as flexibly as a share of their revenues. He also explained the fundraising process for short- and long-term investments.
Key considerations to look for investors
Good investors, Vikram pointed out, not only bring capital for brands but also guide for business endeavours and evaluate companies regularly that they’ve invested in to see steady growth.
Richa talked about ref checks to understand partners/investors for healthy business compatibility. Both parties can bring significant aspects for startups such as innovation, growth strategies, leveraging technology access, and rich experience for brand building.
According to Apeksha, the right investors with the same vision as that of the founders are important. A strategic partner with good networks serves as a sounding board for a small team.
Talking about the short-term to mid-term future of D2C space, Abhiroop said India will witness the growth of D2C brands in the next 10 years. Emphasising on the concept of revenue-based financing, he suggested not to rely on external capital for survival but use additional funds for accelerated growth.