Consumer startups make a dash for funding as investor interest grows

Consumer startups make a dash for funding as investor interest grows

Mumbai, Aug. 13 -- Several consumer startups, including Haus & Kinder, The Souled Store, and Nat Habit, are exploring deals to fund expansion or provide exits to some early backers, according to at least five people familiar with the talks.

The Souled Store (TSS), a pop-culture apparel brand, is preparing for a Rs.300-400 crore pre-initial public offering (IPO) round and is in early-stage talks with investors such as WhiteOak Capital, Abakkus and others, according to two of the people cited above.

The startup saw some of its angel investors sell their stake to Xponentia Capital in a Rs.150-160 crore transaction earlier this year, the people added.

However, TSS co-founder Vedang Patel said the company does not plan to raise any capital before its IPO, which he expects in 12-18 months. "The company is extremely cash flow positive and is on track to do a Rs.180 crore Ebitda this year. We don't plan to raise any capital till IPO. In case there is a secondary sale of angels, etc., that is not the company's purview," Patel told Mint in an emailed statement. Ebitda is short for earnings before interest, taxes, depreciation and amortization.

Haus & Kinder, which focuses on home and baby essentials, is also in the process of raising a Rs.150 crore round, likely to see early-stage venture capital firm Sauce.vc double down on its position in the company, said two of the people cited above. The round is likely to be a mix of primary and secondary share sales through which some angel investors may exit.

"Haus & Kinder is growing at 100% this fiscal year, and we are looking forward to the festive season. This strong growth momentum shall catapult us to be the No. 1 brand in the home Linen category. We do not offer any comments on fundraising speculations," its founder and chief executive, Saket Dhankar, told Mint.

Beauty and wellness brand Nat Habit is preparing to raise about Rs.150 crore and is in talks with investors such as the Sunil Kant Munjal-led Hero Enterprise, as well as existing investors, according to two people familiar with the matter.

The company has raised capital from Infosys co-founder K. Dinesh's family office, Mirabilis, Sharrp Ventures led by Marico's Mariwala family office and Bertelsmann in June, according to documents reviewed by Mint.

Sharrp declined to comment on the development.

Meanwhile, home cleaning startup Scrubsy's raised a Rs.27 crore round led by V3 Ventures on Thursday, according to two of the people cited above. A spokesperson for the company confirmed the development to Mint.

Other early-stage deals include export-led pet care brand Pawfect Foods' Rs.30 crore fundraising led by an existing Dutch family office and Be Clinical, a science-driven skincare brand, raising about Rs.20-30 crore from Sauce.vc and V3 Ventures, according to at least three people cited above.

Pawfect is also exploring the acquisition of Best Pet Foods, an online pet products platform, to strengthen its international growth strategy, provide direct consumer access, and introduce the brands into newer markets. The developments were confirmed by the company's founder, Prashant Patwardhan.

Be Clinical did not respond to Mint's requests for a comment.

The rapid pace of direct-to-consumer adoption is giving smaller brands greater control over branding, distribution, and pricing while providing them the ability to selectively adopt the fit-for-purpose tools and services needed at different stages of their growth.

Channel adoption has accelerated nearly three times as fast as e-commerce marketplace growth. D2C accounts for $10 billion to $12 billion in e-commerce sales in India and could reach $60 billion by 2030, management consulting firm McKinsey said in a note in February.

Rising incomes, digital commerce and changing aspirations are leading much of this growth, taking discretionary and premium consumption beyond the traditional urban consumer.

"Younger, digitally native consumers are accelerating this shift. Gen Z and Gen Alpha are more willing to experiment with new brands, discover products digitally and spend on experiences and differentiated products," said Pranav Sheth, managing director at Alvarez & Marsal.

In many instances, investors are also doubling down on their investments when they see evidence of high repeat purchases, retention, strong reviews and increasingly efficient customer acquisition, Sheth noted.

He further added that the consumer sector is also becoming more attractive for investors as credible exit pathways emerge through both strategic mergers and acquisitions and IPOs. "That is giving investors greater confidence to deploy capital into new-age consumer businesses," he said.

This ability to generate outsized outcomes has translated to sustained momentum in the consumer sector across early- and mid-stages. "Even sector-agnostic funds are ramping up their focus on the segment while our pace of deals has also increased to 12-13 deals a year from 7-8 previously," said Dipanjan Basu, co-founder and partner at early-stage consumer-focused fund Fireside Ventures.

"We are seeing several opportunities for fresh investments and follow-ons in our own portfolio companies, as many of those we invested in 12-18 months ago have scaled up very quickly," he said, without disclosing names.

Basu further added that consumer health and wellness, regional food and snacking brands, and innovative, science-led businesses that create products that are difficult to replicate are key focus areas for the fund. "The bar has gone up in terms of the kind of products that can be built." Published by HT Digital Content Services with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at contentservices@htdigital.in