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The brands – in the personal care, FMCG, electronics and appliances sectors – achieved traction quickly as ecommerce companies including Amazon and BigBasket have put in place exclusive programmes to launch and test brands, and rising consumer intent to purchase differentiated products online, according to founders.
Additionally, the rising prevalence of content marketing-driven sales, through social media apps like TikTok, Whatsapp and Instagram, to promote brands has also pushed these digital-first brands to gain ground, the founders said.
“These niche brands are also taking wallet share from some traditional FMCG companies in certain categories,” said Hari Menon, founder of BigBasket.
In the past two years, venture capitalists have invested more than $300 million in 70 such consumer brands, data from industry tracker Tracxn show.
For instance, when Kanwaljeet Singh founded Fireside Ventures, an early-stage internet brands-focused fund, his thesis to bet on brands was simple — he expected internet brands that he backed with a ?15 crore cheque to hit Rs 100 crore in revenue in 3-4 years, be valued at Rs 500 crore, and make a 5X return on a 20% stake.
“Now, we are saying in a fund’s lifetime, we are seeing the potential for brands build Rs 500 crore revenue business,” Singh said. “From our own portfolio, MamaEarth, BoAt, Vahdam Teas, among many others, have either already hit that mark or (are) very close.”
MamaEarth is in talks to raise $10 million led by Sequoia Capital, sources said.
Matrix Partners, a venture capital firm most associated with investments in technology startups such as Ola, Practo and Quikr, has racked up almost ten investments in earlystage consumer brands in the past 12 months.
The firm says this is the right time to invest in the sector, which could add $1trillion in market capitalisation over the next decade.
Its latest bet in the space, Mosaic Wellness, has been its most aggressive. The fund, along with Sequoia Capital and SAIF Partners, has backed two prominent venture capitalists operating in stealth mode and building a slew of digital-first consumer brands in a $10 million maiden funding round earlier this year.
“India’s favourable demographics will act as a key tailwind for consumer businesses. India has a large portion of the young working segment with rapidly increasing purchasing power and an increased taste for premium products,” said Revant Bhate, cofounder and CEO of Mosaic Wellness.
Fireside has evaluated over 1,500 investment opportunities in the space over the past two years. This indicates that entrepreneurs, too, have realized that there is space in the market and have begun building ventures to fill the gap, leveraging not just online selling but also marketing online.
“The growth of the new-age brands in the past few years has been largely fueled by the rapid growth of the digital universe, both as a medium of brand engagement as well as for consumer access. The millennial consumers are very digitally connected, they are highly aware of global trends and very experimentative,” Singh said.
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