Feature

Fireside Ventures | Betting on consumer brands

To consumer brand start-ups looking to raise capital, here’s a ready-reckoner on Fireside Ventures.

Think marketing, and its four Ps’ are likely to pop up in mind: product, price, promotion and place. Somewhere, in our increasingly mobile-centric world, the ‘product’ seems to have taken a backseat, while the world looks for the next big app.

Guilty as charged, the media has romanticised the lofty funding rounds raised by the food-delivery, fintech and ride-hailing apps. That begs for some attention to be brought back to products that we customers touch, feel, hold and even consume. Kanwaljit Singh and Vinay Singh thought so too.

Having spent a significant time at Unilever (10 years and 7 years respectively), both Kanwaljit and Vinay come from strong FMCG backgrounds. In fact, Kanwaljit has already invested in brands such as Paper Boat, ID Fresh, Epigamia and Licious. Fireside Ventures (FV), which they founded in 2017, is their idea of an early-stage venture capital firm that focuses on consumer products, life-style and apparel-centric start-ups.

VC’s first fund totalled to Rs.3.4 billion (a little shy of $50 million) and was backed by Premji Invest, Westbridge Capital, Mariwala Family Office, Unilever Ventures, Emami, RP-Sanjiv Goenka Family Office, Sunil Munjal’s Hero Enterprise Investment Office and ITC Ltd. Money from the first fund went into start-ups such as Yoga Bar, Bombay Shaving Company, boAt audio, MamaEarth, SARVA, Gynoveda, Samosa Singh, Goodness Beverages, Design Café, Vahdam Teas, Magic Crate, Pipa Bella, Azani, Bog Orchid, The Ayurveda Experience, Kapiva Ayurveda, Tasty Tales, AnKa SumMor, Alpha Vector (Frog Bikes), and more recently, FableStreet, and Gynoveda. With its second fund, FV aims to invest another $100 million into start-ups building consumer brands. 

Ditching tradition
Look closer. None of the brands from FV’s portfolio made a splash on traditional media such as the TV or the newspapers. You probably saw Yoga Bar’s products at airports, your supermarket or pharmacy, Bombay Shaving Company at a premium cosmetics store, while boAt’s headphones seem to have flooded Amazon, Flipkart and PayTM mall. All this with little to no branding exercise, or at least not the kind we’re used to. A few months ago, our scribe Himanshu Kakkar brought you the story of boAt, the desi headphones-and-audio accessories brand backed by FV. It prides itself in its visibility on social media platforms. Co-founder Aman Gupta mentions how brand ambassador Jacqueline Fernandes posting a photo with boAt’s products on social media, or models sporting his headphones on Lakmé Fashion Week’s stage gets the brand a tonne of traction. This strategy comes from a belief that the way to the millennial’s heart is through the web, not through traditional media.

Vinay says that access to technology and the advent of the digital space have weakened TV and print as means for brand building. “Earlier, you would spend on distribution channels, warehouses, TV/print ads. But now, e-commerce sites have stepped in, and you have pay-per-click ads, which make building a brand so much easier,” he says. This is a trend that FV intends to leverage with its portfolio companies. You see, a front-page ad on The Times of India or The Hindu is akin to carpet-bombing. But not everyone is your audience.

Digital offers precision. Social media and social media influencers allow you to target those who are likely to buy from you. “If you’re a baby-care product, you push it on First Cry. If you’re a new cosmetics company, you push it on Nykaa. Yes, you will pay Google increasingly for every click, but the brand also reaches its audience with much more granularity,” opines Vinay.

India’s drive towards the web is powered by cheap data rates and smartphone penetration. However, Vinay points out another factor. We’re on the cusp of switching income brackets. Per-capita-income hovers around the $2,000 mark, which Vinay informs, is where China stood back in 2003. Up to $2,000, families spend their incomes majorly on utilities. However, post that, spending on lifestyle goods increases, and that’s the second trend FV is banking on with its portfolio companies. “One in four urban families earns over $6,000, and by 2030, it will be one in two,” says Vinay. The idea is to look at companies that offer products that sit at a bare premium over familiar offerings, but offer a value proposition that justifies the extra asking price. More on that in a bit.

Getting trendy
Our income is yet to take that leap ahead, but our way of living has definitely changed. Millenials like to wake up to millet energy bars and face the world with cruelty-free cosmetics. “They are looking for natural and eco-friendly, responsible consumer brands. They are more conscious of what goes into their products,” says Vinay. Investments such as Yoga Bar, Gynoveda and Kapiva Ayurveda showcase this sentiment that FV is betting on. This demographic is increasingly becoming health-conscious which makes room for sportswear brands such as Azani. It’s also a space which has witnessed women entering the workforce like never before. That’s where FableStreet, a premium workwear brand founded by IIMC-grad Ayushi Gudwani comes in. It focuses on custom-fitting clothes for Indian women in a market where most formal wear is feminised versions of men’s formals.

Millennials hitting age 30 present a unique opportunity too. Vinay funnily calls the married ones among this lot the ‘double-income, no kids’ or DINKS, who he expects will turn into the ‘double-income, single kids’ households, or DISKS. This demographic is likely to spend on high-quality products for their children since they want to offer the best products for their only child. This flies in the face of the previous generation of parents who waited till the children grew up before exposing them to premium brands. “Why spend on pricey brands when you’re going to outgrow these size-4 Nike shoes in six months,” some of our parents would ask. To capitalise on the recent parents, FV tapped into MamaEarth and Frog Cycles.

Blindside entry
Being sneaky works well in war and in the consumer product space. Vinay explains an opportunity that Fireside saw with Yoga Bar. “Nestle, Kellogg’s and Bagrry’s won’t venture into the energy bar market because at an estimated $ 9.4 million in 2018 (as per TechSciResearch), it’s too small a space for them to pay attention to. For reference, as per Euromonitor, India’s breakfast cereal market is expected to hit approximately $3.5 billion market; Statista pegs the market at a more modest $1.1 billion. However, take the same ingredients as your regular multigrain muesli – cereals, dry fruits – add a dose of clean protein sources such as whey and soy, and you have a recipe for energy bars. With the promise of clean ingredients, Yoga Bar caters to the health-conscious snacker who wants both taste and safe ingredients. That’s a niche, but growing audience. After establishing its foothold among consumers, Yoga Bar diversified into the breakfast cereal space.

It’s a similar story with Frog Cycles. Remember the millennial parents? Consider this explanation by Vinay. “The average kids’ bicycle is in the Rs.4,500 - 9,000 range. But if a parent is looking for a premium offering, they are already looking at spending north of Rs.9,000. They won’t look at a Hero or TI brands (BSA, Hercules, etc).” That’s where FV sees the opportunity to nudge the customer upwards with its brand.

Early catch
FV gets involved with its portfolio companies when they are as small as a few hundred thousands into their revenues. What they do prioritise is whether the founder has some prior experience with their venture. Varun Alagh, founder, and ‘Chief Dad’ at MamaEarth (as per his LinkedIn description) came from a hardcore FMCG background, but knew little about babycare products. But his child developed issues with chemical-heavy brands such as Johnson & Johnson. That’s when he decided to start his own baby-care brand. It’s a similar story with Aman Gupta and team at boAt who saw a lacunae in the market for tangle-free headphones. The desi lifestyle-headphone brand is expected to cross Rs.1 billion in revenues this fiscal year.

Catching start-ups in development stages allows FV to assess the niche they cater to, their unit-economics, and crucially, whether the brand has a digital focus. Explaining further, Vinay states that pre-digitisation, a new iced tea brand would have to fight with the Liptons of the world, and go store to store. Today, however, you can turn to Swiggy or a Zomato with a food brand and find takers. Similarly, FV also gets to prevent niche-product brands from burning through cash and to streamline operations. For instance, it stopped Kapiva (ayurvedic juices) from spreading wildly to 25-30 cities and instead got the brand to focus on three locations, and repeat buyers. To help its brands, FV works with Amazon’s Launchpad (helps customers discover new products) and BigBasket Accelerate. The latter is BB’s accelerator programme wherein the grocery brand works with FMCG start-ups for a small equity. FV’s Kapiva is among the 20-25 start-ups that are part of the programme.

The next disruption
When asked what FV sees as the next space that’s likely to see disruption, Vinay chuckles saying that’s the million-dollar question. However, he did drop a hint. “We want to use tech to create a relationship with the customer,” he says. For instance, where FableStreet caters to custom clothing, Gynoveda, FV’s recent investment, helps women predict potential menstrual health issues with Ayurveda-based solutions. The user answers a comprehensive questionnaire on the start-up’s web portal. The questionnaire is developed by Dr Aarati Patil, MD Gynecology & Obstetrics in Ayurveda, the team’s chief doctor. The responses are fed into a machine-learning engine that suggests customised treatments to manage the specific menstrual issue.

The chief word in the previous line is ‘customised’. “Image processing libraries are getting democratised, and we will soon have softwares that process the photo of a user’s skin and suggest treatments, say for acne, or dark circles,” says Vinay. When it comes to consumer products, customisation at scale is what companies are yet to crack.

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