1Mby1M Virtual Accelerator Investor Forum: With Kanwaljit Singh of Fireside Ventures (Part 5)

Sramana Mitra: I’d like to understand to what degree of certainty do you foresee the family offices that are working with you to be able to cover that capital need of going from $5 million to $15 million?

Kanwaljit Singh: The interesting thing is that the private equity investors in India is a very large group. They are very bullish on the consumer brand space. It’s a very interesting funnel for consumer investing in India. The mouth of the funnel is really the angels and individual investors.

We see a lot of companies that can raise the initial $100,000 because people generally understand it. It’s something that individual investors can figure out. Then the funnel narrows because there aren’t enough VCs or early-stage investors. Then it widens out. At the $10 million mark, there’re a lot of private equity investors who will be interested to invest in companies.

By that time, you have achieved $15 million to $20 million in revenue. You have a clear unit economics established. You have done some basic groundwork on the distribution network. You have enough confidence that the brand is real. Now, the private equity guys want to come in and invest further. Actually, private equity players become very comfortable writing checks.

Sramana Mitra: Beyond $10 million, the private equity money gets unlocked. That’s good.

Kanwaljit Singh: Absolutely.

Sramana Mitra: Besides Mama Earth, what other categories do you have businesses like this being built?

Kanwaljit Singh: We have already done about 12 investments. If I just cut it by broad sectors, four of them are in food and beverage. Two of them are in personal care, two in lifestyle, one in home interior and décor, one in education. It’s a fairly wide mix of sectors, but all of them are original brands catering to the Indian market.

Sramana Mitra: Can you answer one other question that strikes me as a relevant question in this context. Why do you have to go offline? You’re talking about 100,000 consumers creating a pretty robust business online. A hundred thousand is a very small number with respect to the population that is online and that is very active online. You could easily get to two million consumers online.

Kanwaljit Singh: Two reasons. One is, there is a certain natural saturation of the business if you are looking only online. The cost of every incremental consumer keeps going higher and higher because you’re spending a larger amount of dollars in acquiring the next set of consumers. It’s the classic case of the early adopter. You have to work harder to get the next set of consumers.

Second is, it is an interesting learning for us. We have now seen several of our companies do this internet-first approach. They start getting demand from the offline channel because there is a certain amount of effect which the offline channel starts seeing. If you want to build a sustainable brand, you do need to have a hybrid or omni-channel strategy.

It’s a matter of timing of that entry into the offline model and what strategy you need to adopt. Several of our companies have seen demand coming from the offline channels. We can’t ignore the larger consumers by completely staying online. Online is a good way to get started but certainly, the efficient and more robust sustainable model for building brands will be omni-channel in my view.

Sramana Mitra: Of your 12 companies, what is the geographical distribution?

Kanwaljit Singh: There is a large concentration between Bangalore and Delhi. Interestingly, we haven’t seen that many new startups in Mumbai, but Delhi has been fairly active. Bangalore would be a large portfolio for us, but Delhi is almost as large.

Sramana Mitra: Why do you think that is the case? I would have guessed Mumbai would be the concentration.

Kanwaljit Singh: One of the things we’ve noticed is the cost of doing business in Mumbai is significantly higher than either Delhi or Bangalore. That becomes a constraint. Delhi is a large market. People see that as a large opportunity. If you are working in the NCR region of Delhi, then you can operate at a fairly low cost.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Kanwaljit Singh of Fireside Ventures
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