1Mby1M Virtual Accelerator Investor Forum: With Kanwaljit Singh of Fireside Ventures (Part 4)

Sramana Mitra: In this case study, how many customers were they able to reach in an internet-only mode?

Kanwaljit Singh: I think it’s in the thousands. You can build very interesting businesses, especially in the Indian context if you can reach a core community of consumers. We believe that the lifetime value of the consumer is far more important than just reaching a certain number of consumers. A hundred thousand consumers who are buying our products on a regular basis has the potential. We’ve seen interesting milestones since there aren’t so many brands in India that have grown to $15 million to $20 million size.

Sramana Mitra: How much capital do you need in this model? What is your assessment of how much capital is needed to get to that $15 million to $20 million revenue size with 100,000 customers?

Kanwaljit Singh: The broad number would be $5 million. This would be a very wide hypothesis. This is roughly the number that I have seen for the last few years. That is really a Series A stage of investing. If we can raise $5 million, we can see $15 million in revenue.

Sramana Mitra: Is that then getting to break even?

Kanwaljit Singh: A good part about these brands is they are very high-margin businesses. For Mama Earth, this is a 65% gross margin business because personal care, as a category, typically operates at that level of margins. The company can break even at a $10 million run rate. The important point is that if you want to invest in further growth, then you have to invest in people, brand, and marketing. They’re raising further money for growth. That is an interesting distinction versus a typical company where you fund for the burn.

Sramana Mitra: What I like also about the way you think about these businesses is that it has healthy unit economics built into the model. That’s sustainable. With $15 million to $20 million revenue company, you can even take it public.

Kanwaljit Singh: That may be a little too early. In India, companies go public between $50 million and $100 million. Even if they go public, there is a high demand for consumer companies in the public market. Exit-ability becomes an issue.

Sramana Mitra: Let’s say $5 million to get to $15 million in revenue. How much more money do you expect these companies will need to get to $50 million in revenue?

Kanwaljit Singh: That is not a linear equation. My bet is $15 million to $20 million should take you to that number. Then you can self-sustain and keep growing on that base. You don’t necessarily have to raise more capital.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Kanwaljit Singh of Fireside Ventures
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