Consumption-related startups in demand

There are around 200 mn shoppers now, which was 40-45 mn five years ago and it will be around 400 mn in next 5 years. This provides many opportunities for building large and profitable businesses in areas like health, wellness, food, lifestyle and many more - Dipanjan Basu, Cofounder & Partner at Fireside Ventures, tells Bizz Buzz

Cautious Approach

• Resilient consumption prompts VC funds to deploy funds in consumer brands
• Successful listing of Mamaearth, Nykaacreate positive sentiment
• However, late stage funding remains low
• Early stage funding is worst hit
• VC funds more cautious in deploying capital with a lot of due diligence

Bengaluru: At a time when external capital flow into technology startups is at record low level, VC & PE funds remain optimistic about those startups operating in the consumption space. Fund managers are bullish on the consumption-related startups and deploying capital as valuations remain at a realistic level.

“As a consumer-focused VC fund, our views are more consumption-related and we feel that there is huge opportunity. We are seeing very different India because the whole consumption story across the country is going bigger and better. There are around 200 million shoppers now, which was 40-45 million five years back and it will be around 400 million in next five years. This provides many opportunities for building large and profitable businesses in areas like health, wellness, food, life style and many more. Therefore, we are seeing massive opportunities in this space as an investor,” Dipanjan Basu, Cofounder & Partnerat consumption-focussed VC fund, Fireside Ventures, told Bizz Buzz.

The company has invested in successful consumer brands like boAt, MamaEarth, Slurrp Farm, YogaBar, Vahdam, Kapiva and many others.

Indian startup ecosystem is going through a funding winter as VC and PE funds shy away from committing investment owing to macroeconomic uncertainties. Venture capital funding to Indian startups hit six-year low in November 2023. Startups only raised $223 million in 35 deals in November, 2023, which was a fall of 66 per cent from the previous month.

Indian startups recorded about $7.05 billion in funding till November of this year, down 71 percent from $24.36 billion in 2022.

Early stage funding has been hit the hardest as compared to other rounds of funding. Sources in the know said that though funding decision are being taken by the VC funds, they are more cautious in deploying capital with a lot of due diligence.

“Profitability has definitely emerged as a key focus area while deploying capital. While technology-led startups have seen a reluctance in funding from VC funds, consumption has emerged as a key area for investment,” said a fund manager with a mid-sized fund house.

Consumption as a theme has grown popular despite high gestation period with successful listing of consumer brand companies like Nykaa and more recently, Mamaearth among others.

Mamaearth or Honasa Consumer’s public offer was subscribed 7.6 times at close, led by strong interest from institutional investors. Meanwhile, funding in overall startup ecosystem is likely to recover next year on the back of improving macroeconomic parameters in developed economies.