Will Fireside Ventures’ consumer bet pay off?

A couple of small transactions were keeping the Silicon Valley of India buzzing this week until Fireside Ventures, an early stage venture fund, focused exclusively on consumer brands, decided to divulge its latest set of investments. The Bengaluru-headquartered firm announced a series of whopping six new investments, taking the total from 12 to 18 consumer brands in its portfolio. Boosting the portfolio in such a way is not a small feat for even the most active investor, as venture capital investors tend to take a lot of time mulling over a business model before writing the so-called risk-cheques.

Fireside, in the meantime, is not just content writing cheques, it wants to be a platform that creates large consumer brands in the future. The VC firm intends to build as many as 25 iconic consumer brands with revenues to the tune of ₹1,000 crore per firm, over the next 10-15 years.

These plans highlight Fireside fund thesis – to fund and support entrepreneurs who are targeting the emerging millennial consumers with exciting new brands. To be sure, large strategic investors like SoftBank and Tencent have been betting on India’s consumption story propelled by the millennials and the aspirational middle class for several years now.

According to a World Economic Forum and Bain & Co report, India will witness a fourfold jump in consumer spend by 2030. It will add 21 million high-income and 140 million middle-income households. India will also be a young consumer economy with 77% millennials and Gen Z. Consumer spend alone is slated to go from $ 1.5 trillion to $6 trillion.

“India is at the cusp of a great boom in consumerism and will see the emergence of several exciting new brands to cater to the large and growing millennial & Gen Z population. This segment is looking for different sensibilities and product choices from their brands which start-ups’ are best suited to fulfil. And this, coupled with the rapid growth in infrastructure of ‘go to market’ options, both digital and organised retail makes it a unique and exciting ‘point in time’ opportunity for these brands,” says Kanwaljit Singh – managing partner, Fireside Ventures.

Fireside Ventures’ new portfolio firms include active wear brand Azani Sports, mosquito trapper Bog Orchid, Ayurveda products platform Transformative Learning Solutions (The Ayurveda Experience), Kapiva Ayurveda, which manufactures and sells a range of Ayurvedic products, Tangy Turmeric (Tasty Tales), a brand of ready to cook masalas and pastes; and AnKa SumMor Foods, a tech enabled sales and distribution company.

Fireside, a specialised consumer brand-focused investment firm, closed its first fund in February 2018 with a corpus of ₹340 crore. It has deployed ₹204 crore so far across 18 investments. The fund was anchored by marquee investors such as Premji Invest, Westbridge Capital, Mariwala Family Office, Unilever Ventures, Emami Ltd., RP-Sanjiv Goenka Family Office, Sunil Munjal’s Hero Enterprise Investment Office and ITC Ltd. Individual investors such as Samina Vaziralli, executive vice-chairperson, Cipla; Binny Bansal, Flipkart founder; and Anant Daga, managing director, TCNS Clothing Company, have also invested in the fund.

Fireside’s portfolio of brands also include lifestyle brand boAt, online tea brand Vahdam Teas, Mother and baby care brand Mamaearth, food startup Samosa Singh, ready-to-drink dairy beverage brand Goodness Beverages, and Bombay Shaving Company, among others. One of Fireside’s early investment, Kwik 24, was recently acquired by BigBasket.

Industry insiders say focusing on consumer brands can be a good strategy for an investment fund. Also, Fireside’s leadership has a track record of running or investing in consumer brands. Its founder Singh, for example, was previously co-founder of early-stage venture firm Helion Venture Partners and has experience of more than 30 years in consumer marketing and venture investing space in companies like Hindustan Unilever (HUL), Intel and Carlyle Group. He earlier invested in consumer brands like Paper Boat, iD Fresh, Epigamia and Licious. The VC firm recently hired Dipanjan Basu, former chief financial officer of Myntra and Jabong as a partner and CFO.

But the biggest challenge lies in scaling these brands.

“Its very important to have focused themes. There is no doubt that India is a consumption story but the question is can the brands/companies really scale? It doesn’t have to be a $1 billion business but it has to be at least a $100 million idea. How do you create a $100 million brand is still a question that needs to be answered.  So is it a venture capital investable sector? It is too early to say how it will pan out,” says a Bengaluru-based investor, who also invests in consumer brands, requesting anonymity.

In the meantime, the other transactions this week include Singapore-based K-12 education company XSEED Education Pte’s acquisition of Report Bee for an undisclosed valuation, and Matrix Partners India’s investment of an undisclosed amount in video content platform Awaaz.