That Kanwaljit Singh, founder and managing partner of early-stage investment firm Fireside Ventures, has a keen eye for backing promising consumer-focussed companies that innovate for the all-powerful Indian millennial consumer, is evident from some of the investments in his portfolio. Singh, 55, was so passionate about investing in and nurturing consumer brands that he walked out of Helion Venture Partners (which he had co-founded; he was senior managing director) in 2015, since the rest of the team didn’t want to deviate from its focus of investing in technology-led companies.
After quitting Helion, he turned angel investor and was an early-stage investor in firms that went on to become well-known brands such as Paper Boat, Epigamia, and Licious. Singh, who spent 13 years in consumer marketing across companies such as Hindustan Unilever (HUL) and Intel India, soon realised there was only that much he could do as an individual investor and he needed to create an ecosystem to realise his vision of helping consumer-focussed firms grow through capital and mentorship. As a result, Singh founded Bengaluru-based Fireside Ventures in 2016 and by February 2018, the firm had closed its first fund of ₹340 crore with a slew of marquee investors including Westbridge Capital, Marico chairman Harsh Mariwala’s family office, Emami, Hero Enterprise Investment Office, ITC, and the RP-Sanjiv Goenka Family Office.
In an interview with Fortune India, Singh says through Fireside he is trying to foster a symbiotic relationship between his investors and investee companies. Fireside’s portfolio has 18 companies including Mamaearth, boAt, Yogabar, Bombay Shaving Company, and Vahdam Teas. While the startups benefit from growth capital and mentorship, the fund’s investors, many of whom have their own thriving consumer products businesses, get to learn from the latest trends in India’s consumer space.
What was the thought process behind moving out of Helion and establishing Fireside Ventures?
I was always fascinated by the consumer space, I guess partly because of my background in marketing with HUL, and realised there was an emerging investment thesis on backing consumer-led companies. But it was difficult to build a consensus around investing in the consumer space at Helion and many of the investments that we would consider in this space would get a pushback internally. So eventually I decided to step out and invest my own money in some of these opportunities. I invested in some firms like Paper Boat, ID Fresh, and Licious, which went on to become successful consumer brands.
There was an interesting confluence of factors happening at that time. One was the rise of the aspirational and conscious millennial consumers. These consumers don’t care whether a brand belongs to a large company or a startup, as long as they buy into the narrative around the brand and if it meets their needs. For instance, I invested in a company called Mamaearth (which has since become a Fireside portfolio company) and the home page of its website talks about how a couple decided to start the company because of the difficulties they faced in sourcing good products for their baby. So their passion and belief system became a part of the brand.
The other emerging trend was that the ways in which these consumers access brands and products is very different. Digital plays a big role here and that drastically reduces the cost of marketing and distributing these new brands. Also, with the emergence of supermarkets in India, these new brands get an opportunity for prominent shelf space and are no longer tucked away behind products from well-known FMCG [fast-moving consumer goods] giants at local kirana stores.
But at the same time, there were very few institutional investors willing to back new consumer brands in India and I realised there is only that much that I can do alone.
Secondly, a system of learning and disseminating knowledge vis-à-vis the new rules of product marketing and distribution was needed to help these companies grow. I realised I cannot fulfil these two objectives without raising a fund.
How much of the fund have you already deployed and what returns do you expect?
We have already invested close to ₹200 crore and are working on raising a second fund. There are 18 companies in our portfolio currently and, over the life of the investment, the total size of the cheque we write can go up to ₹25 crore. Our desire is to have an internal rate of return ranging from 20% to 30%. We believe at least 75% of our companies can be successful and deliver the kind of returns that we are expecting.
Many investors in your fund have successful consumer products businesses of their own. How does it make sense for them to commit capital in companies that may compete with them?
One is, of course, the financial returns. But more importantly, these large companies want to have their ears and eyes on the ground through these investments. As part of our periodic review, we meet these companies and share the lessons derived from seeing our investee companies operate in the marketplace. There is a significant shift in terms of consumer marketing on the ground and the larger companies want to develop a better appreciation of that. For example, none of our startups engage in any kind of formal market research. Instead, what they do is called insight mining, wherein they go to the large e-commerce sites and study what users are saying through product reviews. They try and identify the gaps in the market and come out with products accordingly. Some of these companies could be potential acquisition targets or some of our investors may invest directly in these startups during subsequent rounds of fundraising.
You have some well-known business leaders in your advisory board. What purpose do they serve?
One of my main motivations behind founding the fund was to build an ecosystem of partnerships, which will help our portfolio companies with their go-to-market strategy, brand building, marketing and support functions, corporate governance standards, financial analytics and so on. So we have mentors like Amit Agarwal, senior vice president and country head, Amazon India; Harsh Mariwala, chairman, Marico; and Aditya Ghosh, CEO, South Asia, OYO Hotels and Homes, who engage with the founders of our investee companies towards this purpose.
This story was originally published in the April, 2019 issue of the magazine.