Direct-to-consumer home and sleep solutions company,, recently raised ₹320 crore in its Series-D round led by private equity major Investcorp and existing investors Sequoia Capital India, Verlinvest and SIG. Despite registering a 30% year-on-year growth and being profitable, it was by far the most challenging round of fund-raising for the ₹810 crore company, says director and co-founder Chaitanya Ramalingegowda. "We raised Series A-B-C in three months, but Series D took us 6-7 months. Four funds took us to the investment committee, until Investcorp agreed to invest."

The funding winter is getting the better of investors and entrepreneurs alike. Investors are wary of stories of revenue-less growth and are asking tough questions around unit economics, scale and profitability. Entrepreneurs are under pressure to jot down their deliverables quarter-on-quarter as opposed to weaving fancy stories of where they see their businesses five years from now. "Despite registering a 30% growth there was skepticism about the depth of the market. Are we going to get the same profitability in newer categories as we have in the matured ones? Can you get to the scale where you will be profitable? Are you skilled to handle scale? We got severely questioned on these parameters," says Ramalingegowda.

Investors and investees are embracing the basic tenets of business — the right product-market fit, unit economics, scale and profitability. Questions around unit economics and profitability are sharper than ever before, says Mayank Khanduja, partner, Elevation Capital. "When a lot of capital is available, questions such as whether you have the right product-market fit gets ignored. You can create an illusion of the same by giving discounts or marketing at the seed stage. Even in Series A (when the focus should be on unit economics) if you are giving discounts, everybody is happy to spend since there is so much capital available," explains Khanduja.

"If you are a company largely selling online and your cost of customer acquisition is high and advertising on Meta and other platforms is not working out, what can be done to get better unit economics? Even if you have a high average order value, and growing at 100%, are you losing money on every order? Those are the kind of questions we need to ask," adds Kanwaljit Singh, managing partner, Fireside Ventures.

Investors, says Singh are now nudging investee companies to grow their core business instead of mindlessly experimenting with adjacencies. "If you are growing well on digital, getting good customer reviews, there is a natural opportunity to explore offline. If you can cut some performance marketing costs and start learning the omnichannel way, it could help in building scale."

This approach is indeed a contrast to the conventional approach of investors pushing investee companies to play the valuation game so that they can exit at astronomically high prices. "We look at so many companies which have insane valuations, now they are stuck. New investors are not buying them and old investors are not willing to put in funds. It is important to build a business which fundamentally makes a consumer happy and you can deliver the product/service in an efficient manner where you make profits," says Akshay Munjal, founder and CEO, Hero Vired.

In fact Munjal believes the funding winter is the right time to build fundamentally strong businesses. "The availability of easy money during Covid was a bubble. It was impossible to build tech talent, people were taking offers and jumping. I am glad it has corrected fundamentally." has also set up its manufacturing facility in the outskirts of Bengaluru. The rationale here is margin escalation. One of the reasons why Urban Ladder was cash-starved before it was bought out by Reliance is because it imported furniture from countries such as Malaysia and had to pay upfront. When unsold, it led to huge inventories., says Ramalingegowda, which also had a similar model, corrected itself by foraying into manufacturing. “We are getting better margins, and

Focus On Core

It's not important to be a unicorn. It's all about being patiently agile and building businesses which would last. That's the big change in the narrative in the start-up ecosystem. Growth will obviously generate valuation, but it can't be at the expense of profitability. After all, there is a lot to learn from overnight success stories of the likes of Byju's, Unacademy and Oyo, which eventually went horribly wrong.

From Mamaearth and Sugar to lifestyle brands such as BoAt and, everyone has an omnichannel story to narrate. This reinforces the age-old FMCG tenet that only a strong distribution muscle can help a brand generate scale. Over a third of lifestyle brand BoAt's revenue comes from brick-and-mortar stores, while close to 40% of Mamaearth's revenue comes from physical stores. For newcomer Renee Cosmetics, 50% of revenue comes from general trade stores. "We use online tools to educate customers and resonate that in offline channels. Offline brings goodwill to the brand," says Priyank Shah, co-founder, Renee Cosmetics.

“If you are not omnichannel you won't be able to sustain. Consumers are flirtatious. They shop online one day and offline the next. If you want to penetrate into India, you need lower price points and the economics will not work online. If you want to scale up you need to have multiple price points as well as an omnichannel strategy," says Vivek Gambhir, chairman and CEO, BoAt.

From a company which imported headphones from China and sold them in India, BoAt has moved to contract manufacturing domestically. Its smartwatches are also being contract manufactured in India. "The easiest would have been to import from China and sell in India, but to build a business one has to be software enabled. We built our own R&D facility and have already created 65 patents. Around 95% of our watches are manufactured locally. If we get it right, we will make in India for the world," explains Gambhir. has also set up its manufacturing facility in the outskirts of Bengaluru. The rationale here is margin escalation. One of the reasons why Urban Ladder was cash-starved before it was bought out by Reliance is because it imported furniture from countries such as Malaysia and had to pay upfront. When unsold, it led to huge inventories., says Ramalingegowda, which also had a similar model, corrected itself by foraying into manufacturing. "We are getting better margins, and are able to manufacture as per consumer tastes."

Social media start-up, ShareChat, is focusing on building a recommender system. "Despite the cash crunch, what will you still do to earn capital? What will you still choose to keep investing in? For that you need to realise the core of your business. We chose to build a world-class recommender system. We chose to build a global team focused on AI within the organisation," says CEO Ankush Sachdeva.

Legacy Leaders

While new-age entrepreneurs are embracing the classical tenets of doing business, those of family-owned conglomerates, who have inherited decades of family legacy, are also reinventing their businesses. Not only are they looking at the legacy they have inherited through a newer lens, they are also entering new-age businesses such as online retail, green energy and building 5G capabilities. Take the case of Isha Ambani, the heiress of the ₹2 lakh crore retail empire of Reliance Industries. She has transformed her father's brick-and-mortar retail entity into a digital commerce giant, by enabling consumers to order groceries and pay for it on WhatsApp. Reliance Retail has forayed into fashion, furniture and toys with the acquisition of brands such as Hamleys, Urban Ladder, Ritu Kumar and Manish Malhotra. The company also has Ajio, its online fashion brand.

Similarly, Devansh Jain, executive director, INOXGFL Group, is not just reinventing his father’s fluorochemicals business, but also betting on renewables. The EV business will invest ₹4,500-5,000 crore over three years in EV batteries, solar panels, hydrogen fuel cells and electrolysers.

The RP-Sanjiv Goenka Group entered the personal care market when the likes of Mamaearth, Plum and Sugar Cosmetics had already launched. Unlike these brands which started off as digital-only, Shashwat Goenka, sector head, retail and FMCG, RPSG Group, decided to look at D2C and offline simultaneously. "We have a focus on the benefit-led space with our brand Naturali, which is typically offered by D2C brands at a premium. We decided to give products that work without harmful chemicals at a price point which a normal brand wouldn’t give you," he explains.

OK To Fail?

Investors in Silicon Valley, says Munjal of Hero Vired, prefer to invest in entrepreneurs who have failed earlier. "Their only question is, 'tell me what you have learnt.' They don't even look at the business plan." The start-up ecosystem does accept failure, but the runway is shorter than before.

"There is an appetite to fail, but on a lower budget. The investor asks you, 'can you do with ₹50 lakh or ₹1 crore, can you do it in one city as opposed to experimenting nationally?'," points out Ramalingegowda.

Khanduja of Elevation Capital says it's fine to experiment in one city or in a few localities. "You could ask specialists who will experiment and tell you if it may work, and then you put in more capital. Marketing pan-India is reckless."

He cites the examples of real estate solution provider, No Broker. "No Broker initially started with two cities — Mumbai and Bengaluru. All they did was to get a landlord or tenant to talk together and close a rental agreement online. Thereafter, they got the tenant to pay for the service of reaching out to a certain number of landlords, and the landlords for getting them tenants. Then came the stage of finding out what customers need for their real estate journey. So they opened up home services, payments etc," says Khanduja. Most founders blindly chase valuations and flounder, he adds.

Gambhir says the onus of aggressively chasing growth is on investors also. "VCs put a lot of pressure to scale up, but the firm may not be ready for the growth trajectory. The moment you overvalue an asset, the founder is under pressure."

While experimenting and failing is a way of life with new-age entrepreneurs, their legacy peers are also imbibing the appetite to take risks. Unlike their predecessors, they are not risk averse.

Success Mantra

What do new-age entrepreneurs keep in mind to ensure they build businesses that are resilient to headwinds? "It's good for entrepreneurs to keep control over losses. You should be close to EBITDA positive otherwise you are a puppet in the hands of investors. Also, one should try to invest more in those parts of the business which are giving better ROIs," says Shah of Renee Cosmetics.

Munjal’s success mantra is to take a rational view of business and not make an emotional decision. "The entrepreneur may love the product, but there has to be a market for it."

The death knell of a business is when an entrepreneur gets into it just because there is a lot of hustle and bustle in the sector. Entrepreneurs should be able to add muscle to the hustle.

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