Overall funding in the direct-to-consumer (D2C) space has increased to $153.4 million this March quarter from $105 million a year ago, as per data from Tracxn. While the number of deals remains flat, the ticket size has increased.
Major deals in the quarter under review include Plum’s $35 million round, BlueStone’s $30 million, MCaffeine’s Series C of $31 million, and DaMENSCH and Renee Cosmetics’ $16 and $10 million fundraises respectively.
Experts say that the sizes have increased as more late stage rounds are being raised compared to early stage ones.
“The overall venture funding scenario continues to be strong with more late stage deals leading to bigger cheque sizes,” said Sumit Keshan, managing partner of Wipro Consumer Care Ventures which has invested in MyGlamm and Ustraa.
“The funding trend is likely to continue, which is also helped by China flow getting impacted. Domestic capital has also grown over the last few years, which would support the flow into the venture/startup ecosystem,” he added.
Last year, D2C brands raised over $2 billion across 105 deals. D2C could be looking at a $100 billion opportunity in India by 2025, the investment banking arm of financial services firm Avendus Group said last year.
Ashutosh Sharma, head of India investments at Prosus Ventures, said, “Launching a brand today is quite easy but sustainability is not as scalability is difficult. A lot of factors like creating a brand, uniqueness of the brand, how many customers you can resonate with drive the brand. While there is a lot of early euphoria, it dies down after these brands cannot keep fresh.”
The industry expects consolidation this year as a number of D2C brands are flattening due to overall negative market sentiments and customers shopping offline after virus, say experts.
“Bigger and mature startups are looking to acquire promising smaller ones as they see opportunity for rapid growth. There are also deals happening in Thrasio-style ventures,” said Keshan. “The early erstwhile startups now have ambitions to create a house of brands, which would lead to consolidation this year.”
Startups like Mamaearth, MyGlamm, CureFood, Mensa Brands, G.O.A.T have already acquired a number of smaller brands and investors expect brands to continue building 'House of Brands' which will add to more consoldiation.
Adding to this, Sharma said, "When macro-economic factors were not favourable, not many such brands existed then. This is the first time that after the resurgence of D2C, such a situation arose. The binary outcome of building a brand is that you can find an acquirer who can build more of the brand."
Experts cite that sectors like beauty and wellness, apparel and accessories, and food will witness consolidation this year.
Overall, Indian startups have raised over $10 billion in the first three months of 2022, which is almost double of $5.7 billion from 225 deals in the year-ago period.
Top deals during the quarter include Swiggy's $700 million in January, Byju's $800 million in March, Polygon's $450 million in February, Uniphore's $400 million in February and Fractal's $360 million in January.
