Note to Readers: Germ of an Idea is a series about an entrepreneurial idea – how it was conceived, shaped and launched, detailing the early days filled with uncertainty and apprehension, the bold steps taken and the eventual success. The series hopes to inspire thousands of potential Indian entrepreneurs who are on the cusp of starting up or have ventured recently or are currently in schools and colleges dreaming of turning founders.
Ananth Narayanan’s grandfather sold bricks for business. Chennai-based Krishna Tiles offered Narayanan the ringside view of a business being built ground up. “The brick business taught me the importance of cash flow,” he says. “I loved how he was able to build his business literally brick by brick.”
Narayanan went on to spend 15 years at consulting major McKinsey but the passion to build a business never diminished.
Mensa Brands, the fastest Indian startup to turn a unicorn, is the culmination of that passion and drive to build an enterprise—brick by brick.
His four-year stint as Myntra CEO helped in creating a vision for his business that’s about partnering and investing in digital-first brands across fashion, home and garden, beauty and FMCG.
Launched in May 2021, Mensa became a unicorn, a business valued at a billion dollars or more, in six months when it raised $135 million in a Series B round led by Alpha Wave (Falcon Edge). Its existing investors Accel Partners, Norwest Venture Partners and Tiger Global also participated in the round.
It raised $300 million at a never-seen-before pace in India. Only Jet.com, an American shopping site, did it faster among global unicorns, achieving a $1 billion valuation in four months.
Investors were attracted by the huge market opportunity that Mensa presented. It wasn’t burning cash and had set its eyes on profitability from the start.
“Hard work trumps intelligence over time. The work you put in compounds,” says Narayanan. “I was never the brightest student in the class. For me, it was all about rigorous execution.”
The germ
Narayanan was on a holiday with his wife, Sandhya, in Kodaikanal in 2021. He had sold Medlife, a company he co-founded, to another e-pharmacy player Pharmeasy. While Pharmeasy didn’t disclose the amount it paid to acquire Medlife, the deal made it the largest player in the domestic online pharmacy space.
After the Medlife deal, Narayanan wondered if he should turn an investor, start up again or take the job of a CEO. “But while on that holiday, an idea struck me that there is an opportunity to build tech-led global brands from India in the fashion and beauty space,” he says.
A billion-dollar opportunity was up for grabs.
From his time in Myntra, he knew big digital brands would emerge from the Indian fashion space.
“But I also knew the methods adopted by early-stage brands were not the way you scale businesses. There was a gap in the market with regard to scaling brands. I had the expertise to scale brands and my McKinsey days had taught me how to structure M&A deals. Why can’t I combine these two and build a business? That was my thought process.”
He knew “where to play” mattered the most in building a successful business. When you pick a relatively large market and a complicated problem, outcomes will be large and you end up building a large company.
“Sandhya was clear that I should start something I’m passionate about. Anyway, she and the kids were vocal about one thing. They were clear that they will go nuts if I sat at home.”
Narayanan called Accel’s Subrata Mitra who he knew from his Myntra days.
His discussions with Mitra cemented his beliefs. It was obvious that India was moving towards more brands in the fashion and beauty space. “Subrata said he’s in, and so did Niren Shah of Norwest and Navroz Udwadia of Falcon Edge. So, I sat down and wrote out the business plan.”
Mensa would bring online brands and local businesses in the fashion, beauty and homecare space to create a tech-led house of brands.
Taking a digital-first approach, Mensa would pick entrepreneurs and invest in their businesses and scale them. The plan was to lift direct-to-consumer (D2C) businesses by injecting Mensa’s expertise in inventory management, technology, e-commerce, supply chain management and marketing. “Nobody has done it before in India and so the excitement was high.”
The idea looked good on paper. It was time to execute it.
Early days
Narayanan knew he was playing to his strengths. Life is also about playing to your strengths as opposed to fixing your weaknesses, he says.
“I knew how to scale a company, knew fashion and beauty well and could work with a variety of people. Now that I was in my 40s, I didn’t want to wait three years germinating an idea. I wanted it to scale quickly. We rolled into the idea immediately and never took a break. The idea itself was energising.”
For outsiders, startups may look glamorous, flush with big money but if you look closer, failed startups outnumber the successful by a distance—the dice is loaded against success.
“I was putting in money into the venture, so there was some risk. I also knew that it was going to be non-stop action for next two-three years if I ventured ahead. However, I didn’t want to regret not doing it after 10 years,” he says.
The initial days were all about founders treating them with suspicion. When Mensa executives called up founders, they thought they were prank calls. Why would someone you have never heard of call and talk about taking over the business you built with so much pain? These brands were their babies and it was not an easy pitch, he says.
This is how Mensa went about it—purchase a majority stake in an emerging brand with a roadmap to fully acquire it in three-five years. The plan was to identify brands with potential but limited know-how in scaling up.
Mensa would help them scale products in all leading marketplaces and e-commerce platforms. It would also assist in anticipating products that customers would need. Backed by tech-led product development, these brands would achieve scale quickly and get ahead of the competition.
The idea is similar to what has come to be known as the Thrasio model but is still different. Thrasio is a US-based consumer goods company that helps in acquiring established or promising businesses to drive scale.
The difference is that Mensa focuses on fashion and beauty (versus just home and garden) and is building a house of brands versus being an Amazon aggregator.
Mensa looks for founders with a good reputation, a brand with a robust income stream and a fairly large and growing customer base.
The initial days were exhilarating, says Naryanan. The target was not to be a unicorn but a $200-million business in 16-18 months. And it wasn’t easy.
“Imagine, calling up a founder and saying we will buy majority control in a brand in fashion or beauty or both. They were taken aback. A particular founder hung up on me twice. The model wasn’t a familiar one for most. One of my team members had his phone number blocked by a founder,” he says.
The Covid outbreak had ruled out in-person meetings and many of the transactions were done on Zoom. The first one was completed in June 2021. A few founders were ready to take the leap of faith with Mensa.
So, what was the pitch to the founders? “Look, you have built a brand. We are proud and excited of what you have built. However, if your brand has to become a household name, that requires a different set of skills. We can help you with those skill sets. That was the pitch. Brands like Dennis Lingo and Karagiri hopped on.”
“I told Pallavi (Mohadikar) of Karagiri that you can either become a digital version of Nalli or you can grow and scale Karagiri. We can help you become a big brand. That’s what we told them.
“With Romil Jain of Dennis Lingo, our commitment was that we will grow them into one of the largest casual wear brands in the country and later grow it into a top-5 brand globally. It wasn’t an easy pitch but many people took it.”
At that stage, the businesses Mensa was talking to were online and Covid was helping them as offline sales took a hit. It was a hard sell. Many were profitable and were hesitant to partner or sell to Mensa. After six months or more, a few of them reached out, saying they needed help.
Several founders stayed on with Mensa even after the acquisition. They helped in design, sourcing or whatever their expertise was.
“We agree on an upfront multiple while picking up a majority stake in the brand and also agree on the time frame for the rest of the company to be purchased,” he says.
When the final exit happens everyone gains—both Mensa and the founder. But Mensa runs the brand. The founder has a clear understanding of what he is dealing with and there is no confusion.
“We are both incentivised to work together and make it as big as possible,” says Narayanan. Several of the brands are now in countries like the US, Germany and the UK.
The backstory
Narayanan’s father was with Hindustan Motors, the makers of the iconic Ambassador. The company was facing a difficult time with the entry of Maruti Suzuki. Ambassador’s sales were plummeting but Narayanan says his father never brought that stress home.
“My dad and I would get up in the morning at around 4.30 am. He would get busy with his work and newspaper reading. I would be practising Math. He would then help me out with the lessons. It was a solid 90 minutes of math learning for me, every morning. I learned from him the importance of leaving work issues at the office. Even today, when I’m home I’m fully in.”
Narayanan grew up in Chennai’s Mylapore, one of the more affluent yet traditional neighbourhoods with elaborately carved temples and ornate churches. It also has a vibrant cultural scene, home to some of the best-known Carnatic music schools. “Childhood was fun. I played a lot of football and I met Sandhya in high school.” He studied at the Vidya Mandir school.
His stint with Myntra was another huge influence. Working closely with Flipkart founders Sachin and Binny Bansal, who acquired Myntra in 2014, shaped his thinking.
“They are outstanding entrepreneurs and I’ve learned a lot from them. They always put Flipkart ahead of their own personal interests and brought in the right professionals and gave them a lot of freedom. Sachin and Binny asked us to run it like our own business and told us to think big.”
The road ahead
Mensa has scaled up enormously in a short period. There are three parts that help scale, says Narayanan. One is technology, which helps to build products, so thinking about technology or the product is important.
“It’s very easy to say I’ll do pricing for 100 SKUs (stock keeping units) but we have 10,000 SKUs so unless we have an algorithm or process it’s impossible to do it. Else, you need an army of people, which, of course, isn’t a very efficient thing to do. So, the answer is technology.”
Second, Mensa has recruited people who have seen scale. Sudhakar (ex-Myntra)is the CTO and one of its earliest employees. PawanDasaraju and Aishwarya Mahesh, part of the founding team, come with substantial experience at Myntra and L’Oreal, respectively. The quality of the team matters, he says.
Third, a business is about execution. “It’s a bit of a boring process but just being disciplined about execution and operation is hugely important. We have a culture of execution at Mensa.”
Over the next five years, Mensa is looking to be a global tech-led house of brands. “We hope to have revenues north of two-three billion dollars in the next five-six years. We want to offer terrific returns on the invested capital. We expect at least 10 brands from our cluster to become household names and break-out brands,” Narayanan says.
As funding winter haunts the startup ecosystem, Naryanan says he’s been talking about profitability for seven years. “Even in my Myntra days, we brought it close to profitability and the same with Medlife. It’s important to have the capital to accelerate, as businesses have to be self-sustaining... it’s always important to keep unit economics in mind and have capital efficiency.”
If you look at fashion, for instance, most global large fashion houses source from India but we have a few global brands. The same is true for home care and beauty, he says. Why?
Indian fashion houses ignored branding and were bogged down by distribution issues. “Our goal is to build global scale from India and create employment. With Karagiri, for example, we used to work with 600 weavers but now they have grown to 2,500.
“We have the opportunity to create real impact on real people across India. Our brands come from Indore, Jaipur, etc and are wonderful examples of where we can create scale and employment.”
Mensa intends to continue to scale brands globally and offline will be a big portion of what they do. “I think you can’t build very large brands only digitally. If you don’t have an offline presence, the brands will not become real in the minds of the customers… We will also look for terrific brands that we can partner with—brands north of Rs 100-200crore,” he says.
Unicorn or not, Naryanan knows the value of the brick-by-brick approach. “I’m after all still a Chennai boy.”
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