Tiger Global Management is in talks to invest in former Myntra CEO Ananth Narayanan’s ecommerce roll-up firm Mensa Brands, only months after it raised its first round and before it has shown any meaningful traction, led by rapid acquisitions and a growing market, sources said.
Mensa, modeled on US-based breakout unicorn Thrasio, could raise about $20 million in the round led by Tiger, valuing it between $400-500 million, said these people, who requested anonymity since discussions are private. Mensa was valued at about $65 million in its Series A round in May.
Mensa plans to acquire fast-growing ecommerce sellers in the apparel, home appliance, personal care and beauty space, with annual revenues of Rs 7-70 crore ($1-10 million roughly). Mensa’s pitch to these brands is that it can help accelerate their growth, provide digital marketing and technology chops and help them even expand globally.
It has signed Letter of Intents to acquire 15 companies so far, more than it had expected, part of the reason why it is raising money again, said one person aware of the matter, requesting anonymity since discussions are private. Mensa goes from first discussion with a seller to cash in the bank in four weeks, as per its website.
Tiger and Mensa did not respond to queries from Moneycontrol seeking comment.
These roll-up brands typically use a mix of debt and equity and fund their acquisitions. Debt is cheaper to raise and carries a lower cost of capital than equity- on which investors expect a handsome return, due to which investors recommend that these upstarts fund buyouts via debt.
For this reason, Mensa and others have raised debt along with equity, something early stage startups don’t usually do. In its much-touted $50 million Series A round, around $30 million is debt commitments from Alteria and InnoVen Capital. This money has only been committed and will be given to the company when it has to actually acquire the brands. The equity was raised from venture firm Accel, Falcon Edge Capital and Norwest Venture Partners.
Notably, Scott Shleifer, partner at Tiger and co-founder of its private equity unit is an angel investor in Mensa, even as Tiger itself invested in GOAT Brand Labs, another ecommerce roll-up firm that competes directly with Mensa. Tiger led a $36 million round in GOAT, founded by Flipkart’s former fashion chief Rishi Vasudev, along with Flipkart Ventures and Mayfield.
“Tiger’s investment in Mensa seems like more of an experiment. GOAT was their main bet, and they are taking a relatively small stake in Mensa. Although competing bets isn’t new to Tiger,” said a second person aware of the transaction.
Tiger has led the startup funding boom in India and globally, giving young internet companies more money at higher valuations than ever seen before. Its speed and aggression has surprised even entrepreneurs and venture capitalists familiar with their workings
The roll-up space has seen close to $300 million in funding already, before any of these companies have made any actual acquisitions, driven by the growing market and investor aggression. Global Bees, co-founded by FirstCry founder Supam Maheshwari, raised a record $150 million Series A funding, while half a dozen others have raised $5-50 million and are raising more currently. Moneycontrol broke down and analysed the frenzy here.
One investor who evaluated Mensa found its valuation and pitch aggressive, with the $400-500 million ask said to be justified by the revenues of all its to-be acquired companies growing quickly, although their individual futures, integration into Mensa, and larger market dynamics are still uncertain.
Narayanan acknowledged that integration is important in an interview with Moneycontrol in June. “You have to be clear about what expertise each person brings...as we look for the right brands, one of the things we do assess is the quality of the founder, and whether the founder is somebody that we want to work with constantly, day in and day out,” he said.
However, another person close to the company said that aggression is the default model of this space, especially when everyone is raising money in record time. “If you had to bet on one person in this space, I would pick Ananth,” this person said. Former McKinsey senior partner Narayanan is one of India’s best known startup executives, having been Myntra’s CEO before he joined online pharmacy Medlife as its CEO. Medlife was acquired by TPG-backed PharmEasy last year, following which he left and started Mensa.
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