With $180 million fundraise, home and interior service provider Livspace has joined the unicorn club. The Series F round was led by KKR with participation from existing investors such as Ingka Group Investments, Jungle Ventures, Venturi Partners, and Peugeot Investments, among others. In an interaction with Moneycontrol, Anuj Srivastava, founder and chief executive officer, talks about the company's plans to enter into newer geographies, the need for inorganic growth and why he wants to evaluate Metaverse startups.
Edited excerpts:
The company's valuation now has shot over $1 billion giving you the much coveted unicorn tag. Tell me how important getting unicorn status is in the Indian start-up ecosystem now?
I tend to be philosophical about these things but you are also human. So obviously it feels good. But I think it's only as important a milestone as it should be.
The unicorn status in some way is a marker of the fact that you have the potential to be a very important company in your space. That is all that it means.
Where would you use the money?
We today operate in India, Singapore and we recently expanded the business to one more country in Southeast Asia. We will soon start talking more about it. We did the joint venture with Al Sulaiman Group which is IKEA's operating entity in the Gulf countries. So the company's footprint is steadily expanding.
One of the principal destinations for this capital will be in accelerating our new country launches. We are planning to expand to Australia and more Southeast Asian, Gulf countries.
In India, Livspace operates in 27- 28 cities but with the value proposition that it has created here, it can extend all the way to 60 to 65 cities.
The second utilisation of this would be brand building in our principal markets.
We will utilise some of this capital to actually start building brands and start looking at the consumption and utilisation of more mass media format because inspiration and information is a vital interaction from my consumer base.
The third thing is that we will be doing inorganic consolidation and strategic partnerships, to accelerate our entry into new market segments, or new geographies. We just bought a company in Singapore (Qanvast).
We will also continue to invest in creating the best technology for this industry. We will do everything that is to be done to make sure that we continue to over-deliver on the best technology and the best marketplace experience for my partner customers and my consumer customers.
With this massive overseas expansion plan, what sort of a revenue target is there for the next financial year? And how are you looking at profitability?
Roughly about 20-22% of my business is now coming from Singapore. About 70-80% of this is coming from India. Both these markets are growing aggressively for us. My business grew to 2x in just five months.
It runs on new order bookings and we are growing so quickly that we essentially tend to use run rate metrics to demonstrate the sense of scale.
Sometime around the March quarter, Livspace would be operating at a new order booking run rate of around $350 to $400 million. This number will be 2x over the next year. By March 2023 Livspace would be closing new orders worth $650-700 million. Even then most of the business would be coming from markets that we have already launched.
The India business broke even a few months ago and we are generating single digit EBITDA. My Singapore business is generating gross margin faster than the comparable time period in India.
If we have to, the company can achieve profitability status over the 12 to 18 months. But look, this is our time to grow as quickly as possible, do the right things and invest in technology.
There is no better time to be in the real estate market. Because across all the markets that we're looking at there is a massive tailwind with the real estate sector. People want to buy new and larger homes. People who live in existing homes want to make sure that they can transform their homes and feel safe and happy. People are spending significantly larger amounts of time in their homes, not just because of COVID. I think there's a readjustment in our head in terms of how we want to feel safe.
How much capital will you dedicate for marketing? What will be the strategy? In the core markets, you will actually start seeing us doing more mass media, conventional brand building, because it's a trust leader market and that is the opportunity. We will also use some of this capital to actually start building more aggressive content marketing.
You may have heard about companies like Pinterest which essentially use a lot of content to drive up funnel interaction. And so we want to invest in creating what would be the most attractive, most visited destination for consumers when they start thinking about their homes. This would be well beyond just home interiors.
We are actually thinking about more interesting businesses that will help us serve the homeowner in more meaningful ways. Is there an opportunity for us to actually start selling more things which are more frequently consumed in addition to the first interior design or the next remodelling experience? We will use some of this capital to incubate some of those newer businesses and see how they will scale.
Will you have in-house products on Livspace? We are looking at both, private labels in house or even smaller inorganic acquisitions, to be able to look at the home improvement category.
Also people consume some home services more frequently. So I think we were looking at home services, as a very interesting new area to invest our energy in. But look both of these are still in the lab.
Is that on the lines of what home services providers offer like house painting, decoration, etc? So those are one level simpler home services. I am talking about subcontracting repair maintenance. More akin to my industry. Things like – false ceiling repairs, flooring, and repair maintenance.
So still operating within the context of home improvement, but essentially starting to look at more frequently consumed home services.
How many acquisitions can we see Livspace making in the next six months? How much money have you sidelined for this? We have looked at companies in lower single digits in India and outside India. We have just announced one acquisition in Singapore.
Four sectors that are interesting to us include content-oriented demand aggregators and we're looking at a few. Then direct to consumers in the material space and broader interior space. So it essentially can improve my margin.
Also the world is changing. Over the next few years my consumer will actually start utilising AR and VR and what is called metaverse in very immersive sort of formats. So we will look at companies that are actually doing good quality product engineering, and product management work.
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