Babycare and skincare products online retailer Mamaearth is in advanced discussions to raise funds that triple its valuation in barely a year, said two people aware of the matter, requesting anonymity.
Mamaearth is seeking a valuation of Rs 2,000 crore, with existing investor Sequoia Capital set to invest an additional $20-30 million (about Rs 150-200 crore). The company was valued at Rs 700 crore in January this year when Sequoia invested Rs 130 crore.
Founded in 2016 by husband-wife duo Varun and Ghazal Alagh, Mamaearth, run by Honasa Consumer, offers over 80 natural, toxin-free products, including bamboo-based baby wipes, lotions and face masks. Online-led brands such as Mamaearth have been boosted during the pandemic which has made consumers more digitally savvy and responsive to online brands.
Mamearth currently has a revenue of about Rs 30 crore a month, based on which its valuation in the current round would be about six times of annual revenue, a multiple common for its sector given growth prospects, investors said.
“Mamaearth wanted to hit the market for a formal round and had a few early conversations but Sequoia is quite bullish on them, so they want to double down,” said one person close to the company, who did not want to be named.
Its other investors include venture capital firms Fireside Ventures, Stellaris Venture Partners and well-known angels such as Marico’s Rishabh Mariwala, who manages Sharrp Ventures; Snapdeal co-founders Kunal Bahl and Rohit Bansal; and actor and entrepreneur Shilpa Shetty Kundra.
Sequoia India also raised $1.35 billion- a $525 million venture fund and $825 million growth fund in July to back Indian and Southeast Asian startups. It expected to put money into Mamaearth from the $825 million fund.
“Sequoia India generally raises a fund every two years. So to deploy this much money in two years, there will be a lot of internal rounds where Sequoia will double down,” said a person tracking the firm, requesting anonymity
Sequoia declined to comment while Mamaearth did not respond to emails seeking comment.
Mamaearth is among a slew of new-age consumer brands- known as direct-to-consumer (D2C) which have blossomed in the last few years. These brands target millennial consumers including young working professionals with high disposable income, who are also discerning and want to experiment with a niche category.
Brands such as Mamaearth, Sugar Cosmetics, Wakefit and Man Matters (Mosaic Wellness) are also counting on the fact that these consumers are not looking for deep discounts, and willing to often pay a slight premium for better quality or a differentiated product- especially when it comes to health and wellness.
While Mamaearth’s original thesis was babycare products, it today sells anti-acne kits, hair serums and makeup remover, among other things. Although most of its sales come from its website and Amazon, it has offline stores in Mumbai, Delhi, Nagpur, Pune, Chennai and Kolkata.
Moneycontrol reported on August 27 that many of these D2C brands have seen demand double and triple during the coronavirus lockdown, and for the initial few months of the pandemic, logistics to fulfil demand was a challenge. The economy opening up, however, has solved this for the most part, and demand has still sustained as offline stores begin to open up.
Investors also say that digital-first brands have better unit economics than traditional e-commerce firms, and have shown the ability to get to Rs 100 crore in revenue in a couple of years.Looking to raise the first round of funding for your startup? Moneycontrol, in partnership with Inflection Point Ventures brings you Pitch Right. Apply here to get funded by marquee investors: https://forms.gle/y4a7ohs4A56LKAkB7. Hurry! Deadline for entries is November 8, 2020.