New-age enterprises that build differentiated, scalable, online brands leveraging social commerce
1
Relatively new, primarily digital, upstart brands; have shown high growth in recent times, changing the landscape of HCMs
2
Build scale using ecommerce with zero or limited offline presence
3
Can cater to both pan-Indian and global markets
4
Priced to be affordable, with coupons and loyalty incentives
5
Focus on building a distinctive, niche designer led / product-led / cause-led brand championing cultural preservation
6
Tend to be planet positive by using eco-friendly packaging, solar-powered facilities and employing carbon-neutral logistics partners
7
Believe customers are moving towards sustainable consumption
Young + social targeting climate conscious Gen Z and Millennials
Artisans at the backend, brand at the forefront
Diverse leadership
Potential to be acquired by large retail brands
-
For-profit, bootstrapped, self-financed, with small teams
-
B2C, target customers tend to skew younger (25 - 40 years)
-
Are fluent in social media
-
3 out of 4 support enterprises <50 artisans
-
Products are made in-house, not a marketplace though may choose to list on them
-
Contemporary, often unique designs
-
Index high on being women-led but increasingly see strong participation from men
-
Higher participation of creative founders but the C-Suite shows diversity
-
Resistant to dilute equity in their early stages
-
Reinvest profits back into the business​
Business Hardships
-
Struggle with establishing brand presence and recall
-
Market penetration is tough due to many competitors
-
Limited resources make it hard to compete with heavily-funded mainstream brands
-
Customers are unaware of the difference in process, pricing, value and how to differentiate between fast fashion and handmade, making it difficult to educate customers about their unique value proposition
-
Find it difficult to price their products to stay competitive and are forced to resort to constant sales and discounts
Financial Roadblocks
-
Mostly creative founders who lack exposure to investor-speak
-
Lack access to supportive ecosystem actors + mentors + investment networks who understand enterprise needs and challenges
-
Conscious production is a common theme but it costs money and not every enterprise has access to that kind of capital
-
Impact investing that prioritises a healthy balance between profit and purpose is missing in India
-
Investment often comes with conditions of ROI or speedy growth that are in direct conflict with the enterprise’s sustainability goals
-
Reluctant to give up equity, prefer debt (10% - 12%) and options like revenue-based financing to address working capital needs
“The biggest problem at this stage is capital and cash flow. Without capital for R&D and access to a robust innovation ecosystem, there are too many craft-based brands and not much product differentiation. As a result, it’s difficult for any brand to capture a large share in the market. How can we expect to grow in this scenario?”
“
— SALONI SINHA, FOUNDER, TARASHA
Diginative Upstarts aim to scale using e-commerce, social media, and a customer base open to experimenting with digital avenues for discovery + purchase. This demands capital for creating products using traditional handmade processes as well as establishing a savvy, credible online enterprise.
“We would love to access funds that will help us grow in the direction we intend to and not in a direction to exclusively maximise profits. Funds which will help take pressure off the business and not add to it. Funds that come along with an understanding and appreciation for what we have set out to accomplish. Funds which we will be proud to take up.”
“
— ESHA FERNANDES, FOUNDER, CHAMBRAY & CO.
Working Capital
Brand & Marketing
Design Distinction
Offline Retail
Customer Acquisition
Banks
-
Loan interest rates of 12% - 24% p.a. expensive and unaffordable
-
Need collateral which Diginative Upstarts and women-led HCMs in particular lack
-
Prefer lending to businesses with significant revenues and profits making the capital journey hard for small, self-funded enterprises
Impact Investors
-
Rarely understand the creativity + culture focus of the HCMs
-
Lack patience needed for the sector
-
Find Diginative Upstarts “not impactful enough”
PE / VC Investors
-
Want fast growth + very high returns
-
More interested in the bottom-line than the story
-
Do not see Diginative Upstarts as scalable or distinctive enough
Patient, Mission-Aligned Capital
-
Helps them to stay on course to achieve People and Planet goals, avoid mission drift
-
Enables them to invest in Technology (ERP), Franchise models, Branding + Marketing
-
Enables them to acquire more customers and scale by investing in distinctive designs to cater to market needs and trends, Sampling + Exhibitions, Social media marketing
-
Facilitates investment in building capacity via machinery, inventory, and distribution and expansion offline, which becomes a critical component to remain viable in the Indian marketplace
-
Helps them to diversify team to include creatives and professionals savvy with operations and compliance to help scale the business
Collateral Free, Risk-Adjusted Debt
Helps them to reduce their dependence on self-financing
PO Financing + Revenue Based Financing
Helps them address working capital challenges to build a strong and steady revenue stream
Non-Financial Support + Industry Mentors
-
Helps them identify and access networks, build a better story, fundraise effectively and become proficient at financial planning
-
Helps them navigate the steep learning curve and take more risks
-
Enables them to become investment-ready
“We want to scale up in a big way and the roadblock we’re currently facing is not having the funds to market and promote our brand the way we would like to. And because of this, we don’t have the production to support any demand. Both marketing and outsourced production need to go hand in hand.”
“
— KAVYA SINGH KUNDU, FOUNDER, KAVYA SINGH KUNDU