UpScalio Invests In FMCD Startup Hestia To Scale It To INR 50 Cr ARR

[Exclusive] Thrasio-Styled UpScalio Invests In FMCD Startup Hestia; Plans To Scale It To INR 50 Cr ARR

SUMMARY

UpScalio plans to scale its fourth acquisition 10x the current ARR through brand-building initiatives, launching the product into new markets and expanding the product portfolio

Previous acquisitions include D2C furniture brand Green Soul Ergonomics, travel bags startup Polestar, and footwear brand Trase

According to UpScalio, it chooses brands with over $1 Mn revenue and at least 15% EBITDA margin, with a high focus on founder-fit

Delhi NCR-based Thrasio-styled UpScalio has marked its fourth investment in high-end kitchen appliances’ startup Hestia. Previously, the startup has invested in D2C furniture brand Green Soul Ergonomics, travel bags startup Polestar, and footwear brand Trase.

With the acquisition, UpScalio plans to grow the brand to INR 50 Cr ARR, a 10X growth in the next 2-3 years. For this, it plans to work on brand-building initiatives, launching the product into new markets and expanding the product portfolio.

Founded by Nehal Shah in 2018, Hestia is a fast-moving-consumer-durables (FMCD) startup focused on kitchen appliances and complete household health. From cold-press juicers to vacuum blenders, the startup has patented its products that are engineered to retain nutritional value in food.

Talking about the synergies between Hestia and UpScalio, cofounder Saaim Khan said that both the companies aim to provide “healthier solutions” to Indian consumers. “Hestia is a culmination of Nehal’s innovation streak and his extensive experience in the health industry. We are aligned on the direction of growth we’d like to unlock for the brand,” Khan added.

UpScalio’s Roll-Up Methodology

UpScalio is one of the many Indian startups that acquire and scale fast-growing digital brands, just like Thrasio, the US-based company that pioneered the concept of offering complete household health. Hence the moniker — ‘Thrasio-style’. Other companies with a similar business model in the country include Globalbees, Mensa Brands, Evenflow, Powerhouse91, CureFoods among others.

Founded by Gautam Kshatriya, Saaim Khan, and Nitin Agarwal earlier this year, the eight-month-old brand claims to be working on acquiring and scaling business with 5-10X growth over the next few years. It also provides a full exit to founders of the acquired companies over time, helping to create wealth.

UpScalio offers multi-marketplace management, digital marketing, branding, logistics, sourcing, finance and business operations — all optimised using advanced analytics to consumer goods brands.

“We look at three aspects when we partner with a business. The first is founder-fit, as we will be working with the founders for a good amount of time. Thus, it is important to have a shared sense of values,” Kshatriya told Inc42.

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The other fundamentals while selecting a startup to add to UpScalio’s portfolio include companies with revenues upwards of $1 Mn and their profitability — EBITDA margin of at least 15%.

“We also look at the customer love that they have generated on Amazon and Flipkart and if their ratings are high. We don’t want to partner with a company we can’t add value to. So, we study the challenges that the company is facing, and accordingly decide if we can work together to create a 5-10X brand value in the next few years,” he added.

As UpScalio plans to scale to newer segments such as automotive accessories, gardening, pet, home furnishing and sports and fitness, this investment marks its entry into the fast-growing premium consumer appliances market. “We plan to invest in 15 startups by March 2022,” Kshatriya added.

The Thrasio-styled roll-up brand recently raised $42.5 Mn in its Series A round led by Presight Capital, Heliad Equity Partners, MPGI, 468 Capital, Whiteboard Capital, OfBusiness founders, Innoven Capital, and Alteria Capital.

The Changing Face Of D2C In India

D2C brands, business models and platforms are arguably the biggest game-changer in retail since ecommerce with an expected market size of $100 Mn by 2026.

In the first seven months of 2021, Indian D2C startups raised $783.7 Mn — 251% higher than all of 2020. The influx of capital has not only resulted in thousands of new brands but also introduced disruptive models such as ecommerce roll-ups, houses of brands and more while giving enablers and digital sellers new opportunities to grow.

For D2C startups, looking to enter the global market and venture beyond India, becoming a part of a bigger house of brands or an ecommerce roll-up offers a faster scale-up. The feeling is that D2C brands that have the slightest bit of momentum can become a target for acquisitions by such platforms. If not in late 2021, then at least by 2022, such models should become more and more prominent in the market.

One of UpScalio’s major competitors Mensa Brands also recently became the fastest unicorn in Asia, within 6 months of its launch. Mensa Brands has acquired majority stakes in 10 D2C startups as of now.

Another Thrasio-style platform Globalbees had raised $150 Mn in Series A funding in July this year, with plans to invest in 20-40 D2C brands.

While Globalbees acquired two brands this year, Thrasio has earmarked $500 Mn for a foray into the Indian market and has already completed its first local acquisition. This includes Lifelong Online which offers products across the kitchen, grooming and lifestyle categories.