There exists a significant opportunity to invest in brands that offer urban-centric solutions, according to Kanwaljit Singh of Fireside Ventures
Singh says 50% of Fireside investments are outside FMCG,CPG space
“We are trying to build an ecosystem of platforms, in talks with the likes of Flipkart, Amazon, BigBasket,” Singh said.
Kanwaljit Singh, the founder of Fireside Ventures, is strong headed, to say the least. Having spent a decade at Hindustan Unilever as a marketer and a couple of years as general manager at chipmaker Intel, Singh learnt the ins and outs of building brands and selling to consumers.
Fireside is an early-stage venture capital (VC) firm that focuses on consumer brands and was birthed from Singh’s deep passion for consumer products. His passion for consumer brands is evident in the fact that he parted ways with Helion Venture Partners, a venture capital firm he co-founded earlier because it was moving in the direction of having a tech-heavy portfolio while his interest lied in consumer brands.
Singh said one of the most notable trends in the consumer space that has him excited is the increase in the amount of money parents are spending on their kids because of higher disposable income and being in nuclear families. It’s no surprise then, that Fireside has already done three investments — Magic Crate, Alpha Vector, and Mama Earth — in the kids segment across education, lifestyle, and health care, and plans to do more in the future.
Between quitting Helion in 2015 and raising the first fund for Fireside in early 2017, Singh spent time by investing in a personal capacity in brands such as Vahdam Teas and greek yogurt brand called Epigamia.
In March, Fireside closed its first fund of $47.1 Mn (INR 340 Cr), of which it has already spent $13.9 Mn (INR 100 Cr) in over 12 deals; three more have been closed but haven’t yet been announced. The fund aims at closing between 20-25 deals in total by 2020.
At Fireside, Singh has led investments in Bombay Shaving Company, which sells men’s grooming products, Samosa Singh, an online seller that delivers a different take and flavours on samosas, Boat Lifestyle, a consumer electronics brand, and Yoga Bar, a protein snack bar company.
“There is a willingness to pay extra and consumers are not caught up with legacy brands,” says Singh, while commenting on what attracts new-age consumers, of which millennials represent a significant portion.
Here are excerpts of this week’s Moneyball with Kanwaljit Singh, the founder of Fireside Ventures.
Inc42: A lot of your portfolio companies sell online, but you are not tech-focussed. How do you play tech?
Kanwaljit Singh: From a consumer validation point of view, starting online makes a lot of sense as it involves less capital and gets you more information on consumer metrics like their taste preferences and how often they come back.
Now, with the market dynamic changing after Walmart acquired Flipkart and Amazon’s acquisition of retail store chain More… there will be more integrated omni-channel opportunities for brands to sell their products.
Tech is omnipresent — there is no difference in my head (between tech and non-tech companies). What matters is the consumer brand story and what problem the startup is trying to solve. We have been very wide in our choice of consumer brands if you look at our portfolio — some of them only sell only online, some are omnichannel, and others are primarily offline sellers.
Inc42: What are some of the latest trends in the consumer space in India?
Kanwaljit Singh: New-age consumers are younger in age and have a high disposable income. They focus more on the quality of products and less on the price.
We’re seeing a significant trend in organic labels, natural products, and health-focussed products — what you put in your mouth and body and everything that comes associated with that. There is a willingness to pay extra and consumers are not caught up with legacy brands. They’re comfortable with trying out new brands that have their own narrative and story.
The other trend we are seeing is enablement of these brands to reach consumers without having millions of dollars in the bank, which is driven by the emergence of the digital space, where a whole new breed of social celebrities are allowing brands to access consumers in a more accurate manner.
Digital sales channel is the third trend — like ecommerce, which is also enabling reach without (companies) having to do door-to-door distribution of product.
Inc42: A lot of these demands are urban-centric. Isn’t that limiting yourself?
Kanwaljit Singh: The way I would categorise the above statement is different. There are still significant opportunities to hold brands that are urban-centric — the size and opportunity are so large that every niche category can open up the doors to millions of dollars worth of opportunities. A brand starts expanding beyond the urban centre as you build it up and deepen your connection with the consumer. It is important to note that the overall aspirations and desire of consumers across regions is not different — maybe a bit different in the value aspirations or how they access things — but similar in a lot of other ways.
If you take the example of Paper Boat, the company did a very good job of establishing its core business of ethnic Indian drinks and exotic flavors, which helped it achieve critical mass in urban centres.
Once the brand became strong, it launched a range of food products such as ‘chikki’ (peanut brittle) and banana chips, which can go beyond urban centres. In the last three months, it has launched a new brand called Paper Boat Swing, which is aimed at lower-tier cities.
Inc42: Many of these new companies are servicing categories that don’t exist. How do you assess the feasibility?
Kanwaljit Singh: We try and understand the consumer that the company is trying to target and, on the basis of that, we learn more about what the company’s end goal is. Are they solving a real problem, is it a sustainable long-term differentiator…is it a real opportunity that is emerging because of market segmentation or changing consumer behaviour and can they sustain the brand over time either through some emotional connect and brand building or through IP (intellectual property).
Just looking at market size can be misleading. Take, for example, when we invested in Yoga Bar — at the time, the concept (the energy bar market) was very nascent, but we analysed from the insights we got when we looked at the number of people looking for healthy products and alternative snacks…we felt Yoga Bar was servicing an emerging need and our bet has paid off.
One of my personal investments is in a brand called Epigamia — yogurt itself is nothing unique, but the fact that yogurt can be positioned as a healthy snack rather than a meal accompaniment is something new. Both of the above examples have global learnings and aspirational quotients that have been borrowed from international trends by Indian consumers.
Inc42: Which sectors dominate your play?
Kanwaljit Singh: That has been one of our pleasant surprises. We initially thought of fast-moving consumer goods (FMCG), consumer packaged goods (CPG), etc as our key areas, but 50% of our investments ended up in domains outside these core areas — in sectors such as education, lifestyle, fashion, and a wide range of other categories.
The Indian consumer is looking for choices across products and brands, which is good news for us, because it means we have a larger field to operate in.
Inc42: how big is the first cheque when you invest in a company?
Kanwaljit Singh: It is about $500K–$1Mn and we take an about 15%–20% stake.
Inc42: Are you interested in investing in later rounds in companies?
Kanwaljit Singh: We only do Series A and Pre-Series A and we also reserve an extra $2-$3 Mn for the next round of follow-up investment.
Inc42: Going forward, what sectors are you excited about?
Kanwaljit Singh: We are very excited about the health and wellness space across categories such as personal care and beverages.
The amount of money parents are spending on kids because of an increase in their disposable incomes — which is considerably more because families are nuclear these days — is a key driver for us. So, we have already done three investments in kids as a target segment across lifestyle, education, and healthcare. The home interiors and decor goods space is also an exciting sector that we are optimistic about.
We are trying to build an ecosystem of platforms and partner with the likes of Flipkart, Amazon, BigBasket, while building relationships with some marketing and PR firms.
When we go and have a conversation with the senior management team of a company like BigBasket about our portfolio companies, we try and create a platform relationship with them, which defines a certain playbook where we can partner with across categories so that we don’t reinvent the wheel and relationship every time one of our companies wants to use these platforms. There is no financial benefit that we include for our fund…its always good to know how these big platforms operate and it smoothens the operations.
Inc42: Could take me through some your latest investments?
Kanwaljit Singh: One of our last investments was Boat Lifestyle, which offers a very interesting category of products for Millennials. They have seen amazing success in the last three-four years, moving from making charging cables and power banks to wireless headsets and bluetooth speakers.
The value proposition over here was the design aesthetics, colours, and the quality of the sound which was more bass and tighter sound. A strong online brand, they (Boat Lifestyle) created a cult around the brand and now you have Hardik Pandya and Jacqueline Fernandez, who are promoting the brand. It checked almost all the boxes.
The common thread is all these exciting products servicing the new-age consumer and they have a sense of what these consumers are looking for.
Inc42: Any updates on your investments?
Kanwaljit Singh: We have announced 12 (investments) and have closed three more that we haven’t announced yet…(we are) evaluating them some more. By 2020, we want 20-25 companies in our portfolio. About $13.9 Mn (INR 100 Cr) has been utilised from a $47.1 Mn (INR 340 Cr) fund.
Inc42: What’s your advice for startups?
Kanwaljit Singh: It is important to remember that you can’t accelerate growth beyond a point, but once the foundation is set and consumers like the brand/product offering, rapid scale can be achieved across channels, product expansions etc.
Also you need to focus on repeat metrics instead of just new customer acquisitions. Trials can be bought — loyalty can’t.
This article is part of Inc42’s MoneyBall series in which we bring you up close and personal with the pioneers of the investment world. Dive in to find out about what excites them, their views on the latest technology and investment trends and what the future looks like from their viewpoint!
