Rukam Capital’s Archana Jahagirdar On Backing India’s Next Wave Of Consumer Startups

A consumer revolution is upon us, bolstered by new-age brands. Bain & Company calls them insurgent brands keen to outperform their respective markets and on track to capture an outsized share of growth. They not only challenge incumbents with disruptive products, services and business models but also resonate well with Gen Z and millennials, demographics that dominate India’s consumer landscape.

In a digitally driven consumer ecosystem, B2C and D2C brands are the new power players expanding their reach and redefining almost every category, be it food and beverage, beauty and personal care or lifestyle. Think of personalised skincare,like Minimalist, plant-based F&B with essential nutrients like Beyond Meat, or how consumer electronics startups like boAt and Noise have disrupted high-end audio and wearable markets in India.

Ecommerce as a go-to distribution channel also fuels this consumer segment. Delivering across India’s sprawling network of pin codes is no longer an added perk but a necessity for driving business growth. 

A quick look at the numbers narrates the growth story well. While the ecommerce market is estimated to reach $400 Bn by 2030, at a CAGR of 19%, investors have been bullish on early stage consumer brands embracing digital commerce for growth. India’s startup ecosystem has yet to recover fully from the funding winter. However, ecommerce brands have bagged $1 Bn+ in funding alone in 2024 (Q1-Q2) and the total number of funding since 2014 is more than $34 Bn, according to Inc42 data. 

What makes early stage consumer brands so appealing to investors? Inc42 caught up with Archana Jahagirdar, founder and managing partner of Rukam Capital, to find out. Set up in 2019, the Delhi-based venture capital firm invests in early stage consumer products and services companies with significant growth potential. The VC has funded as many as 20+ startups, including noted brands such as Go DESi, Sleepy Owl Coffee, Burger Singh, BECO, The Indus Valley, Curefoods and more. 

During the interaction, Jahagirdar shed light on the three pillars forming the investment playbook of Rukum Capital and how the VC keeps pace with an evolving market and adds value to portfolio companies. Here are the edited excerpts from the interview. 

Inc42: What is the core philosophy of your investment playbook? How does it help you spot and scale promising consumer brands?

Archana Jahagirdar: Our playbook involves working with startup founders who understand the three core pillars of building a business from the ground up. The first is spotting the gap in the market. Sometimes, startups introduce products that may seem too niche, almost insignificant from a market perspective. But it is precisely these niches that may lead to market dominance. We look for such insights when meeting with founders. 

For instance, when we invested in BECO, its core play was making everyday products like garbage bags and tissues from bamboo and to most downstream investors that looked like a very niche consumer category. However, conscious consumers really care about these products and when BECO launched more mainstream products like dishwashing liquids and laundry detergents, the consumer base happily accepted the new but far larger categories. And that is how niches help you to build a large company.

The second pillar is solid business acumen. This includes everything from business and operational knowledge to compliance and the ability to build an EBITDA-positive company in the long run.

Finally, we assess whether founders understand brand-building from scratch. At a time when performance marketing rules the world, people tend to mistake marketing success for brand strength. But that is not the case. That distinction is crucial for investors like us when we decide which founders to back.

Inc42: What critical metrics do you consider when investing in a startup?

Archana Jahagirdar: Well, we value capital efficiency in a founder. Consumer businesses need not raise funding at the same pace as tech businesses. But recently, some consumer startup founders have been trying to compete with their tech counterparts by frequently raising large amounts and grabbing media attention. This approach can be counterproductive for a consumer brand. Raising too much capital can be as harmful as undercapitalisation. That’s why we seek out founders who understand these nuances.

Inc42: Has your investment thesis changed over the years? How do you align it with evolving market dynamics?

Archana Jahagirdar: As an early stage VC, you must respond to the market in real time as new ideas and business cases emerge. Staying too rigid can be the death knell for any early stage investor. But it is equally important to know when not to give in to trends likely to be fads. Let’s say it is like walking a tightrope. You must evolve, though, as the market changes, which is happening rapidly in India.

Inc42: Last year, you launched a second fund called Rukam Sitara for tech startups. Does this mark a shift from consumer brands?

Archana Jahagirdar: Rukam Sitara is a continuum rather than a shift. We are looking at adjacent sectors related to consumer businesses, including packaging, warehousing, logistics and a few consumer tech categories. Today, consumer companies are looking to optimise various aspects of their operations, be it supply chain, customer data analytics, specialised packaging for shelf life extension or meeting ESG (environmental, social and governance) goals. This new focus has emerged from years of investment experience in consumer companies.

 Inc42: Which is the most critical stage in a consumer brand’s journey that requires VC hand-holding, and why?

Archana Jahagirdar: There is no one-size-fits-all playbook for startups. A good VC has a playbook, but a great VC rises to the occasion for every challenge their portfolio founders face. During Covid-19, our portfolio startups faced various challenges. Some needed help with funding; others had to make difficult pivots, and some dealt with team and supply chain issues. Sure, a standardised approach is helpful. However, new challenges will emerge as a business grows and one may come to a fork in the road.  One must be prepared to cope with those.

Inc42: What about adding value to your portfolio startups? 

Archana Jahagirdar: At Rukam Capital, we target holistic growth, and the focus goes much beyond business expansion. We also ensure that our portfolio startups stay resilient against economic headwinds. Our approach revolves around four core elements – robust governance and compliance, right hiring, smart capital infusion and effective strategy discussions. Now, let us look at these one by one. 

• A robust framework for governance and compliance: The startups we invest in are mostly small [as these are early stage businesses]. Hence, their primary focus is revenue growth rather than governance and compliance, which may seem boring. However, we know these aspects are critical for long-term success and help them build robust frameworks early in the day.
• Right hiring: Bigger companies can tap into large talent pools, but early stage startups don’t have access to many experienced professionals. So, hiring remains our key focus area, especially for critical functions like finance. It’s because we are not just recruiting talent but hiring the right people to set up a solid foundation for growth.

Holding proper board meetings rather than doing them on paper or hiring top-tier finance experts can significantly shape a startup’s future. Building the right culture from Day 1 impacts more than surface-level activities like team bonding. When employees see that founders prioritise doing things the right way, it fosters a culture of integrity and governance that resonates throughout the company.

• Smart fundraising: Contrary to what people think, raising money is not a box for founders to tick off and be done with; it’s not a natural extension of their role. Proper capitalisation is the lifeblood of a new venture. Both underfunding and overfunding may pose risks to a business. 

We work closely with founders to help them assess funding requirements and ask them to factor in past performances, market conditions and macro trends, locally and globally, before looking for investments. Then, you must find the right investment banker depending on the business stage, founders’ vision, specific goals and market dynamics. It is quite critical, and we help them navigate every step.

• Effective strategy discussions: Strategic mistakes prove expensive in the early growth stage. If founders hold strategy discussions regularly, they will be open to feedback without delay, can quickly change their plans and do necessary course corrections. These discussions may not be well-structured, but the ability to adapt fast will keep the company on track and move forward.

Inc42: What are the most lucrative D2C segments from a VC perspective?

Archana Jahagirdar: There are quite a few such as jewellery, beauty and personal care [BPC], home décor, pet care, single speciality healthcare, consumer durables, food & beverages and fashion & apparel. Interestingly, modern Indian women are reshaping many of these segments.

As more women join the workforce, how they look at fine jewellery has changed. Occasions like festivals and weddings still drive the demand. But there is an opportunity to create modern heirlooms, a trend that brings a minimalistic approach to traditional materials and design rulebooks to cater to new-age Indian women.

Similarly, consumers look beyond fashion in the lifestyle space and explore make-up, home décor and more. Even new categories like pet care are gaining traction. Aspirations for better living among the growing Indian middle class (to hit 38% of the population by 2031 and 60% by 2047) are also evident as dining out and food discovery become popular.

Inc42: Do you have any advice for founders looking to raise capital? 

Archana Jahagirdar: One should be capital-efficient and focus on differentiation. Don’t follow what everyone else is doing; stand out in the market. And always remember that rejection is part of the journey. Don’t let a ‘no’ dampen your enthusiasm for building your company.