Many have been asking me this question. From D2C is the flavor to D2C is dead to, D2C is now back. What’s really happening here
TLDR: Investments follow cycles. The current cycle is on sustainability. And, consumer brands will display that - with healthy P&Ls.
And so, investors that are experts SaaS and deep tech are also opening their coffers to brick & mortar + click & mortar. The recent rounds of NEWME, abCoffee and Mokobara are examples of this.
But why?
🚀 Precedents: Digital-first brands like Mamaearth and boAt Lifestyle have set a successful precedent for investors in terms of value growth & scale.
🚀 Brand Starvation: India is still brand starved. There’s just so much upside left across any space that you look.
🚀 Aspirational Middle Class: New-Age brands target young, affluent customers who are looking to upgrade.
Investing in consumer is fundamentally a different ball game from tech investing.
✅ There’s no Power Law:
You won’t see 1000x returns in most cases. Unicorns are rare (but possible) and, a good outcome is 1,000 Cr.
✅ Success % Higher:
If you play your cards right, these are businesses with real P&Ls. Hence - you can return capital on your lower performers. While upside maybe a little limited - downside is also capped.
✅ Different rhythm:
Consumer brands have a different pace. They will take time to build and hyper scaling them with growth at all costs will not be the best idea.
Some may complain but, I think tech VCs coming in is a boon as well. It expands the market and capital pool. I also think it brings a new perspective.
I won’t be surprised if you see consumer brands becoming more tech driven. We’ll start to use more SAAS, AI tools and a data driven business approach.
If consumer VCs and tech VCs can take the best of both worlds and work together - it can be 🔥 for the ecosystem
Do you agree? What have you seen?
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This post was originally shared by Arjun Vaidya on Linkedin.