Funding for Indian DTC brands highest in the past 3 years

Funding for DTC brands FY22
(Last Updated On: April 15, 2022)

Funding for DTC brands is at its highest in the past three years. In the financial year 2021-22 (FY22), Indian DTC firms collectively saw funding worth ₹41.23 lakh crores ($543 Million). What does this mean for your eCommerce business in FY23? Let’s explore.

Funding for DTC brands: Trends in FY22 

Traxn, a market intelligence provider released reports that suggest that – on average, more than 2 Indian DTC companies raised funds every week in FY22. Here are some other observations that they made:

  1. The DTC ecosystem saw the most funding this year compared to the last two fiscal years put together
  2. Even though the amount is at its highest, the pace of DTC adoption has slowed down with only 134 new registered DTC brands in FY22
  3. Out of all the 600 DTC brands in India, 5% achieved the 100cr revenue milestone
Funding for DTC brands FY22
Source: The Economic Times

What do investors want when funding DTC brands?

Despite lesser DTC brands starting their ventures in 2021-22, it is evident that DTC brands are enjoying more favour from investors. Here are some reasons why investors are putting their money (and faith) in DTC brands:

  1. DTC markets have quicker revenue cycles than traditional FMCG brands
  2. These consumer-facing brands can promise a cohesive vision and a strong brand identity
  3. New-age companies that promise disruption are going to attract an estimated 10% higher valuation and funds compared to traditional FMCG companies
  4. Companies that can adapt quickly to changing consumer preferences will attract more funding in the longer term

“From an investment point of view, investors would be interested in brands that have a mobile-frist appraoch with personalsied offerings as it creates a repeat and loyal customer base”- As told  by Gaurav VK Singhi, Founder of Founder Circle and serial startup investor, to Economic Times.

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3 reasons this best time to start your own DTC eCommerce business

  1. Sell online: Accelerated during the pandemic but with no end in sight, consumers are today shopping online more than ever. Shifting to online or omnichannel commerce should be a priority for all Indian sellers.
  2. Consumer preferences: Indian shopping trends for 2022 suggest that Indian consumers are increasingly supporting and buying from brands they believe in. Consumers are evaluating brands based on the story they tell, the experience they create and the ethics they follow.
  3. Direct-to-consumer mindset: According to a study, 55% of consumers prefer buying products directly from a brand or manufacturer’s eCommerce website rather than buying from distributors or aggregators.

Related read: See our detailed guides on how to sell online in India

Here are some expert opinions: 

“DTC brands enjoyed a price multiple of 15-48 times of their respective revenue while conventional FMCG companies like ITC, Bajaj Consumer, Britannia enjoyed a multiple of 3-7 times,” said Ankur Bisen, Senior Partner and Head, Retail & Consumer, Technopak Advisors.

“DTC disruptors which launched their business in the early formative years of this segment have taken pole positions. However, capital infusion in the sector will continue unabated as market leaders and even niche players will need more capital to grow” said Prabhkiran Singh, founder of Bewakoof to the Economic Times. 

 

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