Private consumption accounts for 60% of the Indian GDP. Consumer spending drives the Indian economy. As the economy continues to skyrocket, consumer spending will follow it.
Launching consumer brands is easy. It doesn't require the technical skills of software founders, and there are no entry barriers. Anyone can start a consumer brand, but very few people can start an AI or a SaaS company.
However, scaling up consumer brands is infinitely difficult. The market is immense, but the competition is intense. Any new consumer brand can steal market share from incumbents with the right pricing and clever marketing.
So, if you want to build a D2C startup in India in 2024, you will struggle to raise venture capital unless you display a strong moat or sustainable competitive advantage.
Most consumer VCs use 4-5 criteria in their evaluation.
Big Market and Scalability – Everyone meets it in theory.
Founders' background and expertise – Unique for every founder, you can't change it a lot.
Past growth – You will raise capital if you have grown quickly over the past 1-2 years with healthy Gross Margins. Numbers speak no matter what. If your numbers can do the talking, you don't need to bother about anything else.
Innovation – This is the tricky bit. How can you innovate in consumer products? Dozens of companies are already selling everything people can or want to buy. How are you different?
Timing – This is another critical parameter. Is the market ready for you? The most successful startups get their timing perfect.
Innovation coupled with the right timing can build a moat and create powerful tailwinds. VCs call this disruption. However, to disrupt any industry, your timing must be impeccable.
Smart D2C founders combine innovation with timing. They borrow ideas from different geographies and build startups around them. They launch new products and market them with persuasive stories.
Recently, a 6-month-old Indian skincare cosmetics startup Clayco raised Rs 16 Cr ($2 M) from Unilever Ventures. Skincare is an extremely crowded category in India. We have dozens of new & old homegrown and Korean brands competing for the same pie. Since Clayco is a 6-month-old company, I doubt its revenue or growth justifies a $2M round and $6–10M valuation. It's a typical VC investment in an innovative product that can quickly capture market share.
How is Clayco different?
It sells products like the Rice and Sake Sleep Mask, Sake Glass Glow Essence, and Azuki Beans & Koji Rice Foaming Cleanser. It claims to combine traditional Japanese ingredients with advanced skincare technology.
I don't know how many of these claims are true, but it's an interesting brand positioning. It creates a compelling narrative that both consumers and VCs love.
This is the D2C playbook of 2024 in India. If you want to build a successful consumer brand, find a popular product from a developed market such as Europe, the USA, or SE Asia that's not mainstream in India and weave a powerful narrative around it.
If you can do it well and convince investors that you can execute it, you will raise capital.