 "Abhishek Goenka")
Established in 2018, RPSG Capital Ventures is an early-stage consumer VC fund focussed on investing in the D2C ecosystem including food & beverage, personal care, and lifestyle goods. After deploying its first fund of Rs 100 crore over the last three years, it is raising a second fund of Rs 500 crore. Abhishek Goenka, head and CIO of the fund, who spearheaded investments into D2C start-ups like mcaffeine, Skinkraft, Plix and The Souled Store spoke with Business Standard about the road ahead.Edited excerpts:
You do not invest in startups outside of consumer brands with online distribution. Given that the fund was started pre-pandemic in 2018, what was your thesis and how has it held up?
It was the time when online marketplaces like Flipkart, Amazon and logistics players like Ecom Express and Delhivery were scaling up massively. So, I thought it would be a good idea to invest in consumer brands who can piggyback on that infrastructure. That is when I got in touch with the RPSG Group and they agreed to anchor a fund of Rs 100 crore.
Over three years later, we have invested in 12 start-ups so far across segments like beauty & personal care, health, food & beverages, apparel and more. On their growth, I can say that around six of them have crossed the Rs 100 crore revenue mark, 100 per cent of our portfolio’s revenue comes from online channels and a significant part of that is via the direct to consumer route.
What will change with the second fund which is five times bigger?
We will also have external investors in this fund apart from the RPSG Group. We have always been really good at coming in at series A or pre-series sort of stage. That’s the playbook that we have kind of developed over the last 3 to 4 years and this is the playbook that has been kicking for us. So, we will end up making 12-14 investments from the second fund.
For the first fund, Rs 8-15 crore has been our sweet spot. At this point of time, the cheque sizes would increase but the number of investments and the style of investments would be very similar to the fund one.We will focus on cheque sizes anywhere between Rs 10-12 crores at the lower end to about Rs 24-25 crore at the higher end.
Do you also participate in follow-on rounds of funding?
Absolutely. Each and every company from our portfolio, we have participated in follow on rounds. There is one company where we participated five times. There are other companies where we participated 2-3 times depending upon how many capital raises that they have done.
Have there been any exits you have made on the investments from the first fund?
Not yet. It has only been a little over 3 years since we started making investments. I don’t think it will be optimal to chase for exits right now. In 2023, we will be seeing exits.
There is a tendency among online-focussed D2C start-ups to seek valuations like pure play technology companies. What has been your experience?
Firstly, these are not tech companies. They are consumer brands that are adopting technology to grow more efficiently and productively. Technically, there is no concept like gross margin in a tech company, gross margin at some point can completely be indefinite. For a consumer brand company, typically, gross margin can be in the bracket of 60-80 per cent. Obviously the cost of marketing is quite high but if you are able to crack it, you will be able to create a positive unit economics model from Day 1. This is another big difference.
As an investor, one has to be disciplined about the valuation. Many times what we hear, I think multiples are kind of blown out of context.
What categories within consumer brands are you bullish on for the next couple of years?
Health and wellness are something we are quite keen on. Within health and wellness there are multiple things, like there is nutraceutical wellness, women’s wellness, mental wellness, sexual wellness. Then there is convenient food, especially with the entire quick commerce space coming up very rapidly. These are categories we would be keen on.
