Furniture rental company Furlenco sweeps up $30 mn funding
Raising its second round of funding, online furniture rental company Furlenco on Tuesday announced raising $30 million (Rs 200 crore). While half of the funding amount ($15 million) was equity, the other half was raised as debt by the company.
The equity portion of the investment was led by existing investor Lightbox Ventures, with participation from Hong Kong-based venture capital fund Axis Capital and four other HNIs. The $15 million of debt has been raised from banks as unsecured loans, from NBFCs as secured loans, from HNIs in exchange for non-convertible debentures and from family offices for an asset lease.
The capital will be used for geographical and product expansion as well as pushing the growth for the company.
Speaking on the occasion, founder and CEO Ajith Mohan Karimpana said,
Being successful in raising debt shows that we have been successful in trying to make even furniture an asset class. The furniture rental business is still an asset heavy one, and we knew from last year that we cannot scale the business just through equity funding.
In their last round of funding, close to $4.5 million of the total $6 million raised went into developing new furniture units.
Hence, 60 percent of the debt raised is on an asset lease basis, which means that once a vendor makes a certain piece of furniture, family offices will buy it and lease it further to Furlenco and its customers. Ajith further explains that the debt is only used once the family offices buy the furniture and give it to Furlenco and the market for renting. He adds,
This allows us more runway to build and grow the business through the equity funds rather than investing it in just building the furniture stock. Further, it is the decent revenues, assured cash flows and our asset-backed nature that made us qualified to raise such heavy debt.
At present, the company claims to add $1 million (6.7 crore) worth of new furniture every month and has products worth over Rs 100 crore in value rented out to various households at any given point of time.
Further, according to Ajith, the company has seen an overall increase of 24 percent in revenues and growth. In the month of July, the firm says that it was adding almost 2,000 unique customers (up from 1,200 in March 2016) to its platform and continues add another 10 percent every quarter on an average. The average ticket size for the firm is Rs 3,000.
However, the 2012-launched company has serviced only close to 15,000 homes till date. On enquiring after why the metric seems slightly lower than would be expected, Ajith cites drop-outs as the prime reason. He also says that there were certain months when the firm wasn’t seeing the claimed 10 percent growth in consumer base.
Present only in Bengaluru, Mumbai and Pune, the firm plans to start operations in New Delhi and Hyderabad in the next year. It also plans to double its growth in one year, reaching close to 30,000 total customers and serving an average ticket size of Rs 3,500.
While still focused on millennials or the bottom of the pyramid with basic usage, Ajith says that Furlenco is building a norm and a habit for renting furniture.
90 percent of the furniture sector in India is still unorganised. Furthermore, out of the organised section of the market, only one percent is online. According to a Redseer Consulting report, the home furniture industry is a $25 billion market altogether, of which $250 million is online. However in 2020, the home furniture industry is supposed to be worth $35 billion on the whole, with $700 million of it being online.