How clothing startup NorthMist overcame rejections from 350 investors to raise Rs 1 Cr and partner with Udaan
Fast fashion is taking a toll on our planet. But there is a way to change things, thanks to sustainable clothing labels and brands like NorthMist showing people that they don't have to compromise on style trends while being gentle on the environment.
An eco-friendly brand that manufactures sustainable and ethical menswear from pesticide-free organic cotton, Bengaluru-based NorthMist was started by Smrity Gupta and Arijit Mazumdar in March 2018. Arijit claims that with every NorthMist T-shirt, the startup saves 435 litres or 1,750 glasses of water. And backing their green drive is a group of angel investors who have invested Rs 1 crore in equity in the sustainable clothing startup.
The round saw participation from Sanjay Koul, Managing Director and Chairman of a top US company; Birju Gala, CEO of Zibo Paper Tech; Somendra Biswal, Head of Corporate Affairs – Sahi Export; and Srinivasan Sarangpani, Director of Supply Chain at a US company.
Commenting on the investment, Somendra Biswal told YourStory:
“I like the concept and believe in the team. Being a conscious consumer, this product was for me. I know there are people around who are looking forward to supporting such ideas. More importantly, bigger problems like global warming and depletion of resources can be addressed through such concepts.”
The startup has also partnered with B2B ecommerce unicorn Udaan. “Our partnership with Udaan will enable us reach pan-India. As a small team, it is difficult for us to reach every distributor,” says Arijit.
With the freshly raised funds, the startup plans to launch a new T-shirt collection in August, and get into womenswear by January next year. For its menswear range, NorthMist is planning to launch shirts and trousers as well.
For team NorthMist, raising funds has been an experience peppered with many important learnings.
Learnings from rejections
Starting up takes more than just passion and cause to function – it needs funds. “Being a clothing brand, we have to maintain inventory for which we have to make upfront payment,” Arijit says.
Despite having all that it takes, raising funds was not a cakewalk for team NorthMist. After raising debt funds from 20-odd friends, the startup approached many investors for external funding.
Arijit says, “About 350 investors rejected us, and after a point, we were very demotivated.”
Having previously worked with Artifacia, a startup, Arijit knew rejections came with the territory; he just wasn't prepared for the avalanche. Once, the startup almost closed a deal, but the investor said they would require more time and would like to see their revenues double.
“But how do we double our revenue? We need money to scale as well,” Arijit adds.
Despite being a challenge, fundraising was also a learning experience for Arijit and Smrity. A few investors even asked for internal revenue and growth data for reference.
“When we realised they are not going to touch base again, we decided to never share our internal data on the first or second call; at least up until the time we get some commitment,” says Arijit.
Back in January, the startup had almost closed a Rs 2 crore deal when the investor demanded a 45-percent share in the company. “We were in a very difficult situation. If we didn’t take that money, our company would have died,” recalls Arijit.
NorthMist, however, didn’t accept the deal.
“I am planning for the long term with NorthMist. We are not ready to dilute our share,” he says.
To keep the business going, Arijit had to take a loan from his family and friends.
The founders initiated their interactions with the angels in February-end this year, and within two months they were able to sign the deal.
Birju of Zibo Paper Tech says, “I found the business model sustainable. The product is a basic necessity in today’s world. The idea is interesting and has tremendous potential, and the founders are very enthusiastic and driven.”
Some of the startup’s B2B clients include 247.ai, PrimeFocus, Hillfort Capital, and Swoo.
The winning pitch
Arijit says they kept iterating the pitch as they met more investors.
“We made up to 25 iterations. Earlier, our pitch deck was around 20 pages. When we met our current investors, we had trimmed it down to 13 pages,” he says.
However, today, the startup is working with 20 corporate companies that have purchased their T-shirts in bulk. Some of their B2B clients include 247.ai, PrimeFocus, Hillfort Capital, and Swoo among others.
NorthMist continues to do pop-ups at coworking space WeWork, and is currently in talks with Third Wave Coffee Roasters. The startup also sells its T-shirts on ecommerce platforms, including Amazon, Flipkart, and BetterIndia. It is now launching its range on LBB (Little Black Book) as well.
The brand is available on 11 multiple branded outlets (MBO) in Bengaluru, including GoNative, The Organic World, Mimansa, Just Organics, and Organic Valley.
A sustainable route to growth
When YourStory last spoke to NorthMist in January this year, the startup had an average cart size of Rs 1,000. In just six months, the startup has doubled its cart size. Its average repeat rate, however, continues to be up to 20 percent.
At present, NorthMist records sales of Rs 7 lakh to 10 lakh per month from both B2B and B2C verticals. Most of the revenues, however, come from the corporate orders. Within the next four months, the company plans to increase its sales to Rs 20 lakh.
Going ahead, NorthMist plans to promote sustainable living, and launch more product lines, including sustainable stationery and home décor.
“The whole idea is to make more people aware about sustainable clothing,” says Arijit.
(Edited by Megha Reddy)