D2C brands choosing dilution-proof financing?

One of the world’s fastest-growing ecommerce markets, India has seen a direct-to-consumer (D2C) boom in recent times. Accelerated by the pandemic, D2C brands are focusing on consumer feedback, R&D, and varied business models to launch international quality products.

Friday November 12, 2021 , 3 min Read

One of the world’s fastest-growing ecommerce markets, India has seen a direct-to-consumer (D2C) boom in recent times.

Accelerated by the pandemic, D2C brands are focusing on consumer feedback, R&D, and varied business models to launch international quality products.

Startups in the D2C segment raised a whopping $1.4 billion across 100 deals this year.

The spurt has seen the emergence of two unicorns — Licious in the food category and The Good Glamm Group in the personal and beauty care segment — and the sector seems poised for further growth.

Despite the good tidings, a 31-year-old founder of a personal beauty care brand recently expressed reluctance to approach an investor and decided to go the revenue-based financing (RBF) way.

Revenue-based financing helps startups and entrepreneurs raise capital without any equity dilution. It is based purely on the revenues they project and make.

VC interest in the D2C sector has been rising but remains inaccessible to a vast majority of brands. A report by Velocity adds that out of 75,000+ independent ecommerce stores hosted on platforms like WooCommerce and Shopify, less than 0.5 percent are equity funded.

Here’s why D2C brands are choosing to take the revenue-based financing route.

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