The what, the when, and the how of fundraising

The term ‘funding winter’ has gained so much traction in the last few months as startups struggle to secure funding and are laying off employees to cut costs and extend their runway. 

Venture capital firms are treading cautiously due to macroeconomic factors like rising interest rates, crashing public markets, high inflation, and geopolitical conflict owing to the Russian invasion of Ukraine, among others. 

However, the entrepreneurial spirit is resilient and new startups are cropping up every day with new innovations, fresh offerings, and a never-say-die attitude.

YourStory's Brands of New India presents a new series called ‘Whose Brand is it Anyway?’, in collaboration with Fireside Ventures.

Bengaluru-based Fireside Ventures is an early-stage investment platform for consumer brands. Anchored by a slew of marquee investors, including Premji Invest, Westbridge Capital, Mariwala Family Office, Unilever Ventures, Emami, RP-Sanjiv Goenka Family Office, Sunil Munjal’s Hero Enterprise Investment Office and ITC, Fireside invests in exciting consumer brand startups in multiple rounds, from Seed to Series A. 

Founded in 2017, Fireside is also building a first-of-its-kind ecosystem for entrepreneurs in this space, with a strategic support network of in-house and partner resources.

In the first episode of ‘Whose Brand is it Anyway’, co-hosts Shreyans Gangwal, Vice President, Fireside Ventures; and Amit Kulkarni, Director, Finance and IR, Fireside Ventures; are joined by guests Priyanka Salot, Co-founder, The Sleep Company, and Smytten Co-founder Siddhartha Nangia to talk about the basics of fundraising for consumer startups. 

In the context of conversations about making the cash last longer or extending the runway, founders and investors talk about the basics of raising capital--knowing when to raise capital, whom to reach out to, cold calls, and everything in between.

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The first learning that the two founders agree on is “identifying the use case”, and understanding whether the fundraise is really needed, and if it solves a particular purpose for the startup.

“A lot of people have started taking funding as a success metric or it’s the glamour. Sometimes it feels like if I get money early on, the chances of success could be higher, but they need to understand that what you’re also doing in the process is that the earlier you raise money, the more dilution you do over the timeframe. For entrepreneurs, it’s very important to even understand that aspect, while taking the decision--what is the right time to raise money,” says Priyanka Salot, Co-founder, The Sleep Company.

The entrepreneurs then talk about the various types of capital available today and their relevance for startups at different stages, with a special focus on consumer brands. 

Amit Kulkarni, Director, Finance and IR, Fireside Ventures, maps out the various stages that a startup experiences as it makes its way to the top. He talks about germination from the seed stage to early growth stage to “doing about Rs 200 crore of revenue”, and the different kinds of risks that businesses and entrepreneurs take at each stage. 

“Today, we have the expertise and go-to-market strategy, we have expertise in D2C brand building, we have expertise on organisation building, fundraise including liquidity, debt, all of that, and we back all our brands with this expertise, so that is what becomes available,” says Kulkarni.

“But all of these come with certain restrictions and responsibilities, like any power in life. And founders should be aware of these responsibilities because this is what will take you to the next level,” he explains. 

The conversation then moves on to talk about what is the quantum of capital and whom to raise it from. Here, Shreyans, VP at Fireside, recommends some considerations that a founder makes—the first is the length of the time you need to raise capital versus the bandwidth you're willing to allocate in frequently raising capital, and second is the timing which impacts dilution, and third, the market conditions.

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The next question answered is one that's very important—whom to raise the money from.

“Mine is an arranged marriage, and it is a successful one. That is the way it should be seen when you are deciding whom to raise funds from. While entrepreneurs are looking to raise funds, fund managers are looking to invest in the right firms. If you don’t get that mix right, it can create a lot of trouble,” explains Smytten Co-founder Siddhartha Nangia. 

In May 2022, Smytten raised Rs 100 crore in pre-Series B funding from Fireside Ventures and Roots Ventures. Prior to this, The Sleep Company raised Rs 13.4 crore in pre-Series A round led by Fireside Ventures in January 2021. 

Tune into this session to know about the journey of The Sleep Company and Smytten, and the founders’ own adventures into making these companies the Brands of New India.