Thresio-style ventures seeking to replicate the ecommerce model made popular by Massachusetts-based startup Thresio, have soared during the pandemic in India, and have attracted significant funding in a short amount of time. Powerhouse91 is one such venture.
in an interview with vCircleAaqib Mohamed, co-founder, Powerhouse91, said that Powerhouse has already made three investments, and plans to invest in essential and health-focused brands going forward.
Edited excerpt:
> What inspired you to start a Thracio-style venture?
A: Before starting Powerhouse91, we had a direct-to-consumer (D2C) hygiene brand called Azah, with which we gained the experience of running an online-first brand. We spent the last three years building this, leading the brand to an annual revenue rate of over $1 million dollars in profit margins. This too is a highly commoditized product, and is also a category dominated by the FMCG giants. By building this brand, we realized that the lessons we learned from it could be applied in a broader sense, and help other brands as well. There are many vendors across India, especially in tier-2 cities, whose revenue is in crores by selling great products, but they lack the resources to take this forward. Even if it gains traction, FMCGs with bigger marketing budgets will have to compete with them. So, we want to use what we learned from Azah to help these smaller brands grow.
Q. Since moving from D2C to Thresio-style venture, have you received inward interest from investors?
We’ve already raised a seed funding round from Cross Venture Partners and Titan Capital, noting that this is a very hot spot right now. Investors are interested, but we’re trying to be a little different here. We’re trying to build a lot of in-house capabilities to help our brands, and develop a track record because we don’t want just the capital to be separated.
Q. What areas is Powerhouse91 focused on for the acquisition?
We started with a sector-agnostic thesis and are open to a variety of categories, but for now, we’re focusing on essential, everyday products around health that people use on a regular basis. We stay away from the fashion and luxury categories. We already operate three brands in such categories, and we are patient with our acquisitions. We have set tough growth targets rather than number of deals.
> What does your acquisition pipeline look like? What is your typical ticket size?
a. Our process in terms of valuation is that we choose profitable brands with a good product-market fit, and value it in terms of EBITA multiples rather than revenue multiples. Going forward, in 2022, we will be looking for opportunities in different categories like baby care and gardening. We are expecting faster growth in these brands due to our early entry as compared to other roll-up firms operating in this space. As long as the products have some essential use and have a good market fit, we are open to those ventures.
Q. Thracio-style ventures have also received significant funding this year. Has it made the space more competitive?
A. This is a proven model that has been replicated in every market, so investor interest is justified. In terms of heated competition, I think if there are enough brands that can run profitably across all categories, then we have enough room to roll-up companies. Only the model does not guarantee success, it is the implementation in this market that will prove whether there is enough room for these companies. Also, considering India’s huge market, it is not a game-win-all.
Q. There are also many venture capital-backed start-ups in India. Do you see them as potential acquisition targets?
a. It ultimately depends on the financials. Our acquisition model is completely based on the financial health of the brand, we focus on strong unit economics, market fit and profitability. If a brand fits our model, whether it’s a bootstrapped or a venture-funded firm doesn’t matter.
> What is the broad outlook for the company?
A. We have been expanding the brand ever since we launched Azah. In October alone, we have 50% month-on-month growth. We want to find and grow great brands from across the country, and our long-term vision is to grow our brands to touch $1 billion in revenue over the next five to seven years.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,