New Delhi, June 16 -- Fireside Ventures, a consumer-focussed early-stage investor riding high off a bumper exit from clean label nutrition brand Wellbeing Nutrition, is looking to increase its investments in consumer health, nutraceuticals and related industries, a top executive said.
The early-stage VC firm, which closed its fourth fund last December, has so far invested in wellness, health and nutraceutical firms such as Gynoveda, Traya, Ace Blend, Earthful, and Inito.
"Given our pipeline, we see almost 20 to 25% of our deals in the consumer health, nutra and related investments. This is an uptick from what we have seen earlier," Dipanjan Basu, co-founder and partner at Fireside, told VCCircle.
The VC firm had made a 10-15% allocation for the segment previously, he added.
When asked about the reasons for the increased allocation, Basu pointed to "timing and maturity of the segment."
"As GDP per capita grows, individuals in India are becoming rapidly more aware of their health needs. More founders are building, the ecosystem is developing, and exits are happening in this segment," Basu said.
In February, Mumbai-based drugmaker USV announced it was strengthening its presence in India's growing nutraceuticals and consumer wellness space with the acquisition of a controlling stake in Wellbeing Nutrition. USV said it would pick up a 79% stake in an all-cash deal valuing Wellbeing at around Rs 1,583 crore (about $175 million).
"Our learning has been that to build a successful consumer health brand, the following approaches are important: (a) the formulation to be deep rooted in science such as Well Being Nutrition, Ace Blend or Chosen (a dermatology led BPC brand) and (b) building a regime based solution for a large unsolved problem such as hair health (Traya), fertility (Gynoveda), mental health (Amaha) etc," said Fireside's Basu.
"Retention is key for all nutra businesses to build a sticky platform," he added.
Fireside was among Wellbeing's early investors in 2021 with a Rs 13 crore investment as part of a Series A round. It later pumped in another Rs 13.5 crore in early 2023. On a fully diluted basis, Fireside held a 19.77% stake in the company. HUL had also invested in early 2023, picking up a 19.8% stake for Rs 70 crore and valuing the company around Rs 354 crore.
Based on the value of the latest deal, Fireside would have mopped up about Rs 300-310 crore in the exit, as per VCCircle estimates. This translates to an internal rate of return of around 82-84% in rupee terms and a multiple of almost 11.8x on the invested capital for Fireside. This is well above the 20% IRR that private equity and venture capital firms chase at the fund level in local currency terms.
When asked if Fireside would look at more strategic exits such as Well Being, Basu said, "We see high exitability in the space. We look for companies that build clear value propositions, strong unit economics, high retention and are science-led; it will be a combination of all these factors to build a valuable brand."
Discussing the impact of the ongoing geopolitical unrest in West Asia on companies, Basu conceded that gross margins were under pressure, but firms were addressing this based on the company type.
"We have not seen consumer demand impact yet and are seeing strong growth across the board. But with rising oil prices and inflationary pressures, we are closely monitoring the potential impact on demand. There might be an impact in the coming months, but we have not seen it yet," Basu said.
Published by HT Digital Content Services with permission from VC Circle.