Online-only D2C brands leave Accel, Fireside cold
Accel Partners and Fireside Ventures no longer want to back domestic online-only direct-to-consumer, or D2C, brands, a category that had become a startup industry buzzword not too long ago, drawing in millions of dollars in investments.
These two leading venture capital investors will, however, continue to invest in businesses having both an online and offline (omnichannel) strategy, underlining a conclusive shift in how consumer brands are being built and evaluated by early-stage investors.
“Investors are looking for teams today that have the ability and ambition to go beyond D2C,” Prashanth Prakash, partner at Accel Ventures, said in an interview to Mint. “Investors are looking to fund companies and entrepreneurs who are willing to be not only just digital D2C but omnichannel.”
India currently hosts about 10,000 D2C brands, a concept that gained currency a few years ago and was originally focused on an online-only or digital-first approach. Buyers became more comfortable shopping, discovering and experimenting with new
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brands online during the covid lockdowns, and in 2021 about 100 Indian D2C companies raised more than $2.1 billion.
But what founders and companies perceived to be a new digital normal has not played out as they had expected it to, and over the past two years investors grew increasingly wary of backing these digitalfirst companies.
The stretched-out funding winter has also made things harder for D2C brands, which now have to figure out not only how reach customers but also how to deliver a sticky brand experience that reduces their customer acquisition costs.
Eyewear retailer Lenskart, cosmetics brand Mamaearth, and meat-delivery platform Licious all began with an digitalfocused strategy, but have since invested heavily to grow offline as well as they evolved into unicorns—companies estimated to be worth at least $1 billion.
Stuck with investments that will take longer than expected to deliver returns, investors are now following the more traditional approach of being where the customers are.
To avoid being capital-intensive, startups are adopting the franchiseeowned, companyoperated (FOCO) model, in which franchisees take on the risk while the company delivers the brand experience, Prakash explained.
A report titled ‘Decoding Omnichannel: Strategies for D2C Brands’, published by Accel, Fireside and consulting
By 2030, offline retail is expected to grow to more than $2 tn and online retail to $150-200 bn
firm Redseer on Thursday, states that about 90% of sales will happen offline, though discovery of brands and a significant portion of purchases are likely to be influenced online.
In 2023, India’s offline retail market was worth $1.1 trillion, while online retail stood at $65 billion. By 2030, offline retail is expected to grow to more than $2 trillion and online retail to $150-200 billion, the report said.
“We believe all brands will eventually have an omnichannel presence. The real opportunity is to integrate the digital and offline channels into a seamless consumer journey,” said Kanwaljit Singh, founder and managing partner at Fireside Ventures.