If you run a D2C brand, here are 4 points of Reality Check you need before you go out to raise funds…
👉🏼 Currently, numerous brands generating over Rs 1 crore in monthly sales are self-funded and seeking their initial round of investment…
Therefore, it shouldn’t come as a shock if investors perceive your annual revenue projection of Rs 3 crores as insufficient traction. Many founders, influenced by shows like Shark Tank, may mistakenly believe that monthly sales of 20/25 lakhs warrant accolades simply because they’ve heard the Sharks express admiration for such figures on television.
👉🏼 Investors appear to prefer D2C brands that are EBITDA positive and intend to utilize funding for enhancing growth through capital expenditure and geographical expansion, rather than for covering working capital. Debt financing is typically more cost-effective for working capital needs, as opposed to equity, especially venture capital funding.
👉🏼 Revenue Multiples are down to 2.5x to 4x (at best)… Thinking someone will give you a 5-6x revenue multiple or more is the exception and not the norm!
👉🏼 Performance Marketing is darn expensive, and the focus has to be on offline expansion. The real moat now lies in cracking offline distribution through wholesaler and distributor networks to get their product in not just modern trade but even kirana stores.
it’s essential to base your understanding of valuation multiples and traction on solid business fundamentals rather than relying solely on brief segments from shows like Shark Tank.
Demonstrating a robust and profitable business model is essential to attract investment and ensure sustainable growth.
