Fund focus: Local LPs lift Fireside to new heights

Every dollar in each of the first three funds raised by India-based Helion Venture Partners came from global investors, according to co-founder Kanwaljit Singh (pictured). When he spun out to create consumer brands-focused Fireside Ventures in 2017, it was a completely different story.

The firm raised USD 52m for its debut fund in 2018, with domestic LPs putting up 60-70% of the capital. It was the same story for Fund II, which closed on USD 118m three years later. For Fund III, which recently closed on USD 225m, beating a target of USD 200m, the domestic share is around 90%.

LPs include SBI, PremjiInvest, conglomerates ITC and Emami, and Sharrp Ventures, the family office of the Harsh Mariwala family. Fund-of-funds Waterfield and the government’s Self-Reliant India Fund also contributed. The entire process was wrapped up within seven months, including documentation.

It marks the third final close for a Helion spin-out this year, and the domestic capital theme appears to be a common denominator. Arkam Ventures closed its debut fund on USD 106m in April with 40% of the corpus comprised of rupee-denominated capital. Four months later, The Fundamentum Partnership closed its second fund on USD 227m, 80% of which came from local investors.

Singh offered a range of explanations. First, travel restraints related to ongoing pandemic conditions have stymied the deeper conversations needed for global investor participation. Second, Fireside’s domestic consumption thesis is easily digestible for local investors, especially corporations and family offices. Third, it reflects the growing maturity of domestic capital pools.

“We are seeing respected consumer families and high net worth individuals starting to recognise the potential and allocate to private equity. When I started the first Fireside fundraise just five years ago, they were not looking at private investing, especially funds,” Singh said.

“And we’re seeing a lot more stability in that money. Several of our investors that have come in for the third fund have invested three times over. The long-term foundation of this money is very real. People are looking to double down if you’re delivering performance.”

Fund I, which made 18 investments, has returned 75% of its capital to investors and is considered a top-quartile performer locally, according to ratings provider Crisil. Fund II, now fully deployed across 14 deals, has seen its portfolio increase aggregate revenue 4x in the past 2.5 years. Overall, there have been five full exits and five partial exits.

At the same time, consumer brands have become a hot M&A target in India. Due to historical logistical and marketing challenges, there remains a relative dearth of local brands for large buyers to choose from, resulting in a seller’s market. Singh said Fireside has realised exits to local leaders such as Nykaa and Byju’s, as well as multinational corporations.

The standout deals are skincare brand Mamaearth and wearable gadgets maker Boat. Fireside was the first investor in both. It put USD 3m into Mamaearth and exited a USD 15m position while retaining 10% of the company, now a unicorn. Fireside made a partial exit from Boat last year as part of a USD 100m investment led by Warburg Pincus. The company has nearly USD 500m in annual revenue and is planning an IPO.

Several other companies are throught to be well-positioned for rapid scaling, having already received follow-on funding from Fireside and other investors. “Our ability to work with companies and help them leverage digital infrastructure and then exit in a timely manner contributes to a large number of successes, not just one or two out of 10,” Singh said.

Fund III will maintain the local consumer brands strategy, with the larger corpus supporting early-stage cheques for a portfolio of 25-30 companies plus an increased capacity for selective follow-on investments. Health, wellness, and lifestyle remain the core sectoral themes.

The young, online demographics that have helped Indian brands gain traction against global incumbents in recent years are still the fulcrum of the playbook. But there is momentum with older consumers in health and wellness, as well as rural and small-town consumers exploring lifestyle products online for the first time. Boat, for example, does most of its business in rural areas.

Fireside is also seeing promise in the idea of taking Indian brands overseas. Mamaearth has launched in the Middle East and is looking at Southeast Asia, Europe, and the US. There are also two portfolio companies billed as “born in India for the world” – tea and spices brand Vahdam and turmeric-based ointments maker The Ayurveda Experience.

Strides in India’s digital build-out have made these kinds of breakouts possible for the first time, perhaps especially programmes that help local brands piggyback online giants such as Amazon Global Sales. But it’s no coincidence that Vahdam and Ayurveda have overtly India-themed offerings – and they will need guidance pivoting offline when the time is right.

“It’s a matter of people accepting interesting products from India and other Eastern markets as good-for-you and trendy. Turmeric is a global trend,” Singh said. “The digital infrastructure allows these brands to get quick entry into those markets, so at least the starting point has become easier. But eventually, they’ll have to sell at Whole Foods.”

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• Topics
• South Asia
• Fundraising
• Venture
• GPs
• Consumer
• India
• Fireside Ventures
• Helion Ventures
• Premji Invest