In an insightful interview, VS Kannan Sitaram, co-founder and partner at Fireside Ventures, addresses some of the common criticisms about the rise of consumer startups and the apparent slowdown in deep tech investments. Fireside Ventures, known for backing D2C (Direct-to-Consumer) brands like Mamaearth and boAt, remains bullish on the consumer sector, while exploring new focus areas such as sustainability and travel. In this article, we unpack Sitaram’s views on the evolving startup landscape, the potential of deep tech, and the future of IPOs in India.
Consumer Startups and Deep Tech: Are They Competing?
One of the criticisms often leveled against the current venture capital trend is that consumer startups are growing at the expense of deep tech ventures. However, Sitaram disagrees with this notion. According to him, the growth of consumer startups is driven by rising consumption as people earn more and demand more. These startups, ranging from food delivery to niche products like gourmet ice creams, have created thousands of jobs, including logistics and supply chain roles. They contribute significantly to tax revenues in the form of GST and income tax.
Sitaram emphasizes that backing consumer startups does not hinder the growth of deep tech ventures. Instead, he points out that the real question is why more deep tech startups aren’t being created or noticed. He suggests that there’s enough capital for both sectors, but Fireside Ventures remains focused on consumer businesses, which aligns with their investment mandate.
Key Sectors Fireside Ventures Is Focusing On
Fireside Ventures has backed a wide range of consumer startups in areas like beauty and personal care, food and beverage, and health and wellness. Health and wellness, in particular, has seen a strong shift among younger consumers, especially millennials and Gen Z, who are prioritizing their health. The demand for wellness products, including supplements, has surged, prompting Fireside to expand its portfolio with investments in companies like Kapiva, Traya, and Gynoveda.
Beyond health, sustainability is emerging as a key theme that Fireside is watching closely. Younger consumers are increasingly attracted to brands that promote sustainability, with trends like “beauty without cruelty” gaining traction. Additionally, travel is another sector seeing a resurgence in demand, as travel restrictions ease and both domestic and international travel pick up.
The Slowdown in IPOs: Will the Trend Continue?
The slowdown in IPOs, especially among consumer startups, has raised concerns. However, Sitaram remains optimistic about the IPO pipeline, citing that the total valuation of consumer companies expected to list this financial year is around $34 billion. While the timing of IPOs will depend on global market sentiment, many companies are actively preparing, filing draft papers, and engaging with bankers. Sitaram believes that once market volatility eases, the IPO pipeline will reopen.
Foreign Investors and India’s Long-Term Consumption Story
Despite global uncertainties, foreign investors continue to back Indian consumer startups. According to Sitaram, international investors see India’s long-term consumption story as a solid investment opportunity. They remain confident in India’s stable policy framework, especially when compared to the unpredictability seen in other markets like China. Sitaram also highlights that investors are confident about exit opportunities in India, whether through IPOs or strategic deals, making India an attractive destination for venture capital.
Conclusion: The Future of Consumer Startups and Deep Tech
Fireside Ventures’ focus remains on digitally-oriented, capital-efficient consumer businesses, with a keen eye on emerging sectors like health and wellness, sustainability, and travel. While deep tech remains an important part of the startup ecosystem, Sitaram suggests that the future of Indian startups lies in striking a balance between consumer growth and technological innovation. As the country’s consumption story unfolds, India remains a key hub for both consumer and tech investments, attracting global interest and paving the way for future IPOs.
Stay tuned for more insights on India’s dynamic startup ecosystem in our upcoming posts.
