Online mattress retailer Wakefit has raised Rs 185 in its Series B funding from Belgian investor Verlinvest and existing backer Sequoia Capital India, the latest sign of digital-first brands exploding in India.
Wakefit was valued at about Rs 1900 crore, a jump of nearly 10 times from when Sequoia first invested Rs 70 crore, valuing it at Rs 210 crore in 2018.
Founded by Ankit Garg and Chaitanya Ramalingegowda, Wakefit has also started manufacturing and selling furniture over the past year- a category that already accounts for 20% of its overall revenue, Garg told Moneycontrol overcall.
India’s furniture market is 15 times larger than mattresses, and as per a report from RedSeer Consulting, India’s mattress market is expected to be worth $2.5 billion by 2022.
Despite the coronavirus lockdown, which led to months of zero revenue, Wakefit will more than double its revenue year-on-year to Rs 425-450 crore for FY21 compared to Rs 200 crore FY20.
Direct-to-consumer brands such as Wakefit have been one of the biggest stories in startups the last year or so, led by a boom in internet usage, e-commerce, and demand beyond the top 8 cities. This year, over 40% of Wakefit’s revenue was beyond the top 8 cities during the festive season, compared to 30% in February.
Online brands also tend to be inherently profitable, given that costs are lower as the middle man is being cut out, and the fixed costs that many offline brands have become variable.
However, many brands that started as purely online- Urban Ladder, Pepperfry, Lenskart, Nykaa- have eventually had some offline presence, given how offline heavy the Indian retail market is.
“We already have 5-6 offline experience centers, and we will open more. But there is going to be a lot of experimentation involved because generally, these stores take 3-4 years to be profitable, but we want that to happen faster,” Garg says.
As part of the round, Verlinvest also bought Rs 15 crore of ESOPs from early employees, giving these employees a rare financial windfall.
“The past year has been an exceptional one for us, with customer demand evolving and growing in a completely upturned lifestyle. To create rapid growth opportunities in this landscape, we raised Series B funding to bolster key functions such as R&D, logistics, operations, technology, and marketing,” said Ramalingegowda, co-founder, Wakefit.
New investor Verlinvest was founded in 1995 as a family-owned business by the founding families of beer giant Anheuser-Busch InBev, with over a billion dollars in assets under management. Its Indian portfolio includes online learning firm Byju’s, Sula Vineyards, and cosmetics brand Purplle, among others.
“The home solutions segment in India is largely unorganized with a broken customer experience, thereby providing the immense potential for disruption. Current tailwinds have created a systemic shift towards online shopping, which offers a digital-first player like Wakefit. Co to organize the market,” said Manvitha Janagam, Investment Professional, Verlinvest, in a statement.
The D2C brands market could be worth $100 billion in the next 5-7 years, according to a report from investment banking firm Avendus Capital.
Indian D2C brands have raised about $1.5 billion in the capital, with valuations of $12-15 billion in total, including one unicorn — eyewear retailer Lenskart — so far.
Globally, D2C brands have raised $31 billion in funding, and there are over 20 unicorns — privately held firms valued at over a billion dollars — including Warby Parker, Dollar Shave Club, and Peloton