The trend of investing in startup companies and reshaping them into profit-making ventures is picking up over the world. The trend is slowly emerging in India, where savvy investors are shifting from investing in shares to now investing in startups with promise in helping them reach that potential.
UpScalio is one such company that looks into helping brands by nurturing them towards their success. Founded in 2021 by Gautam Kshatriya, Saaim Khan and Nitin Agarwal, UpScalio is a brand that invests, grows and buys utility driven e-commerce businesses and further helps them operate businesses by providing capital solutions. It provides funding to digital brands selling on e-commerce marketplaces like Amazon, Myntra, Flipkart and Nykaa, managing key operations, such as multi-marketplace management, digital marketing, logistics, sourcing, finance, branding and business operations.
UpScalio has acquired various consumer brands including D2C brands like Gizga, Tizum, Aircase and HomePuff. The brands are category leaders and operate in the next gen-computer, PC and phone accessories, laptop bags and kitchenware segment. UpSaclio is helping them grow and thrive.
In an email interview with India Retailing, the CEO and co-founder of UpScalio, Gautam Kshatriya shares how the company plans to achieve it and how it will be a win-win situation for both.
What inspired you to start UpScalio?
It was the vast opportunity possessed by the dynamic Indian market. The country is witnessing an e-retail boom, and a lot of promising brands are leveraging platforms like Amazon and Flipkart to sell. Our model would provide a substantial fillip to these brands by creating wealth and growth prospects while also bolstering the larger e-commerce segment in India.
Moreover, each co-founder was well-equipped and excited to pursue this model. Having been an entrepreneur, I understand the challenges of scaling a bootstrapped startup. As management consultants at Bain and McKinsey respectively, Saaim and I honed the ability to identify high potential businesses, and also quickly identify levers that can be pulled to enable rapid growth. Nitin brings immense experience in driving growth in marketplaces and private label contexts.
What is your thought behind acquiring only utility e-commerce businesses?
We started out by evaluating deals in the lifestyle, fashion, and personal care brand space, but as the thesis evolved, the focus has been mainly on utility brands as they do not require large investments in marketing. Though the margins in fashion and beauty categories are higher, a large chunk is dedicated to marketing the brand. Moreover, the trends in the category do not change often and continue to draw customer attention after one to three years of setting it up.
What is your business model?
We are building the next generation, digitally and analytically driven consumer goods giants. Instead of building brands from scratch, we partner and acquire high potential brands that sell on marketplaces such as Amazon and Flipkart, then scale them up 5x-10x over time.
Most e-commerce entrepreneurs face growth barriers in the form of working capital, and challenges to hire a strong expert e-commerce team that is required to scale their businesses beyond a certain level.
In the roll-up model, the company invests in such e-commerce brands, infuses working capital and brings on an expert e-commerce team to scale their business. For example, our team helps increase revenue through levers such as digital marketing, e-commerce storefront optimization, and demand and inventory planning to reduce stockouts.
The experts work on multiple brands, share cross-category intelligence and create synergies that lead to revenue expansion for each individual brand. They also enter Joint Business Plans with marketplaces like Amazon and Flipkart and get favorable terms for ad spending and other marketplaces expenses, which further helps the bottom line.
Additionally, by centralizing e-commerce capabilities and other functions such as finance and supply chain operations, we are able to increase profitability of these businesses. What results is a house of brands made up of fast-growing and profitable businesses.
How do you arrange funds?
We have raised a total of $57.5M over two rounds. Leading investors include Gulf Islamic Investments, Presight Capital and an undisclosed hedge fund. Heliad Equity Partners, MPGI, 468 Capital, and Whiteboard Capital also participated in the funding round.
How do you decide which companies to buy?
The key factors which make a brand an attractive target for acquisition include a clear path to profitability over a period of six to nine months, a minimum revenue requirement of Rs 5 crore annually, and good reviews and ratings on e-commerce marketplaces where the brand sells its products.
What makes UpScalio different from similar companies in the market?
What really sets us apart from other e-commerce roll-ups in India is that we shoulder the responsibility of running the brand from end to end. Whether it is optimizing sourcing, warehousing logistics, delivery logistics, supply-demand planning, e-commerce storefront optimization, digital marketing, or analytics, we do it all.
Not only do we claim we can do this, but we have the team to be able to do so: more than 160 professionals, out of which 100 are focused on core e-commerce operations.
Moreover, we’re entrepreneurs, so we understand the challenges entrepreneurs face – and work with these founders who have bootstrapped their way into building amazing products and enterprises with pure capability and hustle.
Therefore, not only do we bring the right capabilities and knowledge, but we’re also great to work with! Just ask any of the entrepreneurs we have already partnered.
Overall, I’ll say this: acquiring stakes in brands is relatively easy. Scaling them is hard. When we partner with a brand, we commit to growing it. We take this responsibility seriously.
Supercharging brands is our #1 priority.
13 brands in 12 months across 7 fast growing categories… What is your growth Strategy?
We expand on the product portfolio, unlock more distribution channels, and kickstart the process of brand building to cement the brand’s presence in the heads of customers.
How do you use technology to help businesses grow and scale?
While acquiring a company, we dive deep into their product portfolio to identify the segment gaps. Our proprietary data platform UpScience, gives us rich data sets to help with rapid benchmarking against different companies, different geographies, and more.
With this, we are able to identify variants in size, colour, and many more attributes. These are then communicated to our sourcing team, which has an extremely strong network and are able to plug in these NPDs with no additional effort. Our strong focus on the home and kitchen sector also helps us build synergies and connections that quicken the sourcing process.