After a blockbuster exit from the PharmEasy-Medlife deal last year, Ananth Narayanan quickly moved to his new venture – – a Thrasio-styled rollup ecommerce startup with an aim to take India’s D2C (direct-to-consumer) brands global.
Less than a year later, the Bengaluru-based company is a unicorn – a feat that it achieved in less than six months of inception, with 16 brands under its belt. The startup has so far raised $300 million. Unicorn is an industry term for startups with over $1 billion in valuation or more.
Mensa Brands isn’t the only startup catching on the D2C tailwinds by following what is called as Thrasio Thesis. Its local peers in the segment include startups such as , GlobalBees, Evenflow, Powerhouse91, UpScalio, , and Bzaar.
Like the global player, Boston-headquartered Thrasio, these new-age startups give online brands the marketing and technology chops needed to scale business.
Mensa Brands says it is building a tech-led ecommerce rollup startup by investing in and scaling up digital-first brands across diverse categories including fashion and apparel, home and garden, beauty and personal care.
Over the last six months, it has acquired brands like aromatherapy D2C startup Florona, leather brand Estalon, denim brand High Star, designer saree brand Karagiri, traditional and contemporary jewellery brand, Priyaasi, men’s casual wear brand Dennis Lingo, women’s ethnic wear brand, Ishin, affordable men’s casualwear brand, Hubberholme, women’s ethnic wear brand, Anubhutee, smart home-device company, Helea, and men’s personal care company, Villain, among others.
Continuing on its deal-making spree, Mensa Brands acquired homegrown online gardening solutions brand, TrustBasket last week. This was the company’s third acquisition this year.
In an interview with YS, Ananth Narayanan, Founder and CEO of Mensa Brands talks about the startup’s journey so far. Before he joined as a co-founder and CEO in 2019, Ananth had served as the CEO of Walmart-owned online fashion retailer and also, as a senior partner at McKinsey & Company.
Edited excerpts.
YS [YS]: Tell us about Mensa Brands and why you decided to choose this model.
Ananth Narayanan [AN]: Over the next 10 years, India will move from an unbranded to a branded market because GDP will go up. Secondly, brand building will be very different compared to the last six years. In the last six years, what mattered in brand building was distribution, and marketing these products heavily.
In the new age, distribution is democratised because of Amazon, Flipkart, Myntra, Nykaa, and Ajio. Content and community have become an easy way to build a brand because then, the customers can be reached directly.
One of the reasons why we are here is that there will be a lot of brands to build and these will be built very differently. The goal of Mensa is to take the next tech-savvy digital-first brands from India but for the globe, that is what the business is about. We want to become the equivalent of a digital Inditex or Unilever.
YS: How does Mensa zero in on a brand? And, what follows next?
AN: We look for the right product-market fit. We look for brands where the founder has scaled the business to some extent but we think we can scale it much beyond because what it takes to scale a brand is very different from how you start a brand.
So, there is an acquisition engine where we invest and partner with brands. There is a brand acceleration engine where, once we have the brand under the Mensa family, we work on growing and scaling them and third, there is a capital allocation. We make decisions about investment between growth and acceleration, and acquisition and acceleration. Those are the three parts to the business.
YS: How would you classify the brands that Mensa has acquired?
AN: We divide them on the basis of run rates. There are some brands that are crossing the Rs 100 crore run rate, some are between Rs 50-100 crore, and some are between Rs 10-50 crore. We invest differently in these stages.
The brands with Rs 100 crore run rate are brands that are growing very rapidly and are called break-out brands. For these brands, we invest in technology and brand building.
For the mid-brands, we invest in category expansion and channel expansion. Between the Rs 10-50 crore run rate are the emerging brands where the focus is on growth, scaling and finding the product-market fit.
YS: Tell us about the growth of Mensa’s portfolio?
AN: The average portfolio for us continues to grow between 80 and 100 percent year-on-year which is double the rate of the market. The reason we’re able to do this is because we do a lot of tech-enabled services. We are doing four to five lakh shipments a month and that’s growing very rapidly in just 8 months of operation.
YS: What are the services that Mensa provides to companies at different stages?
AN: We provide help on both the demand side and the supply side. The first is to help with channel expansion, which we have done for almost all the brands that we have partnered with so far. They are usually under one platform or an offline model initially.
The second thing we do is growth hacking where we look at ways to go up organically on the search results, ways to deliver a better consumer experience, ways to ensure that the consumer ratings are good, and to ensure that the A+ content of the brands is good.
The third area is that we offer product development and sourcing services. We look for market opportunities for the brands, and help them expand their product offerings in a tech-enabled manner.
The fourth service that we offer is on the supply side, where we offer our operating systems. This implies order management, warehouse management, improved delivery speed, tech-enabled ways of looking at consumer experience, understanding customer sentiment by analysing all the reviews and ratings.
The last service that we offer is digital brand building. As a part of this offering, we focus on what a brand should stand for, who its target customer is and how we take the brand global. All of these put together, double to triple the rate of growth that the brand usually has without compromising profitability.
YS: What are the teams that look at the different types of companies acquired by Mensa Brands?
AN: We have about 100 people in the core team at Mensa which is separate from the Brands team which is another 60 people or so.
In the core team, most people have Amazon, or Flipkart, or Myntra, or Purplle, as their background. We also have an investment team that looks at mergers and acquisition opportunities and plans how to reach out to brands.
Other than these, we have the product and technology team, category team, operations team, growth and marketing team and planning team that form a part of the core team at Mensa. These are the big areas that we focus on and we built the teams around.
YS: What are some metrics that the investment team uses when they are looking at brands?
Ananth Narayanan: The name of the game for us is sustainable growth. We look for how much a brand is growing year-on-year, month-on-month, and how much it is able to make in terms of EBITDA and profitability. That is one metric that we track.
The second is consumer experience, which is central to us. It is important to us to track how the brand is doing, whether its reviews, ratings, repeat rate, cohort data.
The third metric that we look at is brand experience and relevance. This implies answers to questions like what does the brand really stand for from the top-of-mind and spontaneous recall standpoint and how do we continue to improve that.
There are also a few operational metrics that we use on a day-to-day basis. When we think about partnerships, we see what is a good return on our investments.
YS: How do you help D2C brands get more visibility on such third-party platforms?
AN: Roughly 80-85 percent of our revenue comes from the marketplaces. It’s split across Amazon, Flipkart, Myntra, Nykaa, Ajio.
While about 8-10 percent is from D2C websites and mobile applications, very little comes from offline. In terms of how we work with the marketplaces, the basic way to think about it is the marketplaces are also looking for good brands for their own customers.
So, we spend time figuring out ways to improve the consumer experience for the customer of the marketplace. Because if we do this, then automatically we get more visibility because marketplaces are also looking for brands that customers love. Our focus, hence, is on ensuring faster delivery, high-quality product and packaging.
YS: How does Mensa help these brands acquire customers?
AN: So with consumer digital-first brands what matters is the ratio of cost of customer acquisition to the lifetime value of the customer. It determines how sustainably a brand can acquire customers. One has to make decisions like what are the right channels, how do we optimise on the keywords, how do we think about SEO and content, how do we think of ads, how do we think about partnering deeply with Google, Facebook ecosystems.
