Please tell us about the genesis of UpScalio and how you strategize its business model.
UpScalio was started to capture the vast opportunity in the dynamic Indian market. The country is witnessing an e-retail boom, and a lot of promising brands are leveraging industry giants like Amazon and Flipkart to sell. Our model provides a substantial fillip to these brands by creating wealth and growth prospects while also bolstering the larger e-commerce segment in India.
Each co-founder of UpScalio was well-equipped and excited to pursue this model. Having been an entrepreneur, I understood the challenges of scaling a boot-strapped start-up. As management consultants at Bain and McKinsey respectively, Saaim Khan and I honed the ability to identify high potential businesses, and also quickly identify levers that can be pulled to enable rapid growth. Nitin Agarwal brings immense experience in driving growth in marketplaces and private label contexts.
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, UpScalio’s team helps increase revenue through levers such as digital marketing, e-commerce storefront optimization, and demand and inventory planning to reduce stock-outs.
The experts are able to work on multiple brands, share cross-category intelligence and create synergies that lead to revenue expansion for each individual brand. They also enter into joint business plans with marketplaces like Amazon and Flipkart and get favourable terms for ad spends and other marketplace 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.
The roll-up model not only provides expertise, but also provides capital. It invests capital in the businesses, and purchases stake from the entrepreneur - helping him or her to unlock personal wealth - rewarding years of hard work. As the brand grows, UpScalio continues to buy stakes in the entrepreneur’s business, at higher and higher values, thus continuously creating wealth for the entrepreneur.
What kind of companies have you worked with so far and what has been the outcome? How do you pick the brands you support and what are the criteria?
While 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. We stay away from fashion, beauty, and personal care categories as these brands take a long time to register profits. With D2C beauty brands, it is difficult to predict whether it will be profitable, while fashion requires a new drop every quarter or so.
On the other hand, the utility category, which we deal with, does not change often and continues to draw customer attention after one to three years of setting it up.
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 the e-commerce marketplaces where the brands sell their products.
UpScalio-owned Green Soul just launched an ad campaign featuring actor Taapsee Pannu. Tell us about the association.
Green Soul Ergonomics is one of our leading brands, that is focused on ergonomic furniture which provides much-needed support for our backs. We wanted to promote the health benefits of owning a Green Soul chair and Taapsee Pannu's presence as a health and sports enthusiast is aligned perfectly with Green Soul’s health-focused value proposition.
Along with the tie-in with Taapsee, we wanted the campaign to emphasise the unique use-case of Green Soul, which is helping people bear the brunt of a sedentary lifestyle to treat their back to some tender loving care without moving a muscle.
What is UpScalio’s USP in today’s crowded marketplace?
Upscalio’s key differentiator is its strong operating team. While acquisition is a crucial part of the business model, what will make a company in this space successful is its ability to take an acquired business and scale it rapidly, whilst keeping it profitable. This is only possible if the company has deep expertise across key e-commerce functions such as supply chain, category and marketplace management, digital marketing and analytics – which UpScalio has.
Across your career, you have worked for consultancies such as EY and Mckinsey and also dabbled with entrepreneurship. What are your big learnings over the years?
Working at EY and McKinsey gave me a front-row seat to how large companies and conglomerates operate, and the inefficiencies and efficiencies that govern their growth. This has helped me develop an ability to both identify high-growth businesses as well as the levers that can be pulled to enable rapid growth. Having worked with entrepreneurs in the past has definitely contributed to my understanding of the challenges they face, and enabled me to work more closely and effectively with the entrepreneurs we invest in.
What marketing strategies are you coming up with and do you plan to launch other campaigns too for acquired brands?
Rather than promoting the brand in isolation, we're taking a customer education route in our marketing campaigns.
For example, for Green Soul, we've created content around the benefits of using an ergonomic chair for long bouts of sitting. This helps to expand the reach of the ergonomic chair category, which in turn boosts Green Soul's reach. With Hestia, our focus has been to talk about the virtues of cold-press juicing and how it's a much better alternative to simple blenders. We have seen a lot of health enthusiasts engage with the content, and eventually become customers. Creating more awareness about a category as a whole is helping our brands.
The second strategy we're experimenting with is reaching our customers on platforms where they usually consume content, and in their desired medium. For Green Soul, we promoted our newest campaign with Taapsee Pannu on YouTube, where most of India's gamers usually consume and produce content, and that cohort is a large part of our customer base.
