For these start-ups, customers buy and fund, too

Purvita Chatterjee Mumbai | Updated on February 22, 2018 Published on February 22, 2018

Consumers doubling up as temporary investors in customer-oriented businesses is slowly gaining ground   -  Getty Images/iStockphoto

Three-year-old food and grocery start-up Milk Basket would have folded up had it not been for the support of its loyal customers, who came forward to invest in it.

The Gurugram-based portal, which started with angel funds, was finding it difficult to sustain operations in the wafer-thin grocery segment till 40 of its customers came forward with about ₹2 crore of capital with a 3 per cent stake in the start-up in 2016.

Consumers doubling up as temporary investors in customer-oriented businesses is slowly gaining ground and is considered an offshoot of the regular crowdsourcing methods.

But unlike crowdsourcing, which is cause-based, supported by an unknown set of niche investors, those backing food and grocery start-ups are regular end-users who believe in the business model and are familiar with the products and services of such start-ups

“Such customers can relate to the concept which could be a neighbourhood service like grocery. It is not exactly crowdfunding as these are potential or future users who have a substantial supply of capital and want to invest in a concept in the realm of customer-facing businesses,” said Rahul Khanna, co-founder and Managing Partner, Trifecta Capital Advisors, which provides debt-financing solutions to its clients.

After raising money from its customers, Milk Basket has now attracted big-ticket investors such as Blue Ventures, Lenovo Capital and lately Unilever Ventures, but it was the customers who bailed it out at its most critical time.

“Our customers who were buying milk and daily grocery from us were our lifeline before we could attract institutional investors. Without their funding we would have shut down, and today, they are our best advocates for raising future money,” says Anant Goel, co-founder and CEO, Milk Basket.

Ahmedabad-based SaleBhai, selling regional food products, is another start-up which has got the blessings of its customers who turned investors before raising funding from institutions.

While it did have an angel round, it has also garnered ₹1.8 crore from about 21 customers who have come forward as investors in its two-year-old e-commerce venture.

A woman customer from Hyderabad actually made the first move through SaleBhai’s call centre wanting to become an investor after buying food specialities sold on its platform, soon after its launch in 2015.

“Customers are usually the last ones who want to become investors. But in our case, we got the first call from them through our call centre in 2015. Since then, we have roped in about 21 customers who have investments of ₹5-50 lakhand have raised ₹1.8 crore with a 3 per cent stake from them,” said Vishwa Vijay Singh, co-founder, SaleBhai.

The start-up is now ready to go in for a bigger fund-raise of about ₹22 crore from institutional investors this year. But till such time, it has the faith and trust of its existing customers.

“We have given our customers-turned-investors a lock-in clause of about three years till the time institutional investors come in. Customers have put in small amounts of money after believing in our business model,” added Singh.

Published on February 22, 2018
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