When the pandemic was at its worst, during the peak of the unicorn boom in India, start-ups were more interested in discussing their astronomically high valuations than their actual businesses. Back then, blue-sky opportunities also meant unheard-of valuations, but a lot has changed since then.
Even though they have raised a new round that would qualify them for the league, startups are now anxious about valuations and their unicorn status. Currently, “proficorns” is the word of choice. These days, founders want to talk about two key metrics: revenue and profitability.
Start-ups and their investors are being forced to face reality now that the post-pandemic world’s pixie dust of exorbitant valuations has begun to settle down. Even though FreshtoHome, a start-up that sells fresh meat and fish, raised $104 million in Series D funding led by Amazon Smbhav Venture Fund, Shan Kadavil, the company’s co-founder and CEO, declines to discuss valuations. Values cannot be the only North-star metric, claims Kadavil. Up until now, unicorns have dominated the media. We need to promote proficorns, which are designed to be profitable, for the Indian startup scene.
The founders of this fresh meat and fish vendor believe that while consumers are aware of them, they are not aware of their technological prowess. It has consistently put a premium on profitability, which is why it plans to list on the stock exchanges.
The meats and fish offered by FreshtoHome are free of antibiotics and preservatives. Kadavil, who has experience working in Silicon Valley and has also taken a few businesses public, teamed up with other coworkers to launch FreshToHome in 2015. Within the next three years, this direct-to-consumer or D2C startup hopes to go public. Our ultimate objective is a public listing in three years, and we want to start becoming PAT (profit after tax) profitable right away, he claims.
The type of capital we hope to raise is still too early to say. It might represent 10–20% of the total amount of capital raised.
Since its founding, the startup has raised a total of $254 million. Due to confidentiality concerns, Kadavil declines to disclose the specifics of the most recent round, which very well could have produced India’s next unicorn. Instead, he prefers to discuss the company’s revenue, which is currently $1,100 crore and places it as the largest organized player in the nation in terms of revenue. The start-up has achieved operational profitability with gross margins of 40%. The achievement of net profitability is the following milestone.
According to Kadavil, the initial public offering (IPO) is the ultimate goal for valuing a company when raising additional rounds of capital. I advise businesses to increase operating-margin profitability and lessen the need for ongoing fundraising. In contrast to the ecosystem, FreshtoHome is operationally profitable, he continues.
The business has positioned itself as a provider of fresh, antibiotic- and chemical-free meat and fish. He claims, “What is unknown is the work we have done with farmers and fishermen. We use technology to procure fish directly from the fishermen, who receive a 20% premium over market prices. FreshtoHome uses the Commodities Exchange technology platform, which it has patented, to connect farmers and fishermen to the internet so that they can sell their produce directly.
Moat construction before a public listing
The top team at FreshtoHome invested time in developing the Commodities Exchange platform, giving them an “unfair advantage” over rivals. Delivery operations are based on an effective supply chain. Therefore, if a customer in Delhi places an online order, the product will be delivered within 24 hours of the catch. Produce is transported to the regional centers, processed there, and then delivered after orders are placed.
“In GCC, we are using the same model” (Gulf Cooperation Council). We will travel to places that can be reached by air in three to five hours from India, according to Kadavil.
The raised $104 million will be used to increase the number of physical stores in the network from 30 to 100. Because India still favors purchasing fresh fish from wet markets, physical stores are helpful. This has made it simpler to convert customers to online sales.
Fishermen sell their catch to middlemen, who then sell it at auctions, as boats keep arriving at harbors. FreshtoHome has an electronic exchange where it purchases fish from fishermen because it is impractical to establish a brick-and-mortar presence across 5,000 harbors. Through the exchange, farmers can sell their fish online for a higher price by taking a photo of it and uploading it. At harbors, there is consistently an imbalance between supply and demand, which enables organized players to use technology to obtain the best prices.
He asserts that there are numerous middlemen in this category. Additionally, the middlemen lend money to the smaller fishermen. For 43% of sales, FreshtoHome purchases fresh fish directly from harbors and auctions. Kadavil says, “We built our moat on these lines.
Retailers of meat and fish, like FreshtoHome and Licious, have a market opportunity
10 million metric tons of fish worth $50 billion are consumed in India. In addition to being sold in India’s wet markets, the fresh catch is also exported to the GCC (Gulf Cooperation Council) region. Fish alone accounted for $5 billion in Indian exports to the GCC region, making up a significant portion of the region’s fish imports from that country. FreshtoHome thinks they have a scalable business with profitable unit economics. The business has a broad scope and is present in 160 cities. Before going public, the company wants to strengthen its business case even more.
