Venture capital firm Fireside Ventures is ramping up early-stage investments, moving to back pre-product market fit (PMF) and even pre-revenue startups through a co-investment model with other funds and value-add angels.
Strategic shift towards early-stage investing
The Bengaluru-based firm, which has traditionally focused on venture-stage investments with notable investments in several consumer firms such as Honasa Consumer, Boat, Yoga Bar, and The Sleep Company amongst others, has already deployed capital in around 7 deals, with plans to complete 8-10 in all via its third fund (Fund III), Prayag Mohanty, Principal at Fireside Ventures, said.
It will pursue a collaborative approach where it co-invests with other funds and brings in value-add angels to provide strategic support across different business vectors like product development, customer acquisition, and distribution channels. The focus on consumer brands and consumer health will remain.
The firm’s seed deals will range from Rs 8-10 crore, compared to its venture cheques of Rs 15-30 crore. It has already invested in beauty brand Sammmm (co-invested with Sauce VC), fashion brand Underneat founded by Kusha Kapila (co-invested with angel investor Ghazal Alag who is co-founder of Honasa), health focused brand ESCA, and children’s wellness brand Wellopia (co-invested with Sharp Ventures and Antler).
Rise of new Go-to-Market channels
This early-stage focus will become even more prominent in Fireside’s fourth fund (Fund IV). The firm is reportedly in advanced stages of raising $230 million (around Rs 2,000 crore), a similar size as its third fund of $225 million raised in 2022.
“In Fund IV, which we will start deploying next year, will have some dedicated allocation for these investments. That is why in Fund III itself we have put in place this strategy,” Mohanty said, indicating the firm expects to make double-digit early-stage investments in the new fund.
Fireside aims for 20-25% of its core portfolio to eventually come from this early-stage cohort, a significant strategic shift from its previous venture-focused approach.
“The idea here is to get as much value-add capital around the table and take the founders to product market fit. Typically what you see in the ecosystem from seed stage to series A, almost 70-80% of deals would be falling off. We want to increase this probability of success,” Mohanty added.
The shift in strategy is being attributed to improved entrepreneurial activity and infrastructure changes, particularly the emergence of quick-commerce platforms that have created new distribution channels for consumer brands. “What used to be 2-3 go-to-market channels is probably 8-10 GTM channels today. You could build a much larger brand entirely online as compared to what you built back in 2017,” he noted.