Roots Ventures: Realignment and Growth
Updated: Dec 9, 2020
We are fortunate that our investment philosophy of taking the path less travelled helped us identify emerging trends in pre-purchase assistance, health and wellness and pet care.
This coupled with lack of FOMO of the hot sectors helped us take early bets on Smytten, Just Herbs, Tea Monk, Plant Power, Supa Foods and Em and Em, Mind Your Fleet, Remitr and Raaho. The other advantage of looking for deals where no one is looking is we do not end up paying over the top valuations which in these times help us against valuation markdowns.
A clear focus on people behind these businesses help us identifying teams which can knuckle down and build for the long-term sans the limelight thus avoiding outrageous customer acquisition costs and burn rates. Such teams are quickly able to retool their business and cost structures to meet the new reality – People always Matter. This coupled with the runway we are helping them create for between 15-20 months, should allow them to tide over any hiccups in the interim. Due to the need for “low touch” as one of the key means to prevent Covid-19, we believe digital first businesses focusing on consumer health, safety and hygiene will either be minimally impacted or stand to benefit from this pandemic. Almost our entire portfolio lends itself favourably to this emerging dynamic.
The strength of the portfolio can also be seen from the fact that four investments Smytten, Just Herbs, Tea Monk and Remitr have seen / are seeing up rounds within a year of our investing and two more companies are seeing active investor interest. As mentioned earlier, significant part of the portfolio is back to or above pre-COVID revenue numbers.
From January, we were observing the news emerging from China and globally. The news flow combined with the inputs from various sources helped us take a view that Covid 19 may present disruption challenges to businesses. Smytten, our largest investment till date sourced packaging material from overseas. We encouraged them in February to secure supplies for the next few months and made additional investment in the company to allow them to procure these supplies.
In the middle of March, we sent our communication to all the investee companies. Our message in that communication was clear that we do not know how long this pandemic will last or how deep the impact will be on the business environment. Hence, we urged each one to preserve cash and chase receivables on priority, develop and test business contingency plans if not already there and demonstrate empathy for the team, customers and community in which they are operating. The underlying theme of the communication was to pass on the seriousness and urgency of the situation thus catalysing the teams to prepare for the worst while hoping for the best.
In early April, we followed that up with a communication detailing our learnings of the evolving lockdown situation, potential scenarios and sharing best practises gleaned from investee companies for the benefit of the entire portfolio. The focus continued to be on how to extend the runway and fund raising during challenging times.
During and since the lock down our team has been working with each of the companies to assess their business plans, retool them for the changed scenario as well as actively working on fund raising with them.
We are handholding our portfolio companies to digitize their businesses where needed, streamlining delivery channels and scaling businesses on e-commerce platforms as well as own digital assets. Further, we are leveraging the paid medium and improving efficiencies of spend by putting in place tracking to improve conversion funnels. As a result, thereby optimizing CACs (Customer Acquisition Cost) and driving engagement with existing customers to better cohorts and LTV (Lifetime Value). We are also working on leveraging technology and content marketing to improve the traffic through owned & earned mediums. The initiatives are helping our portfolio companies to improve Return on Ad Spends (RoAS) and is helping them with better efficiencies on their marketing spends along with capturing the opportunity better in the post lockdown scenario.