Aavishkaar Capital said to lead D2C fashion brand Zouk’s new funding round, enter tech-enabled fashion sector

“The round, which is expected to close at around $8 million with participation from other existing investors, will largely be primary, with a 5-10% secondary component,” one person said.

The capital infusion, potentially Zouk’s largest so far, will be used to fund the direct-to-consumer fashion company’s expansion across online and offline verticals, the person added. A second person said discussions with some existing investors are at a preliminary stage and the round is expected to close in the next couple of weeks.

Zouk and Aavishkaar did not respond to Mint‘s request for comment.

Aavishkaar, which has raised eight funds since 2001, typically invests in three core sectors – financial inclusion, food & agriculture, and essential services. Recently, the company has placed more focus on tech-enabled sectors such as climate technology.

Its investments span across early-to growth-stage companies, with ticket sizes ranging from $5 million to $25 million. Besides India, the venture capital companies have a presence in other parts of Asia and Sub-Saharan Africa.

The investment firm has about half a billion dollars in assets under management. Its Indian portfolio companies include Agrostar, Ergos, GoDesi and Utkarsh Small Finance Bank.

Zouk raised $3 million in its Series A round led by Stellaris Venture Partners at a valuation of almost $40 million in 2021. Titan Capital, Sharrp Ventures, JJ Family Office, Deutsche Bank India CEO Dilip Khandelwal, Atomberg founder Manoj Meena and Sugar Cosmetics founders Vineeta Singh and Kaushik Mukherjee also participated in the round, according to market intelligence provider Tracxn.

New customer segments

Investors have shown an increased preference for new-age D2C brands across categories such as fashion, apparel and health over the past two years as premiumization on the back of changing consumption patterns has resulted in a shift in sentiments.

Several bigwigs in the industry have lost market share to some of these startups after they failed to break away from conventional practices in terms of product innovation and supply chain systems needed to cater to their Gen Z and millennial customer segments. Some recent deals include luggage brand Mokobara’s $12 million fundraise in February, fashion brand Pant Project’s $4.25 million round in June, and ethnic brand Libas’ $18 million round in May.

Zouk, which sells bags, wallets and footwear, had used its previously raised funds for promotional activities, expansion of its product catalog, hiring of more people, strengthening its supply chain and opening offline stores. Besides its own website, the startup sells products on online platforms such as Amazon, Myntra, Flipkart, Ajio, Nykaa and Tata Cliq.

Zouk has offline stores in Indian cities such as the National Capital Region, Bengaluru and Mumbai. The company’s focus on offline expansion is in line with other larger startups such as Purplle, Nykaa and Mamaearth, which are also adopting an omnichannel strategy as consumers return to their normal shopping patterns after the pandemic.

A recent report by RedSeer Strategy Consultants in partnership with investors Accel and Fireside Ventures highlighted that brands must evolve to adopt an omnichannel approach to tap the larger Indian retail market. The report estimated that the country will have an over $2 trillion retail market by 2030, yet 90% of it will be offline.

At some point, online channels will act as a customer acquisition tool for the offline business. In the process, companies will have to evaluate the right time to go offline, choose suitable offline channels, run pilot projects to assess supply and demand, and use strategies to help online and offline verticals complement each other. Hence, new-age consumer-focused companies need to think of this large opportunity as they scale up, RedSeer said in the report.

Founded in 2015 by Disha Singh and Pradeep Krishnakumar, Mumbai-based Zouk raised its first round of external capital from Stellaris about six years later. Over the past year, the company’s revenue from operations more than doubled ₹47.4 crore while its loss widened to ₹10.5 crores from ₹77.4 lakh in FY22.