Aavishkaar Capital to lead new funding round for D2C fashion brand Zouk, enter tech-driven fashion sector

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

The capital infusion, potentially the largest yet for Zouk, will be used to fund the direct-to-consumer fashion company’s expansion into online and offline verticals, the person added. A second person said talks with some existing investors are at an early stage, with the round expected to close in the next few weeks.

Zouk and Aavishkaar did not respond MintRequest for comment.

Aavishkaar, which has raised eight funds since 2001, typically invests in three main sectors—financial inclusion, food and agriculture, and essential services. The firm has recently put more emphasis on technology-driven sectors such as climate technology.

Its investments range from $5 million to $25 million in early-stage companies. In addition to India, the venture capital firm has a presence in other parts of Asia and sub-Saharan Africa.

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

Zouk has raised $3 million in a Series A funding round led by Stellaris Venture Partners at a valuation of nearly $40 million in 2021. Titan Capital, Sharpp 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 information provider Tracxn.

New customer segments

Over the past two years, investors have shown greater interest in emerging D2C brands in categories such as fashion, apparel and health, as premiumization driven by changing consumption patterns has led to a shift in sentiment.

Several industry heavyweights have lost market share to some of these startups because they failed to move away from conventional practices in terms of product innovation and supply chain systems needed to serve Gen Z and millennial customer segments. Some of the recent deals include a $12 million fundraising round for luggage brand Mokobara in February, a $4.25 million funding round for fashion brand Pant Project in June, and an $18 million funding round for ethnic brand Libas in May.

Zouk, which sells bags, wallets and footwear, has used the funds raised earlier to go towards promotional activities, expanding its product catalogue, hiring more people, strengthening its supply chain and opening offline stores. Apart from 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 like the National Capital Region, Bengaluru, and Mumbai. The company’s focus on offline expansion is in line with other larger startups like Purplle, Nykaa, and Mamaearth, which are also adopting an omni-channel strategy as consumers return to their normal shopping patterns post-pandemic.

A recent report by RedSeer Strategy Consultants in collaboration with investors Accel and Fireside Ventures highlighted that brands need to evolve to adopt an omni-channel approach to reach the larger Indian retail market. The report estimates that the country will have over $2 trillion retail market by 2030, but 90% of it will be offline.

At some point, online channels will act as a customer acquisition tool for offline businesses. In the process, companies will need to assess the right time to go offline, select the right offline channels, conduct pilots to assess supply and demand, and apply strategies to help online and offline verticals complement each other. Therefore, new-age consumer-facing businesses need to think about this big opportunity as they scale up, RedSeer said in a report.

Founded in 2015 by Disha Singh and Pradeep Krishnakumar, Mumbai-based Zouk raised its first round of outside capital from Stellaris about six years later. Over the past year, the company’s operating revenue has more than doubled to ₹47.4 crore, while the loss widened to ₹10.5 crores ₹77.4 lakh in fiscal 2022.