Why We Chose Nykaa & How We Approached LBB’s Acquisition
ICYMI, we announced LBB’s acquisition by Nykaa last month 🎉 You can read more about this here. LBB will continue to operate independently, with a continued focus on being a curated lifestyle discovery destination for our consumers, brand and seller partners.
LBB started as a tumblr blog. And we’re Nykaa’s first consumer-tech platform acquisition- we couldn’t be more proud of how far we’ve come! Both Dhruv (our co-founder) and I are first time founders, and we’re incredibly grateful to our teammates, investors, and our incredible community of superfans, users, brand partners and seller partners who have been rooting for LBB’s success.
Our partnership with Nykaa will give us further momentum to be an urban Indian’s definitive platform to discover lifestyle information and shop unique products. Along with this, it’ll give Nykaa an ability to leverage LBB’s content, community and supply building capabilities as it grows its focus on Fashion and Home & Decor. More on this, on our official announcement.
So, why did we choose M&A as an exit strategy, and why Nykaa?
In April 2019, we’d just raised our Series A led by Athera Venture Partners (formerly Inventus), with all of our existing investors participating in the round. We’d grown phenomenally well through the year, had launched ECommerce for mid-long tail of lifestyle brands, went from 0–700 sellers on our platform in 8 months (70% of which didn’t sell on large marketplaces!), and had grown our brand marketing revenue run rate by 100%.
Cut to April 2020- COVID and the lockdown happened, which brought our well-found momentum to a grinding halt. We used the slowdown of 2020 to rejig a few things in our business (unit economics on commerce, categories for commerce, positioning for our consumers.) FY 2022 was ace for us! We were back to pre-covid levels of growth with exponentially better unit economics (75% gross margin on brand & advertising revenue, average commission of 35% on commerce, 10–15x return on spend, CM2 positive.) In fact, by the closing of FY22, we were at 70% revenue growth and 44% loss reduction, excellent brand retention at 60%, and excellent shopper repeat rates at 30%. On the brand & advertising revenue side, our average spends per brand on LBB doubled; and we found shopper-market fit for LBB’s commerce in Home Decor and Women’s Fashion. 80% of the brands that sell on LBB are inbound (our merchant on-boarding team is 4 people!), which speaks to the brand salience LBB has on the merchant side as well.
Around August/September of last year (2021), we had a couple of companies reach out to us to explore synergies. We didn’t take any of these seriously at first. But through a few preliminary conversations, what became clear was that almost every ECommerce (and related) company is thinking about diversifying their supply, diversifying seller monetisation, prioritising user retention and engagement as a long-term moat, and are (back to) thinking about the top 20–30 million customers in India. As a platform, team and company, we have exactly these strengths, and that got us thinking more strategically about how we could leverage our learnings and capabilities.
And that brings me to…
2. Why Nykaa
We interacted with a handful of companies, and had multiple term sheets and terms under discussion at different points in the process.
We chose Nykaa for multiple reasons- most significantly, that they’re the right long-term bet for LBB. Apart from their stellar IPO listing, powerful business and brand, Nykaa values and understands consumer engagement, evident in everything from their visual merchandising to brands they on-board, their social media & comms, approach to content and more. Especially with Nykaa Fashion’s focus on ‘Hidden Gems’ and Nykaa’s recent collaboration with Estee Lauder on Beauty&You, they have a strong focus on building India’s emerging brands and businesses, a cohort that (I can safely say) no one understands better than LBB and our team. Nykaa also has an excellent track record of scaling the companies they acquire.
For LBB, being under the Nykaa umbrella gives us the opportunity to grow leaps and bounds as a platform, drive unparalleled scale for our brand and seller partners; and together with Nykaa, become the largest platform for leading global and Indian brands to engage with a high intent audience. Dhruv and I will continue to build LBB with our rockstar teams, and also work closely with Nykaa’s teams as they double down on content and community as a conduit to commerce, and powering growth for India’s emerging lifestyle brands.
Many, many thank yous
Dhruv and I are extremely grateful to our investors and board members- especially Rutvik Doshi (Athera Ventures) who has been incredible to work with through all the good and chaotic times. We’re super grateful to Sanjay, Karthik and Ashish from Blume Ventures for giving us their guidance through this process no matter what time of day or night. Karan Mohla (formerly at Chiratae) has been our go-to person for planning, and we’re glad to also have Saketh Katikaneni who worked with us closely over the past few months. Alok Mittal has been our go-to person for brainstorming (Fun fact: LBB Mastershop, our B2B offering, was developed with his inputs and insights!) Rishabh Mehta has helped us navigate many sticky situations and has seen our pivots, ups, downs and wins since 2016! Ashvin Chadha, though not on our board but an investor, is our favourite person to talk to for all things consumer brands. Many thanks to all our investors from IAN! Vinod Murali’s been a friend and guide, and helped us navigate the past few months. Our board meetings were equal parts work and equal parts fun, and it’s been a privilege to build LBB with our investors. We hope we get an opportunity to do this again.
We are incredibly grateful to our phenomenal angel investors- LBB would have not gone anywhere had it not been for Rajan Anandan’s cheque in our business back in 2015. Aseem Vadehra, who I met at a bookstore (fun fact!), was our first angel investor, and we’re grateful to him, Gurcharan Singh and Amit Vadehra for backing us first. Massive thankyous to Aashti Bhartia, who we built Artisans Bazaar (a popular LBB IP) with, Sachin Bhatia, who is more a sounding board and friend now, and Niraj Singh, who is the most resilient founder I know and had helped us with many of our past pitches. A few of our angels exited LBB in 2019, and have given their support to us regardless.
We are also incredibly incredibly thankful to Ireena Vittal, Mona Gandhi, Rajeev Sathe and Deepak Abbott, who through the years have given us their advice and inputs as believers in our brand, mission and our product.
We are most grateful to our users, our brand partners and our merchant partners who have powered through our trials, experiments, new launches, endless pitches and campaign ideas, and trusted us with building their brands. Thank you for being patient with us.
Finally and most importantly- LBB’s growth rests on the shoulders of our incredible team. We’ve approached every problem with curiosity, set the standard for what great content can do, built phenomenal products for our consumers and merchant partners, and pushed the boundaries for how and where discovery can take place. We’ve won, lost, laughed, cried, tried, failed, learnt, succeeded, and we’ve done this all together. Onwards and upwards, Team LBB!
For My Fellow Founders
To founders reading this- In an increasingly competitive and uncertain global environment, collaboration can be a phenomenal vehicle to build a category and achieve collective success. I’d encourage more companies on either side of the table- sellers and acquirers- to look at M&A as long term value creators for your companies. Raising fat rounds at fat valuations is not the only way to build a great and large company!
That said, M&A can be a long, confusing and exhausting process. If you’re a founder thinking about selling your company and need help, I’m more than happy to share my experience. I had my founder friends to talk to through this (thank you Arpita Kapoor, Vivek Prabhakar, Raghav Verma, Varun Duggirala & Sachin Bhatia for being the nicest founder friends one could ask for; and thank you Kunal Bahl and Kunal Shah for helping us earlier on with our decision making.) I will be happiest to pay it forward.
Suchita