This investment banking veteran found midas touch in Indian ecommerce

Nykaa founder Falguni Nayar

For 27 years, Falguni Nayar worked hard to become one of the most successful investment bankers. And it paid off. After graduating from the Indian Institute of Management (IIM), Ahmedabad, she joined the mergers and acquisitions division of A F Ferguson in 1985 and led several high-profile capital market deals in Mumbai. In 1993, Falguni joined Kotak Mahindra Finance to head the mergers and acquisitions division and went on to become the managing director and CEO.

In 2012, Falguni quit her high profile finance career to launch her own startup.

While Falguni was scouting for opportunity in the ecommerce space, she joined Singaporean state investment company Temasek – which has invested in several Indian internet companies including Just Dial, Zomato, and Snapdeal – as its independent advisor. Around the same time, she launched her own ecommerce site, Nykaa, a store for beauty and wellness products.

Ecommerce, such a beauty

“When I was starting with ecommerce, I carefully chose beauty and wellness because there was not too much competition. The other spaces like electronics and fashion had too many players trying to address them. I consciously chose an area that was small but expected to grow and a bit difficult to do,” says Falguni.

Today, she revealed that Nykaa has secured US$9.5 million in a series B round led by the TVS Shriram Growth Fund. Other investors who participated in this round include Techpro Ventures and the family office of Atul Nishar and Harsh Mariwala. The company raised US$3.2 million in series A funding from private investors in July last year.

“Nykaa has hit upon a formidable combination: the fast growing beauty and wellness segment in India, together with the rise of internet retailing. With a ripe market and Falguni’s extensive experience, Nykaa has the potential to be a significant success story,” says Dalip Pathak, one of the angel investors of Nykaa.

With this deal, Narayan Ramachandran, former country head of Morgan Stanley India, who has worked with luxury retail businesses, will join the Nykaa board.

Lakme, L’Oreal, L’Occitane, and more

Nykaa is expanding its private label

Nykaa offers a selection of makeup, skincare, haircare, fragrances, bath and body, and luxury products for women and men. One of the first brands that came on board was Lakme. It also introduced luxury with brands like L’Occitane and Estee Lauder.

“I worked very hard to convince the luxury brands that India needs retailers that travel from Dove all the way to the other luxury products. If you have a retail brand that only caters to luxury, it may not have the adequate critical mass to succeed,” says Falguni.

The startup has an inventory-led model where it sources products and stores them in its warehouses before shipping items to users. Some startups try to avoid that model as it involves so much cash and so many overheads. However, Falguni realized that most fast moving products in the beauty space are often out of stock in retail stores.

“A big centralized warehouse which can be kept current with all the new products and adequate stock is the way to go in the beauty and wellness segment,” she explains.

Beauty in the details

Virtual makeover, anyone?