Rajat Tuli (left) and Rahul Anand, co-founders, Ustraa, an online brand offering men's grooming products.
Image: Madhu Kapparath D
unkin Donuts, Connaught Place, 2012. “Can we please pay for the coffee?” Rajat Tuli and Rahul Anand happily volunteered to foot the bill. The breakfast meeting lasted for an hour, Sanjeev Bikhchandani patiently heard the story of the happy-go-lucky friends who started Happily Unmarried in 2003, hustled in the business of selling quirky merchandise such as beer mugs and T-shirts for over nine years, and now for the first-time, the entrepreneurs had their maiden tryst with a big founder and funder. “He [Bikhchandani] was impressed with our story,” recalls Tuli.
The reaction was indeed impressive. Just a few days ago, the founder of Info Edge had a harrowing time enduring the drab presentation pitch of Tuli and Anand at an investment meet at Sheraton Hotel in Delhi. The founders of Happily Unmarried had built a cult following among the youth for their funky products, irreverent attitude and wacky wordplay. Though Tuli was convinced that Anand made a good presentation, the response from the audience was shockingly contrary to his expectations. “There were no giggles, no laughs, only long straight faces,” he recounts.
For the founders, who always had an enchanting way with words, the reaction was disappointing. Bikhchandani, who knew a bit about the founders because his daughter was keen to do a summer internship at Happily Unmarried, felt obliged to offer his advice to the hustlers after the event. “Normally, I see great presentations and bad business. But you guys had a lousy presentation and seem to have a decent business,” Tuli recounts Bikhchandani’s feedback. A 20-member team, a Rs5 crore-business, and an imposing fan following, the bootstrapped venture had a sedate growth till 2012.
In spite of their perpetual juggling act with their fragile financial state, and intermittently reaching out to family and friends for precious dollars—Happily Unmarried raised Rs30 lakh over two years—the founders had more than what was needed to buy Bikhchandani a coffee. The Info Edge biggie, though, made a priceless gesture. “Pay when you are profitable,” he smiled, decided to back the venture, and dished out a few invaluable nuggets: Take the business online, be more focussed, put a full stop to the bohemian lifestyle and get rid of fears.
Three years later, in 2015, fear resurfaced in a debilitating form. “Kaisey bechenge? Kaun kharidega?
Production kaisey hoga [How will we sell? Will there be buyers? How will we manufacture?]… the founders wondered as they mulled getting into the men's grooming business. It was a Catch-22 situation. Due to the nature of the business—capital intensive and heavily-inventory led—Happily Unmarried was about to run out of the money. And the grim reality was that the status quo was not going to change in the future as well. There was another truth that haunted the entrepreneurs. In spite of 12 years of business, Happily Unmarried couldn’t scale, Tuli and Anand have been using equity money to fund the inventory. The writing was on the wall. Happily Unmarried was about to run out of money. Also read: It's actually a good time to invest: Sanjeev Bikhchandani
No Room for Delhi Guys!
Back in 2003, the Hyderabad-based IT company—where Tuli and Anand worked—went bankrupt. The firm ran out of money, the friends didn’t get salaries for five months, and the duo decided to start their own venture. The business idea came from the pain of hunting accommodation for themselves in Hyderabad. Two unmarried guys became almost untouchable for prospective landlords. “Nobody gave us a room,” recalls Tuli. And nobody gave any room for singles from Delhi. The flawed perception of Delhi guys being loud, rogue and nuisance played against the friends. The duo, hence, decided to dabble into a business which would cater to the unmet needs of the youth. “Let’s provide them with accommodation, furniture and meals,” was the clarion call.
The beginning was interesting. Running low on funds for months, they pawned their office laptops, got around Rs50,000, paid Rs10,000 to juniors who worked under them, and used the remaining amount to make a new start. The first act was a hack, or you might call it a street-smart move. The friends got a bunch of fancy visiting cards, which gave an impression of being the founders of a big company. “We couldn’t afford an office, and we needed to impress,” smiles Tuli, who started with real estate rentals and tied up with local brokers. Though there was huge demand, the problem was with supply. Brokers were unreliable, unprofessional and not disciplined. After a few months, the rental business was laid to rest. The next gig was furniture rental, which too didn’t work. Now the friends started experimenting with manufacturing quirky merchandise: Cups, coasters, mugs, lamps, T-shirts, stationery.
The gambit worked. Happily Unmarried had a happy beginning. In fact, quirkiness became a part of the DNA. Sample this. It was the 2003 cricket World Cup, dairy and FMCG major Britannia was planning to make an impact, and Tuli and Anand became the Man Fridays. The idea was to print pictures of cricketers on marbles, which would go along with biscuit packs. “We got it done on four crore marbles,” recalls Tuli, adding that the process was a production nightmare. Over the next few years, Happily Unmarried spread its wings, and the first outlet came up in Goa. “The coolest brand has to be present at the coolest place in India,” smiles Tuli, explaining the reason to open a shop in Goa. Though the business always grappled with shortage of capital, the gritty friends somehow manoeuvred their way. The journey continued, the business meandered, and the friends had nothing to complain about. “Mazaa aa raha tha [We were enjoying],” says Anand. Though the outcome was not massive, the hope of something eventually coming out of the journey was intact. “We never bothered. We never panicked,” he says.
Meanwhile, in 2015, an alarmed CFO pressed the panic button. “This can’t go on for long,” he warned. The friends scrambled to look for a survival route. Since a chunk of the customers of Happily Unmarried were male, the founders decided to widen their play. Beard is what they spotted on most of their customers, and the duo displayed their beard mentality. “Everybody has a beard, but there are no products for it,” they argued. From T-shirts, bags, mugs and coasters, the founders switched to beard oil, beard wash, face wash and shaving cream. A small manufacturing unit on the outskirts of Delhi-NCR was taken on rent, and small batches of products under the brand Ustraa were rolled out in August 2015.
Also read: Sanjeev Bikhchandani: From pioneer to messiah of India's internet startups
From Cusp to Ustraa!
The experiment was a stunning success. In three months, Ustraa was selling more than Happily Unmarried. Buoyed by the initial results, Tuli reached out to Bikhchandani with two sets of news. First, the investors were not informed about the gambit. “So, we had to tell them about Ustraa,” says Tuli. Second, the co-founders had exhausted all the remaining capital into Ustraa. Now, they didn’t have money. “We also needed to inform them about us running out of money,” he says. Bikhchandani was elated. He saw the ‘Naukri’ moment in Ustraa. The seasoned founder-investor advised the friends to shut down Happily Unmarried, and double down on Ustraa. The friends displayed razor-sharp agility, started a new innings, and hoped to break the past cycle of perpetually leading a cash-strapped life.
Destiny, though, whipped up a different plan. In early 2016, a marquee venture capital (VC) fund evinced interest to invest in Ustraa. The talks went smoothly for a few months, paper work got underway and the deal was about to be inked. For a company which had negligible gas in its tank, the impending funding was nothing less than a lifeline. Unfortunately, the term sheet didn’t come. “They backed out without citing any reason,” says Tuli. The setback was massive, Ustraa slowed down its aggressive marketing and expansion plans, and the hunt for new investors started.
Towards the end of the year, came another jolt. In November 2016, India declared demonetisation, which was a fatal blow for the fledgling startup. Reason: Cash on delivery got disrupted, and the business nosedived. For the next few months, the startup had a painful journey but it somehow survived. Early next year, it again hit the market for funding. A large chunk of VCs was not interested in the story of men’s grooming. In fact, they never saw a big market. Small opportunity and tiny TAM (total addressable market) ensured that the funders stayed away from the category and Ustraa. Wipro Consumer Care, somehow, sniffed an upside. It reportedly invested Rs50 crore and picked up a 20 percent stake. The amount, though, came in tranches. Ustraa, unfortunately, needed big money, and bulk money. It didn’t happen.
Two years later, it was the same old story. Ustraa was back to square one, and the founders again hit the deal street towards the fag end of 2019. This time, there was a fund which was interested. Talks progressed well, and the deal was about to close in the first week of March 2020. There was a delay of one week, though. And then came the pandemic. Ustraa again ran out of money. The investor backed out. Like others grappling to find a way to survive, Ustraa started making sanitisers, which gave it some oxygen for a few months. Once the first wave subsided, the investor came back, but with a new and radically altered term sheet: Half the money, half the valuation and double the stake. Nothing happened.
Next year, there was a new opportunity. In fact, it was surreal. “It seemed too good to be true. And in reality, it was too good to be true,” recalls Tuli, who was stunned with the ‘obscene’ acquisition offer. Around October-November of 2021, Ustraa was striking a revenue run rate of Rs6 crore a month, which translated into Rs72 crore a year. The offer on the table was around Rs490 crore! “We were getting 7x. Everybody was happy,” says Tuli, adding that it was a cash and stock deal.
Curse of Staying Unmarried
The marriage was about to happen, and the elated founders went berserk in business celebrations. A company which had till then been frugal in marketing and advertising pressed on the gas pedal, roped in a brand ambassador and spent a few crores in chasing topline. Meanwhile, the deal took three months to close. In the spring of 2022—March—the startup world saw a dramatic change in weather: Funding weather. The buyer chickened out. Ustraa again remained unmarried! “Our timing and luck suck,” says Tuli. There is a joke, he lets on, that if one wants to know about the start of the bad times in the startup ecosystem, one just needs to find out when Happily Unmarried founders are raising money. Bad luck persisted. Bad timing continued. Ustraa was losing its edge. Also read: Razor-sharp: Wipro Buys More Stake In LetsShave
Towards the middle of last year, the co-founders again started scouting for funds. The signals were mixed. Sample this. On one day—within 24 hours—Tuli and Anand met three top VCs, and all had different messages. “Just be online and chase the topline,” said the first one. “Only focus on offline. Online days are over,” reasoned the second VC. “Beef up your presence on the marketplace and chase topline,” was the advice from the third. “We didn’t know what to do,” says Tuli.
Meanwhile, Bikhchandani tells us what the founders did, and nobody knows. “Both of them pledged their wives’ jewellery and homes twice,” reveals the founder and investor. “We bailed them out twice,” he says, adding that there was a time when he had written them off and told them bluntly that he would not invest more dollars. “And suddenly they launched men’s grooming and then we gave them more money,” he says, adding that the founders always displayed an amazing level of commitment, passion and honesty. “They've had three or four near-death experiences,” he says. “But they bounced back every time. Remarkable resilience.”
In June this year, VLCC bought Ustraa reportedly for Rs250 crore. Contrast what they had on table last November: Rs490 crore! Commenting on the move to sell out, Bikhchandani points out towards the tough environment for fundraising, and justifies the move. “They are not cashing out. So, this thing gives them an opportunity to fulfil their destiny,” he adds.
Tuli, meanwhile, is excited about the new innings. Carlyle, the new owner, believes in men’s grooming space and is willing to put in dollars as the market grows. “It’s a very big thing for us because we believe in the men's grooming space,” he says, adding that the co-founders are not exiting the business. “We are getting more involved. I see a new energy and new hope,” he says. VLCC, he underlines, is the place where Ustraa can meaningfully grow. But does he have any meaningful regret? The friends had a rough 20 years in entrepreneurship. Tuli gives a peep inside his heart. “If we had big money in the bank, we would have approached our business differently and would have been far bigger than what we are now,” he rues. For the founders, the new innings, hopefully, will not be on a razor’s edge.
“But have you paid for Sanjeev Bikhchandani’s coffee yet?” I shoot the last question. Tuli smiles. “It’s coming soon,” he signs off.