Good Glamm’s search for distress funding sparked exit of three directors in two months

A severe cash crunch at the Good Glamm Group that forced it to consider raising fresh funds at a sharply lower valuation triggered the exit of three of its directors, three people aware of the matter said, since a new round will wipe out their shareholding given their disinclination to bring more money.

The three directors from Accel India, Prosus and Bessemer Venture Partners stepped down from Good Glamm's board across November and December.

Good Glamm is planning to raise capital at a very low valuation which would overhaul its cap table, the people cited above said on the condition of anonymity, as some shareholders are not keen to participate. This is similar to what new-age omnichannel pharmacy Pharmeasy went through in 2020 when it raised capital at a sub-$500 million valuation, down from the earlier $5.6 billion. Earlier, Byju's, once valued at $22 billion, had attempted to raise $200 million at a $250 million post-money valuation.

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"They (the Good Glamm investors) tried everything, including finding a buyer. Now, it is a function of risk-reward — it doesn't make sense to put more money now", one of the three people said, adding the fund-raising would be at "punitive terms" to existing investors. The directors who quit were also worried about the potential impact of the restructuring on their other portfolio companies, both in terms of reputation and regulatory issues, the person added.

Detailed emailed queries to the spokespersons of Accel India, Bessemer Venture Partners, Prosus and Warburg Pincus remained unanswered.

Last March, investors brought around $30 million as part of a rights issue, but the business expansion didn't pan out as anticipated. The direct-to-consumer company had become a unicorn in 2021 after raising capital from investors such as Prosus and Warburg Pincus.

“The company has run out of money, and the promoters are now looking to raise further capital at a near-zero valuation, which will wipe out the existing investors and their shareholding in the company,” the second person said.

Good Glamm needs ₹250-500 crore to settle liabilities and payments to vendors, employees and founders of the companies they acquired, the second person said. “The immediate requirement to keep the lights on is around ₹180-200 crore, and the founder will do whatever it takes to keep the company running, including selling a controlling stake to any incoming investor,” the person added.

Quick round

Plans for a new funding round come barely 12 months after the company raised $30 million from these investors through a rights issue in March 2024. “The idea was to give the company enough runway till it turns profitable. However, as it is nearly out of money and has mounting outstanding payments and profitability is still not in sight, the founder wanted more money, which the investors refused to pump in," the second person said.

According to the second person cited above, the company has explored everything from a merger with larger D2C companies to selling separate brands to raise funds in the last 12 months.

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In response to Mint’s queries, a Good Glamm Group spokesperson said, “Good Glamm received term sheets for a new round of fund-raising in December, and is currently in the last stages of closing the same. We will not be making any comments until after the close of our fundraise.”

The company has been looking to cut costs and cash burn in the last 24-36 months. It has scaled down brands, laid off teams and reduced marketing efforts to conserve cash, the third person cited above said. Mint had reported last year that the Good Glamm Group, a beauty products and content company, hadslashedmarketing expenditure, withdrawn discounts and laid off staff over the past year to achieve profitability.

The Darpan Sanghvi-founded startup saw losses balloon to ₹917 crore in FY23, a 150% jump over ₹362.5 crore in FY22. The company’s operating revenue stood at ₹603 crore in FY23, against ₹211.4 crore in FY22. It is yet to file its FY24 financials.

Multiple verticals

Good Glamm operates across multiple verticals. The Good Brands Co. comprises beauty and personal care brands such as MyGlamm, St Botanica, The Moms Co., Organic Harvest and Sirona, while The Good Media Co. includes POPxo, ScoopWhoop, MissMalini, BabyChakra and Tweak India. The Good Creator Co. serves as an influencer platform alongside The Good Community.

The company saw a series of senior-level exits last year. Sukhleen Aneja, chief executive officer of The Good Brand Co. joined Nykaa. Co-founder Naiyya Saggi stepped back from executive roles to start her own new venture, and Priyanka Gill, co-founder in charge of the group's media business, left to join early-stage venture capital firm Kalaari Capital.

Also read |  The Good Glamm Group completes acquisition of The Moms Co for undisclosed sum

In April, Mint reported that the founders of Sirona Hygiene and The Moms Co., as well as the Indian Angel Network (IAN), had filed default notices against Good Glamm Group which had acquired the two companies in 2021, alleging Good Glamm had not paid the final amounts due to them.

Months later, Good Glamm Group said it completed the acquisition of Sirona Hygiene for ₹450 crore ($60 million) in an all-cash deal. The legal notices were later withdrawn after Good Glamm signed an agreement with Sirona founders and IAN to make pending payments in accordance with the new timelines, Mint hadreported.