Mar 20, 2025

House of cards: Roll-up ecommerce model stumbles as founders reclaim brands amid funding struggles SECTIONS By Rate Story Synopsis Overvalued acquisitions, financial mismanagement, and unmet promises have led to founders buying back brands at a fraction of the original price, raising doubts about the sustainability of the roll-up model. This has triggered a wave of legal disputes and financial restructuring in the industry. ETtech (L-R) Darpan Sanghvi, founder, Good Glamm; Ananth Narayanan, founder, Mensa; Nitin Agarwal, founder, GlobalBees Deep Bajaj and Mohit Bajaj, founders of the feminine hygiene brand Sirona , believed they had struck the perfect deal in 2022 when the Mumbai-based Good Glamm group acquired a stake in their startup. At the time, Good Glamm was on a buying spree, aggressively acquiring brands to build a direct-to-consumer empire. Backed by a billion-dollar valuation and eager investors, the roll-up ecommerce model seemed unstoppable. Now, here’s the twist: The brand they once sold for Rs 450 crore was now up for grabs for just Rs 150 crore! The reason: Post-acquisition, Sirona’s sales dropped to one-eighth of its peak as it struggled under Good Glamm’s broader beauty-focused portfolio. Financial difficulties, including salary delays and disruptions in its vendor network, further strained operations. The Sirona founders issued legal notices over delayed payments and unfulfilled deal terms before renegotiating the buyback at a fraction of the original price. Strategic misalignment, cash constraints, and operational challenges led to the failed acquisition, allowing Sirona’s original team to reclaim and rebuild the brand. Live Events The story of the Bajaj brothers is not an anomaly. Across India’s roll-up ecommerce sector, founders who once celebrated lucrative buyouts are now reclaiming their businesses—often at a fraction of what they were originally acquired for. Other than Sirona, mother and baby care startup The Moms Co. along with investors from the Indian Angel Network (IAN) had also issued default notices to Good Glamm last year for failing to make final payments, while Good Glamm initiated arbitration proceedings against IAN. The legal cases were subsequently withdrawn after Good Glamm completed the acquisition in 2024, three years after announcing the deal. The aggressive acquisition spree that defined 2021-22 has given way to a reckoning, as firms that once promised scale and efficiency are now downsizing, restructuring, and in some cases, fighting to survive. Good Glamm, Upscalio and Goat Brand Labs are now grappling with challenges like stalled growth, layoffs and a dwindling funding pipeline. Bigger players such as Mensa Brands and FirstCry’s subsidiary GlobalBees are focusing on a few key brands within their portfolio to streamline costs. ETtech Source: Tracxn 10Club, which changed its model from a roll up ecommerce firm to a D2C brand last year, is on the brink of shutting down, as reported by Mint on March 19. Between 2021 and early 2022, these roll-up firms collectively acquired nearly 100 brands, aiming to build a “house of brands” by leveraging economies of scale, centralised marketing and supply chain efficiencies. However, the anticipated growth and margin expansion have failed to materialise, leaving the model under serious scrutiny. Brands return to founders In February 2025, when Good Glamm sold Sirona, they also divested its digital media arm, ScoopWhoop , which has since been mired in legal disputes. According to people with knowledge of the matter, ScoopWhoop’s cofounders—Rishi Pratim Mukherjee, Sattvik Mishra, and Sriparna Tikekar—have taken legal action against Good Glamm over unpaid dues. In their lawsuit, the founders, who were terminated from the firm in 2022, claim they were promised a cash component and employee stock ownership plans (Esops) worth Rs 17-20 crore as part of the acquisition deal but received only a portion of the agreed amount. Noida-based Pebble, a lifestyle electronics brand acquired by Ananth Narayanan’s Mensa in 2022, is in talks to be bought back by its founders Ajay and Komal Agarwal, said one of the persons who did not wish to be identified. In April 2024, footwear firm Trase’s founders bought back their brand from Upscalio. Meanwhile, Nehal Shah, the founder of Hestia, a kitchen appliance brand known for cold press juicers and vacuum blenders, is still awaiting payments from Upscalio, which owes him an additional Rs 30 crore as part of the original acquisition terms. However, with Upscalio facing potential insolvency proceedings initiated by lenders Vivriti Capital and Northern Arc at the National Company Law Tribunal, the payment remains stuck. “Startups experiencing rapid growth can be unpredictable. One rough quarter might put your deal at risk. If you’re selling to one, try to cash out fully rather than relying on future payments. A structured transition is fine, but deferred payouts (earn-outs) can be uncertain. Even with larger companies, if an earn-out is part of the agreement, push for as much upfront payment as possible and treat the rest as a potential bonus, not a certainty,” said Deep Bajaj. Problem statement Investors and industry experts say that during the peak funding cycle of 2021, roll-up firms rushed into acquisitions, often overpaying for brands that didn’t justify their valuations. “There was a lot of capital chasing a limited number of brands,” said an investor familiar with these firms. “Many acquisitions were made at inflated prices under the assumption that brands would grow into their valuation over time. That didn’t happen.” Besides, the roll-up model’s challenges stem from flawed brand selection, an over-reliance on leverage and an inability to drive organic growth. “The fundamental hypothesis was that if you have a strong central team, access to capital and the ability to create economies of scale, you could generate better returns,” said an investor. “But what played out was quite different—some brands were overvalued at the time of acquisition, and the expected improvement in margins never happened.” Unlike venture capital portfolios, where a few winners can offset the losses from weaker bets, roll-up firms need all their acquired brands to perform at a reasonable level. That didn’t happen. Besides, unlike venture-backed startups, which primarily rely on equity funding, roll-up firms layered debt on top of equity to finance acquisitions. When revenues failed to keep pace, the high debt burden became unmanageable. One of the core issues plaguing roll-up firms is that many of the brands they acquired were either loss-making or too small to generate meaningful revenue. However, firms still expected these acquisitions to scale up quickly, which did not materialise, exacerbating financial struggles. “There is a broad spectrum of brands that were acquired by these companies. Each of them bought 10-25 depending on their scale. Thus, included some ‘hot’ deals which were expensive and some which were middling or struggling and hence were at attractive prices. Across the board, the assumption was that operating performance will improve due to economies of scale, concentrated procurement and marketing efficiencies. But this has not happened in line with expectations,” said an investor in these firms. Funding squeeze Good Glamm, which raised $135 million from investors including Prosus and Warburg Pincus, was aggressively acquiring brands in 2021-22. However, the company has been struggling to raise fresh capital, even as it remains in advanced talks for a new funding round. On January 29 , representatives from investment firms Accel, Prosus Ventures and Bessemer Venture Partners resigned from Good Glamm’s board, following a cash crunch, salary delays and layoffs. “They (Good Glamm) are in fairly advanced stages to close in equity financing. But it's not going to be a one-time cure,” said an investor familiar with the matter. “My read is they’ll get some capital, but it’ll take a couple of years for this to play out fully… Because the business and margins fundamentally have to improve. Also, growth has to come back.” Good Glamm also witnessed several high-profile exits. Sukhleen Aneja, CEO of The Good Brands, the direct-to-consumer vertical of Good Glamm, left in May 2024 to join omnichannel beauty and fashion retailer Nykaa. Prior to that, cofounder Priyanka Gill transitioned to a venture partner role at Kalaari Capital before launching her own lab-grown diamond brand, Coluxe, while another cofounder Naiyya Saggi left the firm to launch her own startup 'Edition' in the consumer electronics segment. To improve liquidity, Good Glamm also explored selling Organic Harvest and The Mom’s Co., but high liabilities on these brands’ books made deals difficult to close. Meanwhile, Goat Brand Labs is racing against time to secure capital while GlobalBees has pivoted towards building its own brands in categories such as car maintenance and small furniture, reporting Rs 1,209 crore in operating revenue for 2023-24. With financial pressures mounting, the viability of the roll-up ecommerce model in India is now in question. While some firms such as Mensa and GlobalBees have managed to survive, others are struggling to stay afloat. “The model itself is not inherently flawed,” said a venture investor familiar with the sector. “It just needed better execution. If you can control margins, scale brands efficiently, and manage leverage well, there’s still an opportunity for success. But for most companies, the road to recovery will be long.” The difficulties faced by India’s roll-up ecommerce firms mirror similar struggles worldwide. In the US, Thrasio, one of the first companies to popularise the ecommerce aggregation model, declared bankruptcy due to excessive debt. Thrasio had secured $3.4 billion in funding and generated more than $500 million in revenue in 2020. However, its rapid expansion through acquisitions, combined with a post-pandemic slowdown in ecommerce, ultimately led to financial troubles. “It’s a classic case of taking too much on your plate and making commitments assuming funding will come... And then the capital never comes in. Also, there was operational and financial mismanagement, with not-so-great planning and even worse execution of the roll-up firms,” said a startup founder, who did not wish to be identified. Read More News on