Source: Financial Express, 13 July 2022
Furniture subscription company Furlenco is planning to launch direct retailing of home furniture and other decor products on its platform as it looks to shore up revenue to be profitable by FY24, a top executive of the firm said in an interview.
Founded in 2011 by Ajith Karimpana, Furlenco offers furniture on monthly and annual rental packages to consumers for their living room furniture, beds, dining tables, study solutions, workstations, and lounges among others. The start-up also offers added services for delivery, assembly, and set-up. It offers two-wheelers, gadgets, and appliances like microwave ovens, LED televisions, laptops, and washing machines on a subscription model.
“As a (rental) company, we have been pushing out newly manufactured furniture and recovering it back from users after the end of the subscription period. We then refurbish this and circulate it back to new users as a circular model. We have understood that some of our more mature users, at a point in time in their life prefer to own their furniture; hence we are now willing to directly retail our furniture products to those customer sets,” said Karimpana in an interaction with FE.
However, Furlenco’s direct retailing philosophy is built around a sustainable circular economy model, where buyers can sell back their furniture to the platform at any point in time either for an upgrade or a cashback in form of user credits.
“Circularity and sustainability of furniture is the core emphasis of the Furlenco model. We realise that when users want access to furniture they plan their expenses depending on the phase of their life. Most bachelors when they start with new jobs, prefer to rent out furniture from us, but users who have a family with children prefer to own their furniture, which we will now be catering to,” added Karimpana
Since its launch in 2011, Furlenco mostly focused on home furniture products which it makes a majority of its revenue from. In FY23, Furlenco claims to be trailing an annual revenue run rate (ARR) of around Rs 200 crore, which has doubled since FY22, according to Karimpana.
To support its expansion strategy into direct retailing, Furlenco aims to add more than 500 new products and another 250 new furniture designs to its arsenal over the next 12 months. The platform also offers a standalone annual subscription model named ‘UNLMTD’ which is specially tailored for families.
With UNLMTD customers can move away from staggered purchases and choose to subscribe to whatever they want at a single fixed price. UNLMTD currently offers two annual subscription plans —Premium and Lite. The Premium Rs 4,999 per month plan allows users to subscribe to more than 15 products and the Lite package priced at Rs 3,999 per month is meant for nine products.
With its existing subscription products alone Furlenco is already netting a positive cash flow of Rs 5 crore per month, according to Karimpana.
“We are generating `5 crore in net cash from operations per month which translates to around `60 crore in annualised cash flow from operations, but we are not profitable yet on the net level. We plan to hit that milestone by the end of the next financial year with a `500 crore revenue run rate target by FY23-24 which we believe will take us to full financial year profitability,” Karimpana added.
To date, Furlecon’s parent company House of Kieraya has raised close to $228 million in equity and debt funding from prominent investors like Zinnia Global Fund, Lightbox Ventures, CE-Ventures, and angel investor Saket Burman and others. Last year, the House of Kieraya brand raised $140 million in a round making it one of the few start-ups to raise a considerable round in the furniture subscription space. A good chunk of the company’s funding comes from working capital loans usually through the way of venture debt, terms loans, NCDs, and revenue-based financing as well.
“At a Rs 200 crore revenue run rate, we are generating about 16-17 crore revenue per month in terms of subscription revenue from customers. We have a history of this transaction for the past 5-7 years, and lenders feel that our financial books are strong enough to provide us with various forms of working capital loans on assets and receivables. As a company, we focus on being non-dilutive, because we knew that in the larger sense, debt is the best method to fund our business,” Karimpana said.