What Will Drive D2C Brands In An Evolving Ecosystem? Daylight Capital's Keshav Agarwal Answers

The Indian ecommerce landscape went parched with the funds tap running dry for around two years until green shoots of revival began showing up late last year, yet direct-to-customers (D2C) brands remained verdant, thanks to a booming digital economy.

Despite a 42% slump in investments to $1.5 Bn in 2024, the D2C brands cornered $840 Mn, or 55% of the pie, staying the course to reach $300 Bn by 2030 on the back of rising internet penetration, evolving consumer preferences, and expanding digital infrastructure.

But scaling a consumer brand in today’s climate is far from a straightforward approach. Founders need to navigate capital constraints, rising marketing costs, shifting consumer behaviours and a crowded digital landscape. This is where the role of strategic partners becomes critical – not just to raise funds but also to build sustainable and enduring businesses.

“India’s D2C ecosystem is an endless market that can be disrupted by a brand or an innovator emerging from your very own neighborhood any day,” says Keshav Agarwal. The investment banker founded Daylight Capital to go beyond the spreadsheets to help founders think holistically about products, positioning, operations and scale.

“Our vision is to redefine the role of financial advisors in India’s startup ecosystem and, accordingly, we have positioned Daylight as a long-term partner to D2C founders to help them make smarter decisions not just during fundraisers, but along the way.”

In an interaction with Inc42, Agarwal spoke about his journey, shared insight on the shifting dynamics of India’s D2C market, and argued why Tier II and III cities are coming up as the next frontiers. He also outlined his vision for the future of Indian consumer brands and what it will take to build the next generation of household names.

Here are the edited excerpts from the conversation…

Inc42: Let’s start with your journey. What led you to set up Daylight Capital? What was the vision behind a financial advisory firm focussed on consumer brands?

Keshav Agarwal: I have always been fascinated by startups, their ambitions and the way capital shapes their journeys. After completing my CA in 2021, I stepped into investment banking only to experience the market turn on its head. Within months, the funding winter set in, just as I was preparing the ground to establish myself.

The market wasn’t simply going through a slump, in fact, it was correcting itself. That also made me relook at the role of financial advisory. It couldn’t just be about pitch decks and selling stories to investors, founders needed a partner who understood more than mere financial models, someone who could also think through manufacturing, marketing, branding, sales, hiring, and strategic decisions.

This makes investors more confident about the company and fundraising becomes less of a dreadful process. It is this belief that led me to build Daylight Capital. The thought was to reassure that there will be light at the end of the tunnel.

Inc42: Daylight Capital is specifically focussed on consumer brands. What inspired this and how has your perception of the D2C ecosystem evolved?

Keshav Agarwal: I always wanted to understand what shoppers think, what truly matters to them, and what they don’t really care about. D2C brands may not be solving deep structural problems for the country, but I believe they are liberating consumers from being captive to sub-par products that dominated the market until recently.

India’s D2C ecosystem is constantly evolving. With a growing population, shifting demographics and shrinking distance, consumption is only going to expand.

Inc42: Indeed, the D2C space has grown exponentially in recent years. From your vantage point as both an advisor and a founder, what are the most significant shifts you’ve observed over the past 2-3 years?

Keshav Agarwal: With evolving demographics, it is interesting to see how more consumers are willing to spend on premium products today. There’s a visible shift from legacy brands that were once the ultimate status symbols in India.

At the same time, customers are more informed than ever. Many are holding brands accountable for misrepresenting product ingredients and even use AI tools to scrutinise product labels. This shift in consumer behaviour is forcing brands to rethink their strategies to genuinely engage and retain consumers.

Such rapid changes have also made it increasingly difficult for investors to interpret company data and identify the right brands to back.

Inc42: Many traditional businesses are pivoting to the D2C model. What kind of challenges do they face? What’s your advice?

Keshav Agarwal: The biggest challenge the traditional businesses face while shifting to the D2C mindset is managing the customer journey – from marketing to delivery – is fundamentally different from selling through distributors and retailers.

Companies often underestimate the investments required in technology and logistics and tend to overlook the importance of brand storytelling online. My advice would be to play the long game, focus deeply on consumer insights and leverage their heritage as a strength while adapting to evolving digital behaviours.

Inc42: The Indian consumer is value-conscious. How are successful D2C brands balancing premium positioning with affordability? What strategies do you think work particularly well?

Keshav Agarwal: True, Indian consumers are value-conscious, but that doesn’t mean they seek out cheap products. Successful D2C brands deliver a premium experience while maintaining a sharp price-to-value balance.

One effective strategy is tiered product architecture that offers an accessible, entry-level product to attract consumers, and premium SKUs for those willing to spend more. This draws customers along the product portfolio, while also fuelling the aspiration for higher-end offerings.

Clear storytelling is another strategy. When consumers understand the ‘why’ behind cleaner ingredients, artisanal craftsmanship or superior functionality, they are often willing to pay a premium.

Behind the scenes, leading brands focus on efficiency in supply chain management and marketing spend, passing on those savings to consumers. In India, the winners are those who successfully combine aspiration with affordability.

Inc42: The D2C space is experiencing a considerable number of consolidation deals, with larger companies acquiring niche brands. Do you think this trend will last? Will it reshape the competitive landscape?

Keshav Agarwal: Consolidation is likely to continue. Larger FMCG and retail players have been acquiring D2C brands because of three key advantages – the growing consumer base, strong positioning in niche categories, and the agility in digital-first marketing. For established players, acquisition is often faster than building a brand.

Of course, there’s a change and that’s visible. For D2C founders, it reshapes the landscape in two ways – while it creates exit opportunities, it also raises the bar so that only brands with clear differentiation, loyal communities, and healthy economics attract serious buyers.

But, that’s not all. What we can expect is a two-speed market. Few scaled D2C brands will continue to grow independently, while many well-positioned niche brands will be acquired and integrated into bigger portfolios. Over time, this will lead to a more mature and less fragmented ecosystem with the rise of multi-brand houses.

Inc42: Looking ahead, where do you think growth for D2C brands will come from? Does this evolving future need a unique approach?

Keshav Agarwal: I believe that the next wave of D2C growth will come from Tier II and III cities. These markets are younger, aspirational and increasingly digital, driven by affordable smartphones, UPI and social commerce. While the demand for quality and branded products is strong, consumers here are more value-sensitive and trust-driven. Therefore, the playbook should be tailored accordingly. We can break it down like this…

• Educating and building trust through vernacular content, regional influencers and authentic founder-led narratives.
• Offering smaller pack sizes and sharper price points to lower entry barriers while maintaining aspirational quality.
• Ensuring strong logistics and cash-on-delivery options as convenience and trust are critical in delivery.
• Combining offline touchpoints like shop-in-shops or local pop-ups with digital efforts to bridge the gap.

In summary, Tier II and III markets represent a huge opportunity but success depends on adapting to local behaviours, rather than replicating metro strategies.

Inc42: How do you see India’s D2C ecosystem evolve in the next five years? Which categories do you think are poised for a breakthrough?

Keshav Agarwal: Over the next five years, I see India’s D2C ecosystem maturing from being digital-first challengers to becoming mainstream consumer brands. The ecosystem will mature, with fewer players chasing unsustainable growth and more of them focusing on enduring businesses with loyal communities and profitable cores. Consolidation will accelerate and we will witness the emergence of multi-brand D2C houses.

In terms of categories, I believe health and wellness, global-appeal apparels, clean beauty and functional foods will see breakthrough growth, driven by younger, highly aware and aspirational consumers. The Indian D2C brands will increasingly scale globally as they gain confidence in telling their stories on the world stage.

My vision is of an ecosystem where the Indian D2C brands are not just competing locally but exporting Indian quality, culture and innovation to the world. Founders will not stop innovating until every product used in a household has at least a bundle of strong challenger brands ready to dethrone the legacy players.

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