I just got off the phone with Justin Silver, the co-founder and COO of Aavrani. He reported significant progress on several fronts.
We introduced Aavrani — a beauty company rooted in Indian tradition and rituals — to First Stage Investor subscribers a little more than two years ago.
Aavrani has come a long way since then. Revenues have grown from $1 million to nearly $5 million this year. The company has increased its revenue by stepping up marketing. It recently added Amazon to buttress its direct-to-consumer marketing efforts.
Beginning next year, the company will shift its priorities to the expansion of its product line. Aavrani had four products when we first introduced the company to you. Now it has five. By this time next year, it aims to have 10. It plans on adding body care and hair care products to its skin care lines.
The company’s metrics look great. It boasts gross margins of 84% and a customer acquisition cost to lifetime value multiple of 20x. I consider anything above four to be good and anything above 10 to be great. Aavrani also has a repeat purchase rate of 31%. The industry standard is 15% to 18%.
These metrics point to two important things. One, the company has strong sales growth potential. That’s been its history — and it should continue. And two, revenue growth should readily turn into profits.
But that’s not going to happen right away. The company is redirecting its potential profits to bolster its marketing efforts. Aavrani is going from a single-barrel growth strategy to a double-barrel one. It’s increasing products AND marketing spend. Justin says that revenue will reach $11 million to $12 million next year, more than double this year’s sales performance.
But as investors, should we believe him?
Growth is never as easy or straightforward as founders would like us to believe. There’s no denying that a lot of factors are going Aavrani’s way. As investors, we should appreciate all the positives.
But what I’d like to see now is more success in reaching out to non-Indian and non-Asian consumers in the U.S. Right now, Aavrani’s revenues are equally split between Asian and non-Asian buyers. But there are a lot more non-Asian consumers in the U.S. than there are Asian consumers. For Aavrani to reach its fullest potential, it needs to change those splits to roughly 80/20 (my estimate, not Justin’s). To be clear, the 80 percentile comes from America’s non-Asian population.
The company will use social media and its growing horde of “micro-influencers” — social media content creators with around 1,000 to 1 million followers — to raise awareness among those populations. Justin is confident that this can be accomplished.
Aavrani is currently raising on Republic at a $24 million valuation cap. Two years ago, investors had the opportunity to invest at a $5 million cap. If you invested back then, you should be pleased today. For those of you who didn’t invest back then, this could be your last chance. You’d be investing in an opportunity that is greatly derisked from where the company was two years ago.