Breathing Life Into Funeral Service Startups

Despite profitability and decent cash flow, investors remain wary of the $3.5-billion Indian funeral services industry.

<div class="paragraphs"><p>A funeral pyre in an Hindu cremation. (Source: Neil Bussey/iStock)</p></div>
A funeral pyre in an Hindu cremation. (Source: Neil Bussey/iStock)

"I wouldn't want to make money off someone's death."

Those were the words of Shark Tank investor and BharatPe's controversy-mired founder, Ashneer Grover, when he rejected a chance to invest in Bengaluru-based Anthyesti Funeral Services.

On the episode, Anthyesti Founder Shruthi Reddy stood stoic as everyone from Namita Thapar to Peyush Bansal showed great hesitation in investing in her business, which was operating at gross margins of 50% already.

Reddy, an Indian Institute of Management Bangalore graduate, founded Anthyesti in 2016. The company provides repatriation of ashes or remains from other countries, offers air ambulance services or vehicles, such as hearse vans, and arranges funeral and cremation services. Despite profitability and decent cash flow, investors remain wary of this industry, of which Reddy pegged the size at about $1 billion.

Anthyesti gets about Rs 1–1.5 lakh in revenues a day across all segments of business.

It has raised about $21,000 (about Rs 17 lakh) from the incubator of the Ambuja Neotia Group, a Kolkata-based real estate conglomerate, and Padup Ventures, another accelerator, according to data by Tracxn Technologies Ltd.

Reddy has recently raised another round of funding from a Kolkata-based angel investor, as she revealed without disclosing more details.

To be sure, Reddy is one of a very select group of founders who have managed to attract investment in this space. The nature of the funeral service industry is such that attracting investment is difficult.

"The angel investor who backed me was against popular public opinion. She got in touch with me post-Shark Tank," Reddy said.

But that's a rarity. The popular public opinion that goes around social media is that making death a business makes people "vultures."

"Most investors feel it’s not scalable, and hence, not VC-fundable. Another major issue is marketing. It's one of the biggest challenges. Thirdly, many have expressed some sort of moral or ethical dilemma while saying no," Reddy said.

Another issue with this industry is that there are no entry barriers, according to Reddy. "It's an aggregation-based business right now. Anyone can come in and aggregate services tomorrow. Companies in this space are not tech-enabled. We operate on an asset-light model, connecting services and clients."

Anthyesti is the second-largest player in this space. Reddy admits that there's a huge gap between the number 1 and number 2 companies.

She is referring to Last Journey, the funeral services arm of Ferns and Petals. It's a peculiar expansion for the brand that usually likes to associate itself with "celebrating special moments" with its two-hour cake and flower delivery service.

Expansion sprouts from personal experience, said Rishabh Jalan, chief executive officer of Last Journey. "It all started about two and a half years ago, when we had the death of one of the relatives in the family. When we saw how it was being handled, we realised that a lot more could be done in this sector. In the past 25 years, FnP's journey has also been centred around organising unorganised sectors. So we took this decision."

The Delhi-based Last Journey now operates in six cities in India. "It was very slow initially; people didn't warm up to the idea. Now, we've grown to servicing an average of 25–30 cremations a day." In comparison, Reddy's Anthyesti does about three a day.

Last Journey also operates in the U.S., Canada, Australia, Dubai, the U.K., and South Africa, where it provides human remains repatriation primarily to non-resident Indians.

They also follow an asset-light model in all cities except Delhi, where they operate via their own assets, such as hearse vans and freezer boxes. "In other cities, we have an aggregator model. It keeps us lean, and scaling is easier."

The big boost for Last Journey came during the pandemic. They hit 100–150 cremations a day. "It was a big boost for us as a company. It was during that time that people realised that such a service was needed. It gave us validation."

The company is also planning to raise funds soon. "We're in talks with investors. A majority of them have responded positively to us, especially when they understand the size of this industry. It’s a $3.5 billion industry in India, with 11,000–12,000 deaths daily in Tier-1 cities alone."

It remains to be seen whether Jalan will be successful in raising funds in a space that investors in India don't see much of a future in.

Globally, the story is different. According to data from Tracxn, there are about 200 'death-tech' companies, ranging from operators of platforms meant for sending after-death messages to those offering funeral services to those creating jewellery made from the ashes of loved ones. A report by Research and Markets pegs the industry size at $152.8 billion by 2026, up from $115.4 billion in 2020.

In India, the death care industry stands at just over $3.5 billion, which is a multifold rise from $0.98 billion back in 2008.

Globally, such startups have managed to raise about $253 million to date. But the road is tougher for their Indian counterparts.

Sajith Pai, a senior venture capitalist at Blume Ventures, says he hasn't come across any startups in the space yet. "Low customer life-time value, given these are one-time transactions, or rare, is a signal. You can't pay a lot for customer acquisition. Plus, there are well-established hyperlocal monopolies — a bit like local pandits or pooja brahmins — who are called for any service, such as transportation of bodies."

Unlike the West, where death rituals and customs have high spending value (such as funeral caskets), there is limited spending in Hindu traditions, Pai said.

Anthyesti's Reddy said a change in consumer behaviour and a marked uptick in the quality of services being provided currently will help this sector boom. "We're definitely seeing an uptick in people searching for keywords on Google related to funeral booking and funeral services. People are warming up to the idea of outsourcing rituals related to cremation to a company."

She said the quality of hearse vans or ambulances and the people managing cremations and funerals need to improve. "Being aggregators, we're still sending the same old people with the same old mentality and attitude. Changing that is going to take time."