From Softbank to Goldman Sachs: Explaining the Beeline of Foreign Investors to India
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From being the third largest start-up ecosystem in the world to boasting of new unicorns being added to the list every other day, India has the world’s attention for being the next big hub of technology. So it comes as no surprise that internationally renowned names are parking their money in Indian start-ups and are rooting for their growth.
The Recent Headliners
Global players like SoftBank, Tencent etc., have long been investing in Indian startups. While Indians can be happy about the growing number of Indian unicorns, it’s actually the world’s largest technology investment firm Softbank that can claim to be a part of their success. Son had announced that he would be pumping in $10 Billion into the Indian start-up ecosystem by 2024. But its 2018, and Son has already invested over $8 billion on Indian start-ups.
In a report last year, US investment bank Goldman Sachs had said that they are looking to invest about $1 billion in India. Reports also suggested that they were looking at investing in early stage fintech start-ups. Since then, it has also made a few investments across the country like home rental startup NestAway. Now, Goldman Sachs has invested in the home design company Livspace.
Earlier, Warren Buffet’s Berkshire Hathway invested in India’s unicorn Paytm. Paytm raised $300-350 million from Berkshire Hathaway, reportedly giving the latter a 3-4% stake in Paytm.
BabyChakra too got Mark Mobius and Rajesh Sehgal-backed Equanimity Ventures Fund on board for investment.
Grabbing the Market Opportunity
The Indian ecosystem offers multiple opportunities to these top investment firms. Anuj Srivastava, Co-Founder and CEO, Livspace and Ramakant Sharma, Co-Founder and COO, Livspace, explain how they got the global investment bank Goldman Sachs interested in them.
One of the reasons that got the investment bank interested is the market opportunity in home interior and renovation market. The home interior and renovation market is a highly fragmented market—made up of single, small and mid-sized players—the world over. “In top 12 Indian cities alone, it is poised to become a $23 billion+ market by 2022. Globally, the market is worth hundreds of billions of dollars. The opportunity for a big player to emerge and capture a large chunk of this unorganized market is imminent. Livspace holds the potential to emerge as a multi-billion dollar brand,” said Srivastava.
Meanwhile, Niladri Mukhopadhyay, a Managing Director at Goldman Sachs in a statement said, “This investment is in line with our focus on backing excellent management teams that uniquely address the needs and aspirations of India’s growing middle class.”
The Promise of Scale
With India’s turn to digitization and the growing acceptance of apps even in Tier II and III cities, along with the Indian government’s encouragement of technological advancement, there’s an opportunity to scale too here.
In the case of Livspace, banking on an investment from Goldman Sachs also meant that they had to showcase growth across all business metrics, while also proving that the business was scalable. Having already shown the market opportunity, which meant that the room was for growth, it now turned to show their growth potential in revenue and business reach.
“We’ve registered over 400% increase in annualised gross revenue in the past 18 months and our contribution margins have almost doubled. At that efficiency, all our previously launched metros areas are unit economics profitable i.e. the company is making money at the order level after deducting all direct costs including marketing,” said Sharma.
Earlier this year, Policybazaar had joined India’s unicorn club list. The leading online insurance aggregator in the country recently signed for an over $200 million Series F investment round led by SoftBank Vision Fund. Yashish Dahiya, Co-founder & Group CEO, EtechAces. had said that SoftBank’s culture of backing disruptive businesses and industry leaders with long-term capital investment gels well with our own values and vision of creating a transparent and empowering financial products marketplace. “We hope to gain a lot from their global footprint and experience,” he had said in a statement.