Investor Chat At Entrepreneur India Summit 2016
2016 has been all about funding and getting the right investors on board.
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2016 has been all about funding and getting the right investors on board. While late rounds have been slow and cheque sizes have diminished, early-stage funding has witnessed lots of investor support this year.
When the going is tough, best to invest?
Sanjay Nath, co-founder and managing partner at Blume Ventures believes that sometimes it's best to invest when the going gets tough. According to him difficult funding season will help segregate the chaff from the best startups in the business.
"We'd like to say that the VC and the funding business is not like fashion wherein fads change every month and it's not our business to predict. However there is a lot of growth in the other India, that is, the enterprise market, whether it's fintech, edutech or SaaS space. A lot of core businesses and IT led businesses are going to get funded. Even in B2C, it's not going to be just pure-play, but a lot of enablers are going to get funded," said Nath. When it comes to his expectations from the government, Nath said that it was too early to talk about the government's initiatives but said that it was very positive that these initiatives were taking place.
Amit Somani, Managing Partner at Prime Venture Partners, spoke about why his firm actively invested in early-stage startups this year. According to him there is great opportunity in fintech and other types of early-stage startups which hasn't changed and hence they have actively invested in 2016.
When asked for domains that the firm plans to focus on for the next 6-7 months, Somani said, "We are very bullish on fintech – disruption of financial services using technology. We are looking a lot on global SaaS and thirdly we are also looking at SMEs that are also beginning to use technology." Sandeep Murthy, Partner at Lightbox, said that early stage doesn't feel the impact of down turn because according to him at an early stage, all you have is an idea and a concept.
"At an early stage, whether the market is hot or whether the market is bad, you are still out there trying to convince people about your idea. In a hot market finding talent might be a bit of a challenge whereas finding money might be easy. I think there are pluses and minuses to any cycle and the thing to remember for any startup, that every cycle is like a roller coaster ride and things will go up and they will come down. The thing to remember is to be prepared and get your house in order to ride the next wave out."
Murthy, like Nath, agreed to the fact that recessions are times to get the best companies built. "Companies that come out of this are going to be very strong with strong fundamentals and going to learn a lot. I think learning is an important aspect of it and are going to execute things effectively," he added.
Is SaaS the new gold in start-ups?
A couple of investors there showed their interest in funding SaaS-based models. On asking what makes an ideal SaaS –based model, Prashanth Prakash, Partner at Accel Partners said, "Entrepreneurs starting enterprise companies really don't need to be good only in product, but a combination of product and online marketing. We have found very few teams which have both the engineering and product sense and at the same time can market this product. The maturity of a team that can build a good SaaS product company will take sometime in our ecosystem. But I think that's where good role models like Freshdesk and mentors come into the picture,"
"I think you are starting to see entrepreneurs go after this space with the right teams and in some cases they need cross-border capabilities. It's not enough if the team can build the product and market it, but it's important that they market it globally. So if one of the founders has not lived abroad or one of the founders has no roots in the western geographies, it's again difficult if he is a first timer in this space," added Prakash.
According to him there are two broad categories of SaaS categories, there are horizontal and vertical SaaS categories. "A horizontal product would be HR that will cater into payroll and other things. Vertical SaaS is an area we at Accel really focus on because we believe these are high-value disruptive opportunities," he further said.
Start-up landscape in India's neighbourhood
Pankaj Jain, Partner at 500 Startups, shared his views on the start-up environment in Sri Lanka and Bangladesh. "Both Sri Lanka and Bangladesh are both very interesting markets. They are both very young and nascent markets with a lot of different opportunities; relative to each other as well as relative to each other. I think Sri Lanka has an incredibly educated population, markets are comparatively small.
What I have noticed is that there is a lot of non-resident Sri Lanka that have come back to Sri Lanka and are starting technology companies, looking at markets in SE Asia, Africa, Pakistan and in some cases other markets as well. Now there are opportunities for them that a lot of Indian entrepreneurs aren't thinking about because India in itself is such a large market. These entrepreneurs have to look at large markets from the beginning because they have no choice. So they can do their early MVPs in Sri Lanka and then go out internationally." Jain added that Bangladesh is sort of in the middle.
"Bangladesh has a fairly large domestic market, probably much more similar to India than Sri Lanka is. A lot of non-resident Bangladeshis have moved back to Bangladesh and started companies. People have now started to set up indigenous VC firms and accelerators in Bangladesh. There are investors from Japan and Singapore that are actively looking at Bangladesh because many of them didn't see the deals in India 5-10 years ago, so they missed out and are now trying to go to Bangladesh early."
"What I really like about Bangladesh is that if you are an Indian entrepreneur, you can very quickly understand how Bangladesh works. The two markets are similar in a lot of ways, however there are a lot of differences that exist in many other ways. But it is probably easier to go into the Bangladesh market than going into the Middle East. There are early opportunities for entrepreneurs domestically as well as in far markets, but because it's early no one is paying much attention to it and that's why there exists an opportunity," stated Jain.
Bullish on Domestic Opportunity
Talking about the venture's domestic strategy for the next couple of months, Jain said that in the longer term he is very bullish about the domestic opportunity which includes domestic contents, video, and fashion. "Right now I am more bullish on B2B products both domestically and internationally.
We will continue to look at B2C opportunities. I think there are so many short term and long term opportunities in India," claimed Jain. He also added that on a personal point of view he is interested in areas of fintech, health, education, and vernacular content.
This article first appeared in the Indian edition of Entrepreneur magazine (September 2016 Issue).