TC Discussion: Are Indian investors biased towards e-commerce?

E-commerce is one of the hottest sectors in India and it has been getting a lot of VC attention of late. Both Indian and foreign investors are pouring millions of dollars into companies like Flipkart and Snapdeal, expecting multi-bagger exits. In fact, this trend has created a general consensus among a section of entrepreneurs that other industries are not getting as much attention as e-commerce. talked to a few entrepreneurs to get their views on this topic. While a majority of them opined that it is a wrong to say that VCs are biased towards e-commerce, some said (on the condition of anonymity) that 'partiality' does exist.

Saurabh Arora, co-founder, Airwoot, a social media listening and analytics platform which is backed by Kae Capital and Google India MD Rajan Anandan

I don't think there is a bias among investors towards e-commerce. In fact, the focus has shifted to technology startups that are essentially e-commerce enablers such as POS & payments, supply chain & logistics, and fulfilment & customer support. To say that they are ignoring other sectors would be too presumptuous.

Ask any Indian investor for their focus areas and you will most likely hear 'mobility, education and healthcare'. As India clears the way for freer markets and increased foreign participation, and with increasing internet penetration, I believe all sectors will get attention. In fact, a popular Indian investor, who I know personally, has kept his investments on hold in an e-commerce firm and is concentrating on other sectors.

Mukund Mohan, an angel investor and director at Microsoft Ventures, which runs a startup accelerator in Bangalore

I don't think Indian investors are biased towards e-commerce at all. If you look at the investments in 2009-2011, there were 73 seed and early-stage e-commerce investments because of the perceived rapid growth in GMV and sales/customer acquisition. This year, most investments were a good mix of SaaS applications, consumer internet, education and healthcare technology startups. Only nine later-stage e-commerce companies, including Ola Cabs, Flipkart and Valyoo raised money.

I think investors are not ignoring other sectors at all. In fact, this year has seen 21 per cent new investments in Big Data, mobile applications and analytics alone. In terms of money, since later-stage companies have received more in pure US dollars, the skew appears to show as if there is a bias towards e-commerce.

If anything, anecdotal evidence suggests this year most investors are shying away from e-commerce companies that are in the early stage.

Raghav Sehgal, an IIM-Ahmedabad alumnus who runs, a medical document management strartup

I do not think that Indian investors, both angel and institutional, are more biased towards a particular sector. In our experience at, investors keep talking to us for multiple reasons and the investment decisions are guided by various factors. Some of them include market potential, scale, execution, team etc. By sheer market size and scalability potential, startups in sectors like healthcare, retail (including e-commerce), education & IT/ITES often get more traction and attention.

So it is a fair call on investors to focus their energies and thoughts to four or five key sectors and not invest in every sector. Many times institutional investors do not look at a particular sector simply because of their mandate to invest. has been told by a few investors that their fund mandate is to invest in e-commerce and education sectors instead of healthcare, but I do not think we are being ignored.

And because of economic cycles, sometimes a particular sector requires more attention that other sectors. E-commerce, and to a certain level education have been enjoying that attention over the past three-five years, but we see a very visible and positive interest in the healthcare sector currently. I do not think it should be misconstrued as ignorance on investors' part towards other sectors.

Each sector and sub segment in the sector needs to reach its critical point before investors start taking risks.

A leading entrepreneur, who runs a consumer-focused internet startup

Most of the VCs in India, including big names, are biased toward e-commerce. But all VCs have burnt their fingers in e-commerce and each has invested at least $20-30 million in those ventures. As far as the other sectors are concerned, although investors provide seed money, they are not willing to put in the next round of money to support their growth, even after showing some traction or validation in terms of revenues or number of customers.


While till recently investors looked at e-commerce as a potential segment to invest in, they have started focusing on other segments, including mobile and healthcare with a more positive perception. The illusion of the bias might have stemmed from the fact that investors, as Mukund Mohan noted, are pouring in more money in e-commerce segment through multiple tranches as it is a high capital-intensive industry, while the quantum of investments in others sectors are comparatively low.

(Edited by Joby Puthuparampil Johnson)

Share this Post