Bengaluru headquartered venture capital firm Chiratae Ventures (earlier known as IDG Ventures India) is currently on the road to raise commitments for its fourth successive India fund. The firm recently received a $20 million commitment from World Bank arm International Finance Corporation for the upcoming fund.
Chiratae was one of the first specialist technology investors in India’s early stage market. It has invested in more than 75 companies from its three earlier funds and currently has more than $470 million in assets under management. The firm typically invests at the seed and Series A stages across sectors such as consumer media and technology, SaaS, healthtech and fintech. Its portfolio includes robotics startup Miko, AI-based robot maker Emotix, and healthtech startup CureFit among several others.
The firm’s investments in the consumer media and technology sectors are led by Karan Mohla, who works out the firm’s Delhi offices. Mohla spent several years in the investment banking and hedge fund businesses across Silicon Valley in the US, Singapore and India before signing up with Chiratae nine years ago.
In an interview with TechCircle, Mohla, partner and executive director at Chiratae, who was also part of the expert panel of investors at the recently concluded TechCircleLIVE in Delhi, spoke about the evolution of enterprise technology startups and the firm’s strategies to ride the ongoing startup wave.
You’ve been an investment banker, worked with a hedge fund prior to becoming a venture capitalist. How have those experiences helped in this business?
Actually, I always tell my analysts or associates working with us or anyone wanting to get into venture capital to go and work in startup either in product or sales and marketing or start something yourself.
I think what helped me most was my three-year stint in Silicon Valley (his first job with Jefferies and Co) in investment banking. I was largely working with fast-growth startups. All I was doing those three years was living and breathing startups in Silicon Valley and that made a lot of difference. My major source of interaction during that time was with venture capitalists and entrepreneurs. I always wanted to work with technology.
In between I worked with a hedge fund focused on technology companies in India and Southeast Asia. Then I went to business school after which I was very clear that I want to work in venture capital. This was at the end of 2009 and early 2010 when there are around six firms including Accel, Sequoia, Nexus, Kalaari, Helion.
The prevailing startup wave seems to be driven by enterprise technology/B2B startups. What's changed in the Indian market over the past 2-3 years?
There are a few things that have changed. Since 2016, the entry of Jio has had a tremendous effect in the country. The first year we saw a little and then the next year a bit more. In 2018 and 2019, we see it in full course as to how the users are adopting the internet. How OEMs (phone manufacturers) are selling their products.
For example, if you look at Xiaomi, in the last two years alone, they have invested in ShareChat, other content and fintech platforms. They have been doing a lot in a few other areas too. So we can see how the overall ecosystem is evolving and on the user side we can see how people are catering to that.
Second, because of Flipkart, Paytm, MakeMyTrip, OYO, Lenskart and few others, a lot of capital has come back. So the belief of large outcomes is there. B2B is much more recent because of Freshworks, Druva and Uniphore. I think that has played a big role in the minds of investors. It takes 6-12 months for returns to show.
The third is the availability of growth stage/late stage capital from India and outside. We saw how investors were looking at the opportunity. We started raising domestic capital in 2013 for our fund. If you look at funds like Premji Invest, we can see how domestic capital is going to participate in a big way. Funds like Alibaba, Naspers, Accel Growth, Lightspeed Growth were not even looking at India two years back.
How are the entrepreneurs that you meet today different from earlier generations?
When we speak to entrepreneurs today, it doesn't matter if they are in their 20s or 30s. They are actually able to think and talk about building something that's not there. Entrepreneurs today are thinking to create something different, big, and do it in a disruptive way. What's helped is that a lot of them have worked in startups that have scaled.
Do you see this wave evolving differently as compared to the consumer internet wave that we saw earlier?
Let's take fintech. Three years ago there were just one or two big fintech companies -- Paytm, Freecharge. But today if you look at the overall landscape of fintech, we have so many wallets and lending companies. There's Amazon Pay, PhonePe, Google Pay which did not exist three years ago. These companies have emerged because the ecosystem around transaction has grown. So it helps the fintech platform to grow.
If you look at how the next set of companies, startups such as Pine Labs, RazorPay have seen disruption because there's a base of users and there is a supply of merchants which was not the case three years back. Look at what Udaan as been able to do. Though they had a lot of capital to begin with, but fundamentally they changed the way SMEs look at transactions.
Beyond that is the next level, where you see what companies are doing around credit. Something like what Cred is doing, and then you take it to different level like what Khatabook or OKCredit are doing. They are basically enabling SMEs to come to digital platforms.
Besides fintech, so many Indian consumer companies have gone outside India in the last couple of years and done really well. OYO and Ola are the best example. Lenskart, Curefit and Healthifyme have also done a good job outside India which wasn't possible three or four years back.
You have a new fund on the way. What kind of businesses are you looking to back over the next few years?
What we look for is a combination of things. When we met Piyush of Lenskart, he wanted to build an online eyewear store. It was something nobody could think of in 2010. So you want entrepreneurs who can think fearlessly.
Second, we look for ideas that are leveraging technology in a way that it is a differentiator and not just an enabler. The reason why Myntra did so well way before they got acquired is because they put technology in supply chain, delivery and innovated around it.
We are also looking to back entrepreneurs who can build global companies, whether it is in consumer technology, enterprise technology, healthcare or fintech. Then there are specifics about having a business model that scales up, where friction points are as minimal as possible. Businesses which have the ability to create high gross margin structures because that's what helps in becoming profitable and cash positive soon.
Given your own focus on consumer media and technology investments, what are some of the more interesting emerging trends and patterns you are seeing in that space?
The next biggest opportunity is around the next 400-500 million users. Obviously the investment for these users is around commerce, call it social commerce or anything. Ultimately it's about how you reach a different set of users who have come online in the last 2-3 years and whose aspirations are at the same level as Tier I city users and they are not necessarily from Tier III and IV cities. They could be from metros. But aspirationally, they are the same as they want similar value and quality.
I also think there's a lot of opportunity around mobility. We spend a lot of time on various parts of mobility and technology, electric vehicles EVs. EVs have tremendous opportunity in the coming decade both at the government level and consumer level. I see a lot of innovation coming in this space because of the government involvement.
The third area is around service aggregation. Whether it is around education, healthcare. I think to aggregate technology in supply, we will have to create a platform for delivery and distribution and provide easy access. Kind of like what UrbanClap is doing but in one segment and it has done really well. In India, if you don't build full stack, it will be difficult to scale beyond a point.