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Backing the Audacious Entrepreneur
After nurturing icons like Flipkart, Myntra, FirstCry, Poilcybazaar and Lenskart in the first wave of India’s startup revolution, veteran early-stage investor Chiratae Ventures is looking to replicate its success in ecommerce 2.0 as well
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In the last two decades, as entrepreneurs made a beeline to solve the world's most pertinent problems by leveraging technology, they were lauded, recognised widely and adored by the masses. While some achieved notoriety and perished during the market downturns, others chipped away at the mountain of issues that plagued humanity. Their sheer audacity to take on massive problems despite being a blip in the grand scheme of things needed support. And that's where VC firms like Chiratae Ventures stepped in to give the entrepreneurial spirit the much-needed wings.
In its 16 years of existence, Chiratae Ventures has funded a wide range of early-stage startups and seen them scale massive heights over time. With big names like Flipkart, Myntra, FirstCry, and Poilcybazaar in its portfolio, Chiratae Ventures has ‘been there and done that’ through the multiple market dips. "This is my fifth so-called 'down cycle'. And every time, we've just put our heads together on the ground, worked hard with our companies. We always found our entrepreneurs to be very mature," says Sudhir Sethi, Founder and Chairman, Chiratae Ventures.
With the current slowdown affecting the global markets, VC firms have tightened the funding tap all of a sudden, and startups that were riding on ample funding in the last two years have had to think about their runways all of a sudden. But Chiratae likes to keep its outlook positive.
"We don't foresee startups having major troubles. But companies have to work on making their businesses profitable and prudently burn their cash now," says TCM Sundaram, Founder and Vice Chairman of Chiratae Ventures. "These cycles keep happening in terms of funding," he adds.
Lenskart, the eponymous eyewear behemoth, received Chiratae's support when it needed the most in its early stages. Twelve years have passed since then, and Chiratae continues to repose its faith in the company which has today grown to boast a valuation of $4.5 billion.
But why would Chiratae make such a strong bet early on? "We back audacious entrepreneurs," states Sudhir Sethi. "We look for phenomenal entrepreneurs who think on a massive scale, domestically and globally, for business. These entrepreneurs build team culture and an organisation which stands out," he says.
The Decade of India in SaaS
The poster child of the Indian SaaS ecosystem, Girish Mathrubootham (Founder and CEO of Freshworks) recently touted the present decade to be India's as a product nation. There have been tailwinds propelling SaaS companies in India as the world turned towards innovation in software to bring about digital transformation since the onset of the Covid-19 pandemic. In fact, 2021 turned out to be a watershed year for Indian SaaS companies which saw a huge surge in their valuations, VC investments, number of unicorns, and even IPOs.
This success story has been crafted by visionary founders in the ecosystem and a healthy mass of engineering and product teams that India has been generating in the tech sector for decades. With a talent pool aplenty and the current pace of growth, India's SaaS segment is now slated to hit the milestone of $100 billion in revenues by 2026. This means that India will soon overtake China to become the second-largest SaaS nation in the world.
A healthy stream of SaaS companies is even going global with their ambitions and quality product. While Freshworks and Zoho are leading this movement, Chiratae's portfolio companies, such as Uniphore and Pixis offer a lot of promise too. "There are more and more entrepreneurs looking at SaaS opportunities which are starting from India and going after the global markets. There's a lot of strong validation for many companies from India proving their mettle in products and go-to-market (GTM) for the global markets," says Venkatesh Peddi, MD and Head of SaaS/Cloud, Chiratae Ventures.
Having been at the centre of this growth with over 40 SaaS companies in its portfolio, Chiratae Ventures is fairly positive on the outlook of this segment, even as the global slowdown continues to affect the larger tech ecosystem. And Peddi, much like Mathrubootham, believes that the challenging conditions of the market are good for attracting quality talent at the right price in SaaS. "While we should talk about the current challenges, of course, one good news startup founders in SaaS would agree with me on is that the current conditions are optimal to attract the right talent at the right price, which was inflated in the past two years," says Peddi.
Speaking on the future of the Indian SaaS companies, Peddi says that the segment will be valued at over $1 trillion in the near future. This might well prove to be true despite the current market conditions, as the Indian SaaS segment crossed $8 billion in revenue last year alone, growing at a CAGR of 55 per cent.
The Rise of Consumer Tech
Consumer behaviour has been changing radically with the growth of the internet economy as barriers come down between technology, media, the internet, and commerce. This also allows the creators to get closer to the consumer like never before. And as a vast sector that encompasses commerce, marketplaces, gaming, social networking, edtech, and more, consumer tech has opportunities in abundance.
These consumer tech opportunities are backed by 25 per cent year-on-year growth in the internet user base and a projected 65 per cent smartphone penetration in Indian homes by 2025. The sector is poised to touch $200-250 billion in the next three years.
Chiratae Ventures was one of the earliest movers to identify the potential in the consumer tech segment, having invested nearly 45-48 per cent of all its invested capital over the last 16 years under this large umbrella. This also means that the VC firm has had a huge role to play in the growth story of India's startup ecosystem, which includes its portfolio companies such as Flipkart, Lenskart, Myntra, Manthan, FirstCry, Policybazaar, Newgen, PlaySimple, and Xpressbees.
“Chiratae team has been wonderful partners for us from our Series B days, back in 2012. It has been an outstanding relationship with Sudhir and Chiratae family. We really appreciate the constant support that FirstCry as an organisation received from him and the Chiratae team,” says Supam Maheshwari, Co-founder & CEO, FirstCry.
"We fueled the first wave of startups in India and now are looking at ecommerce 2.0," says Anoop Menon, Principal of Investments, Chiratae Ventures. "Now, we are there with a new set of companies, who will in the coming 18-24 months enter the unicorn club," he says.
With a huge population of 1.4 billion, there are problems aplenty in the country, which translate into a lot of opportunities for entrepreneurs and startups. The consumer tech industry is uniquely positioned to drive cross-industry experiences located outside of core tech businesses. Startups in this broad segment can address the issues and aspirations of today's India. "If an entrepreneur can identify the right set of problem statements and showcases the interest to go deep into that, he/she will find Chiratae to be the right partner to take at least the early steps in the seed to series A journey," says Menon.
Changing Paradigm of Healthcare
The Covid-19 pandemic was a huge eye-opener, even for developed countries, as healthcare systems were overwhelmed due to the massive number of patients. The gaps in the system were exposed, which were earlier assumed to be not there. But the huge influx of technology in healthcare has forever changed the face of healthcare delivery, especially as telemedicine finally got traction.
While telemedicine existed even prior to the Covid-19 outbreak, its increased adoption amongst the doctor community has stood out now. This has given telemedicine a permanent place in healthcare delivery as the focus shifts to preventive care.
People are now more than ever focused on seeking out healthcare online, i.e., the discovery element, which has surged exponentially in the last two years. This presents some opportunities for entrepreneurs in the healthtech segment, but healthcare delivery is still focused on the offline. "But you know, there is a layer in the middle of these two, which is to do with care management – relates to handholding the patient through a treatment protocol. And I think this stack is where we'll see traction going forward," shares Ranjith Menon, MD, Chiratae Ventures.
The care management Menon speaks of begins when a patient steps out of a delivery system like a hospital or clinic. Once outside the purview of a physician, patients often find it challenging to stick to a prescribed medical regimen, diet, and lifestyle. In such a scenario, healthcare management can help healthcare organisations significantly lower costs while improving efficiency and care quality.
According to Precedence Research, the global health management market was valued at around $34.44 billion in 2021 and is expected to touch $184.51 billion by 2030.
For a country with over a billion people, healthcare needs to be accessible. A positive step to achieving this goal will come from putting healthcare management systems in place sourced from innovation in the healthtech segment of the country. It would significantly improve patient outcomes in medical centres and clinics by providing them with better disease management, reducing in-patient stay at hospitals, and total observation hours of physicians. Healthtech startups could look into this space to upgrade the country's healthcare.
Backing the Entrepreneurial Spirit
In the present decade, India has truly become a land of opportunities with the success of startups paving the way for more entrepreneurs. And with the support of VCs like Chiratae Ventures, the startup ecosystem is finally getting the much-needed fuel to sustain its growth in the long term.
“Over the past 15-plus years, Chiratae has grown to become a leading venture capital firm in India. Chiratae has delivered eight unicorns with three IPOs, having invested in 125 tech startups to date. I would like to compliment Sudhir and his team for delivering consistent, outsized returns to investors, backing stellar founders over the long term, adding value and being supportive on the board of portfolios,” says Ratan Tata, Senior Advisor, Chiratae Global Advisory Board.
As India’s startup journey chugs along despite the current downturn in the market, it will be interesting to see the support it attracts from investors domestically and internationally. One thing is for sure – the audacious entrepreneur will always have the support of a VC through the numerous troughs and crests in the market.