Idein Ventures – which recently invested in Hyderabad-based medical tourism startup Oxa – is betting big on India startups with a mandate to invest in 16 companies this year. The VC firm invests in UAE and is exploring global companies in the US apart from expanding into Israel.
Idein Ventures, which started in India in late 2015, has invested in seven companies at the seed level. The company recently appointed Zoomcar co-founder David Back as ‘Entrepreneur in Residence’. In a conversation, Ashwin Srivastava, co-founder and director, Idein Ventures, discussed his plans for investments, expansion and advising startups too.
Q: How do you view the current investment climate?
A: I see the current climate in its entirety. We are a global private equity firm and our range is not limited by conventional startups. Hence, when I look at the overall climate, I find it to be very exciting. If we look at India alone, as compared to 2015, though the total investment deal size in PE decreased in 2016, the total M&A deal size increased significantly. There has been much needed market consolidation, which presents a much better picture for 2017. While there have been reports of a top home grown e-commerce player not doing great, there are also reports of an international player making huge inroads in India. This says that the market is still excellent and probably better than ever.
Q: How many investments have you done since inception?
A: We started in India in late 2015 when there was a visible slump in seed investments, with an aim to capture Indian startups for global impact. Since then we have done 7 investments in seed stage companies. Apart from seed stage, we are also involved in growth capital.
Q: How was 2016 for you?
A: It has been an excellent year. Some of our initial companies have grown to a stage where they are commanding high valuations for further raise, apart from becoming operationally and locally profitable. We have even received interests for secondary exits in some of our entities, though we have declined those at the moment. Our investments in real estate companies saw a minor slump due to demonetisation, but the same demonetisation has helped them grow and target a much bigger market now.
Q: What is your investment strategy?
A: What is the average ticket size? We focus on investment in startups which can go global. We have offices and presence in different countries worldwide, and we wish to use our value addition to the advantage of our companies. Though we are sector agnostic, we generally prefer companies which use technology to scale up significantly. Our average ticket size would range between $200,000 and $500,000 for seed investments. When we talk about growth capital, the ticket size can change significantly.
Q: How do you choose a startup for investment?
A: We go through a very rigorous process of multi-layered analysis before selecting our companies. We are trying to achieve 100% success rate with our companies, and hence easily reject 300+ companies before selecting 1. We are approached by startups directly, and we also get a number of startups through our pool of investment bankers and startup experts. We do a strong offline as well as online research with respect to the business model as well as team. We have also introduced a unique behavioural mapping technique in our filtering process.
Q: How many companies are you targeting to invest this year?
A: We are mandated to invest in 16 companies this year.
Q: What are your sectors of interest?
A: Any sector that you’re keen on but haven’t invested in yet? Sector wise, we are agnostic. We are open to all sectors but focus on companies which are backed by technology for its growth. We are very keen on the global travel market and are in advanced talks with some companies for the same, but we haven’t closed an investment there yet.
Q: Are you planning to launch a fund?
A: Yes. We operate through multiple structures, and a fund structure is also one of the plans, though it will remain only one of our various modes of investment.
Q: Would you be interested in investing in overseas companies?
A: Definitely. We already invest in UAE. We are exploring global companies in USA, and more importantly, we have very strong plans of expanding into Israel. It may seem like a market saturated with investors and VCs, but we see a lot of potential there which is yet to be untapped.
Q: How are your portfolio companies doing?
A: On a macro level, we are very pleased with the performance of all our companies as they have managed to optimise between scalability and profitability. On a micro level, some of them faced temporary problems during demonetisation but are back on their feet again, while some of them benefited a lot due to the digital push. So, they are going through the regular cycle of minor ups and downs, but moving positively overall. Qriyo is now a market leader in their domain of home tutions in tier 2/3 cities, Infurnia has some of the top furniture stores as its
Q: What is your advice to young startups?
A: Please do not fall into the trap of creating business to seek valuation or to seek investment. Also, do not fall into the trap of creating businesses only to solve a problem faced by you or only to change the world. Create businesses to make money, lots of money, and the rest will fall into place automatically.
Q: Apart from funding, how are you supporting the Indian startup ecosystem?
A: Our value addition goes much beyond the funds which we provide. Our team comes with a lot of experience spanning sectors, domains and geography. Our India team is headed by an ex-SBI banker while our US team is headed by a prolific India-US entrepreneur. Hence we are able to contribute to the ecosystem by helping it not remain constrained to some conventional thought processes and fads which ruin its growth.
Q: What are your views on exit avenues?
A: We have seen most of the exits happening in India through secondary sales or through M&As. They still remain the best avenues for Indian market, considering our IPO procedure is not that easy. Strategic M&As and investments will also act as major exit avenues this year.
Q: How about the IPO landscape for mature startups in India?
A: IPO does not seem near for many of our unicorns. That’s primarily because their businesses are more ideal for strategic exits rather than IPO in India. But there are some excellent companies as well, which we think can go for IPO pretty soon. Indian startups should build themselves keeping IPO as a future exit plan.
Source: dealstreetasia
