Picks for 2017, wait shouldn’t it be picks for 2025?


It is that time of the year when VCs are asked about what sectors are they betting on in 2017? It’s become a game of “hot or not” for the last few years. Sectors seem to change as frequent as the years if not seasons. Food tech was hot a couple of years ago, no one seems to mention it anymore. AI and chat bots are probably still hot.

Investing cycle in venture is typically 10 years. The first 2-3 years is when the investments are made, over the next 5-6 years they are nurtured and then it’s time for exit and returning the money to the limited partners. To make stellar returns the portfolio companies and the sector they address need to be attractive even at the time of exit. The VC not only has the job to catch the wave during the investment, but also must be foresighted to see if a sector will continue to be hot over the next 8 years. That is the difference between a fad and a trend. A short-term capital can ride a fad and make money, but patient capital like venture needs to catch a trend. The difference between fad and trend – Vietnamese food in India may be a fad, but healthy eating is a trend.

Founders have an even tougher choice to make. The path to fad is easy – it is the talk of the town and can attract talent and capital. The path to follow a trend is relatively tougher and needs a greater understanding between the partners building the company – founders and investors. The investors must understand the upside of a trend and continue supporting the team. The founders must believe in frugality to sustain the company for the years until the start of significant cash flows from the business.

For investors, the choice can mean better returns. A fad usually has irrational investor interest and valuation. A trend could be more attractive investment, but would require greater analysis and connecting the dots.

So, shouldn’t the question for the investors be – what is your prediction for major trends in 2025?






Fintech: more than just hype

We in India are experiencing a shift in the way we are paying our bills, buying insurance, investing our savings and borrowing. Tech led companies are offering us better alternatives at lower cost and more convenience.

What are the macro trends that are driving these changes?

Millennials are thinking differently about financial services

A recent survey by CBInsights found that 79% of millennials in the US view their relationship with their banks as transactional and 59% think the financial products are not even targeted at them. Around 2/5 of India’s population is in the working age group of 20-35 years and like their counterparts in the US, do not relate to the traditional financial institutions and their products. These mobile first customers want convenience and personalization.

Incumbents underserving the consumers

Like in most other sectors, the Indian consumers are underserved by the existing financial service providers. Only 14% of individuals save at a financial institution, not a surprise considering that gold is still the preferred asset of investment. Even worse, only 6% of borrowed from a financial institution. We continue to be a cash economy with only 1 in 5 having a debit card.

Government pushing for financial inclusion and digital economy

The government is pushing for financial inclusion with programs like Jan Dhan Yojana, UID / Aadhar and Unified Payments Interface (UPI). A recent paper claims that with Aadhar decision making on loans would be done in 15 seconds and virtual credit cards will be issued instantaneously. Over 200M bank accounts were opened under the Jan Dhan Yojana bringing a large section of the population under the banking and digital umbrella.

Tech players are innovating

The tech players are re-imagining the role of tech from being an enabler to a disrupter in delivering financial products. With credit scores being new in India, tech enables the use of social and transactional data to evaluate credit risk for millions of new to credit customers. It has lowered the friction of making online payments through wallets and seamless payment gateways.

Where are the opportunities?

Creating new markets

As the economy becomes less reliant on cash and moves towards a digital economy, there is a lot of transactional data which can be used for assessing credit worthiness of a consumer or a business.  Companies like CapitalFloat and LendingKart use digitized credit risk processes to disburse business loans in record time. New to credit customers like people in their first job, who would have never got a traditional bank to loan them for a durable purchase, have access to personal finance from companies’ tech lenders like Finomena and Krazybee.

Virtual EMI cards, which are now a payment option on popular ecommerce sites, are pre-approved personal loans for buying from ecommerce sites. NBFCs like Bajaj finance and new age tech players like FastBanking are among the growing number of virtual EMI card providers enabling a large population to get financing for their online purchases.

Disintermediating the traditional bank

Banks have traditionally been the one stop shop for all our financial needs, but they have been very inefficient and discriminatory. Small savers never got the personal finance advice that the HNIs got. But this is changing with personal finance platforms like MoneyView and Slonkit that provide tools to everyone to set savings target and effectively manage the use of credit cards. Personal asset management companies like Scripbox and FundsIndia have democratized the portfolio management services that were earlier exclusive to HNIs. They have simple intuitive mobile apps that makes it easy for a new to investing consumer to save and track investments.

There is a huge disparity between what the savers get for their deposits and what the borrowers pay for their loans in India. This is bound to change as P2P platforms like Faircent take off. It has already taken off in western markets like the UK where over 50K people have cumulatively lent GBP 1.4B to businesses on FundingCircle.

Online brokering

Not long ago, getting a quote for insurance, loans and credit cards involved a visit to a few neighborhood bank branches. Consumers were still not guaranteed the best deal. Platforms like policybazaar, bankbazaar and deal4loans have made it possible to get a comparison and buy insurance and loans almost instantaneously.

Lowering the friction in a transaction

Payment gateways have made the process of completing an online transaction seamless. The governments push for ‘Digital India’ is proving to be a huge boon for the gateways. Wallets, with preloaded money that can be spent at participating online and offline merchants have become ubiquitous. It is not only the backbone for most ecommerce transactions today, but also provides solutions like remittances and transfers.


Tech companies seem to be best placed to offer financial services to the large young underserved population that is mobile first and on the internet. It is happening already with apple, google and amazon making big bets on fintech. The next set of large financial companies will be tech startups that serve this large innate demand of the new consumers.


Pitching your startup!

Founders usually are looking for advice and thoughts for pitching to VCs. Typically VCs look at hundreds of deals every month. Not every VC is looking at the same data or has similar preferences, making it even more complex to know what to cover in a pitch. While I’ve pitched only a few times, it occurred to me that I spend a lot of time listening and discussing pitches, so I should just put a piece about what VCs would like to hear!

You have around 5 minutes to grab the attention of VCs; so do not wait to tell about the most awesome part of your startup – team, market entry, technology etc. Tell it like a story. We need to know what problem you are solving and why you care about it. Tell us about your market. How big it is, how much can you address, how soon and who are the competitors? How will you have sustained differentiation against your competition? Who are your partners in crime, your team. Of all the things they could do in their lives, why this crazy thing? If you have launched, show us what you have done. Nothing like seeing product demo and hear customer testimonials. Have a clear ask, having clarity about what you want from an investor (how much are you raising, at what terms, introductions) tells a lot about your planning skills. One last key takeaway is to know your audience before pitching to them.

Shake it up! Edtech 1.0 ripe for disruption

How do you identify an industry that is ripe for disruption? When there is a gap between the solutions offered by current players in the industry and the changing demands of its customers, new players can disrupt the industry.

Companies from edtech 1.0 assured us that they would solve all the problems with our education system. They did solve for access by bringing offline content online. The best content from top professors and universities that was previously inaccessible to most was bought online by the likes of Coursera and Khan Academy. Online and live tutoring by companies like Tutorvista provided access to quality teachers to students around the world. edtech 1.0 was the best thing to happen in democratizing access to knowledge, since the invention of internet.

However, providing access has not solved all the problems, students struggle to learn, underperform in tests and fail to reach their true potential. As per a public report, 47% of Indian graduates are unemployable and 90% of engineering graduates are unemployable. The key reasons for these are:

–  The current learning process is boring and outdated. The focus is on rote learning and scoring at all levels. There is no engagement in the learning process.

– There is no personalization and one on one tutoring is expensive. It has been reiterated in many articles that we can not have a “one size fit all” solution to educate our diverse students. Students have different aptitudes and most are not even exposed to the various career options they have. The traditional and the edtech 1.0 players have failed to innovate and build products that individualize to every student’s profile.

– There is a disconnect between what is taught and the skills required in the job market. The traditional educational and edtech 1.0 players are teaching curriculum that is not in sync with the new age jobs. The frequency at which the curriculum is updated is slower than the rate at which the job profiles are changing.

If India has to fully capitalize its demographic dividend, then we need to address the issue of unlocking the true potential of everyone in our workforce. While this is a massive problem, tech can offer simple solutions. Edtech 2.0 companies are unlocking true potential of students using data and analytics to personalize education, make the process of learning fun and social, focus on true learning rather than rote and give real time feedback.

Sources for data:

What will it take for high tech startups to bloom in India

A few weeks ago, I heard the pitch from Team Indus which is the only Indian team competing for the Google X prize to launch a rocket to the Moon. In the process of competing for the prize, it is building the next generation aerospace company in India. I left the room with a lot of optimism in the future of high tech in India and with the thought – What would it take to see many more bold startups from India aiming for tech breakthroughs like advanced materials, super computing, blockchain technologies and space?

Nasa photos

Pic from: http://history.nasa.gov/ap11ann/kippsphotos/apollo.html

India has seen hundreds of consumer internet startups by founders who had just graduated. These 23-25 year olds understand the millennials and technology better than anyone else. They built startups that took advantage of the current technologies to define new business models. However, few ventured into advanced sciences, as high tech startups require people with doctoral and post doctoral degrees, research background and experience in the relevant field. Though Indian’s bloom and flourish in research labs outside India, few have built hi-tech businesses here.

The spawning of high tech startups in India could be driven by a trifecta of diverse forces. First, we need to create a higher education system that focusses on real innovation. India has very few institutes that are renowned for advanced research, so people who want to pursue research end up studying in the US / UK. Most end up working in high tech startups in the Silicon Valley and Cambridge, UK. To provide these talented people the opportunity, the Indian government must focus on building advanced education institutions on par with the best in the world and open up 100% FDI in higher education. There are examples of how this has been done. Saudi Arabia founded KAUST (King Abdullah University of Science and Technology), a private post graduate research university that brings together the best faculty from around the world in areas of super computing, visualization, nano fabrication etc. The university has become the nucleus of research and development in the region.

Next, We need to bring together research and business ideas. The scientists and researchers at the various advanced institutes, like ISRO, IISc and HAL are our best bet to start up in the near term. These institutes must encourage their scientists to commercialize their ideas. Most accelerators are focused only on popular business models and consumer internet, which require little intervention. We need specialized accelerators for high tech businesses like the global aerospace business accelerator by Airbus in Bangalore. Government and industry must promote / incentivize many such accelerators that incubate technologies that take longer to gestate.

Finally, the Indian investors – both venture and corporate must build capabilities to evaluate high tech. Opportunities in this space have potential for very large impact and outcomes. Investors could form alliances with universities and foreign funds that have experience in advanced tech investing to understand the technologies. They can take cues from Israel’s venture capital and incubator industry that plays an important role in the booming high-tech sectors like material technology, medical devices and internet security.

With these forces coming together and the large domestic market, India will be among the best places for true innovation and commercialization. I hope to see the next breakthrough medical devices, AI robots and spacecraft designed and built in India.

Let a 1000 high tech startups bloom in India.

World Geo-politics and economic conditions adding to the glut of foreign money in India

First, apologies for not posting last month, I started interning with super awesome VC firm and was busy settling in Mumbai. I will try to make an effort to keep up to my target of at least one post every month. This blog is my first one about macroeconomic views about flow of capital and investments in global markets.

India has seen a deluge of foreign capital inflows in this year, more so after the clear electoral mandate in May 2014. While improved domestic condition is the major reason, changed dynamics in the global geo-political and economic conditions have also resulted in the increased deluge of capital.
A look around the globe and we see unrest in other emerging economies and regions, Turkey, Thailand and Middle East. This is making these regions a no-go for fresh investments. The money pushed out of these regions must go somewhere else and India with a stable geo-political environment for investment, pro-entrepreneurship government and buzzing entrepreneurial environment is providing the confidence to investors.

Russia could become uninvestible by sanctions. Russian investors want to play it safe during sanctions. This has led Russian banks to move their investments to friendly countries like India and lending to Indian entrepreneurs like the debt of $1.5bn to the Ruias of Essar and the venture investments made by the mail.ru group in Indian startups.

Brazil’s economy contracted in the last quarter and China’s clocked growth in lower single digits. Economic recovery in Europe has been slow nudging the ECB to a rate cut, which has led to lower borrowing costs in the EU. The long term impact of this would stimulate the European domestic economy, but it would also flush the system with more and cheaper funds. At least some parts of these funds will invigorate euro-funded carry trades, where investors will borrow at low rates to buy high yielding assets in emerging countries like India. Expect the party in the Indian the public equity, debts and private equity/venture markets to continue for some more time.

Investment decision: Product Evaluation

Most investors focus on the product to make an Investment decision, apart from the people, potential and traction in the startup. Here are a few questions that entrepreneurs must be ready to answer while making the pitch.


What are you developing?

This is the question of “purpose”. Understand the context for the need of the product, how are things being done now and why in a particular way. What will the proposed product achieve, considering the current social behavior of users and available technology

Who is it for?

One can’t design a product that is for everyone in the world, there is no one size fits all. Be sure, which segment of customers are your target – Enterprise/individuals, those who seek luxury/value for money, double income couples/teenagers everyone has different needs. Spreading too thin to cater to every segment will bother stakeholders. Continue reading

When startups should not raise money from angels/VCs

A lot of time is spent in startup circles discussing fundraising rather than business ideas and viability.


Startups must stay focused on the business and its profitability rather than securing investments as the primary goal. If the entrepreneur stresses on commercial viability, the employees recognize that cash generation is of utmost importance. Once a strong business is built the entrepreneur is in a better position to seek funding.

Raising early stage finance is generally a demanding process, which takes up a lot of time, commitment and emotional involvement, which must have been directed towards building the business and meeting customer’s need profitably. Also, external capital comes with demand both in equity and time. There are obligations for results and it limits the ability of the entrepreneur to make independent decisions. So unless, the entrepreneurs have made plans, like a strong execution team, to stay focused on business while trying to raise funds, they must not pursue angel/VC money.

On the other hand Angel and VC money has its advantages – entrepreneurs not only get capital, but also get the vast experience of active VCs, who might prove connectors for you in the industry and help you make decisions. Raising private equity from VC and Angels is a straightforward process and does not require complex permissions/regulations that are a part of raising public equity/debt. And sometimes, the business can benefit from the publicity of the investment,

Reference: A Guide to Early Stage Investment by Alan Gleeson.

Disclaimer: This blog is my personal perspective of this and is not intended to constitute legal advice.

Myntra Acquisition: Efficient price discovery?

The Indian startups are celebrating the acquisition of Myntra by flipkart, some estimates put the valuation of the deal at $370mn. Myntra, the older of the two, is in a high margin category – fashion, which is also one of the largest categories in the offline market. It has made some great moves by introducing its private label and celebrity lineups, but it is also has higher returns, resulting in high operating costs.

Did shareholders of Myntra get the maximum value from the acquisition? Most acquisitions we hear in media have competing bidders and Myntra could have looked for other buyers and not just Flipkart. As news of the deal has been around for months before the deal was finalized, both had invested/sunk time, money and reputation into the deal and were in high pressure to close the deal. Myntra could have been bought over by one of the large conglomerates that are also in offline fashion retail or international investors, these have deep pockets for investments and innovation. With competing bidders, the price discovery would have been more fair and in this case Myntra shareholders may have benefited.

myntra acquisition

Disclosure: Both Myntra and Flipkart are private companies sharing very little financial information, so these comments are based only on publicly available information.

Financial Services: Industry ripe for Disruption

Why are banks pruning their branches after years of growing them? What is the purpose of a bank? To grow savings, get a loan, make and receive payments.

With crowd funding sites like zopa, lending club, ilend and umpteen other crowd funding sites, individuals can cut the middleman and take direct control of their investments or get a loan. Venture capital, PE and debt funds are better capable of evaluating the risks of investing and lending to businesses. NBFCs (Non Banking Financial Institutions) in India – an umbrella that includes micro financial institutions (MFIs), Asset backed financiers (housing, auto and consumer) have better infrastructure like geographical coverage, understanding the market, credit score of borrower, than banks to cater to customers. Focused lenders that lend to infrastructure, agriculture and export sectors are better placed in their sectors than banks. Crypto currencies can’t be written off and will comeback as they offer an almost no transaction charge transfer of money. New payment solutions like mpesa by Vodafone and Square (and the look alikes) serve merchants better than solutions provided by banks. So why do we need a conventional bank in its current form?

Due Diligence: Don’t Miss these

The usual checklist of due-diligence before recommendation for deals/investments involves a series of checks in accounting, actual check of inventory/bank balance and letters from vendors etc. However, the potential target must also be evaluated on certain qualitative parameters like the business model and environment, macroeconomic and social consideration and fit in the portfolio for the acquirer.

Below is a list of a few important considerations

Business model and environment

  • Is there any venture like businesses that has promising high growth?
  • Any Intellectual Property that can be leveraged for new streams of revenue?
  • Will the current management team continue?
  • Is there major re-structuring of business required?
  • What is the prospect of the business – Is this a declining industry?
  • When is the next level of large capital investments required for the current growth figure?
  • Credit ratings of the business
  • Evaluate investments made by the company in other businesses?

Continue reading

Pre-owned Truck Finance: a way to generate both social benefits and financial returns

The business of financing pre-owned trucks has given stellar returns and attracted investments from both private equity and Development Finance Institutions (DFIs)1. It still has immense potential in a large and growing, but highly unbanked economy like India. The higher risk in providing capital to the unbanked single truck owner, who does not have access to credit from institutions is compensated by the higher interest spreads due to ability to raise capital cheaply from DFI, securitization of portfolios and the satisfaction of doing social good by lending at rates lower than that provided by private/individual financiers.

Continue reading

aliexpress.com to India

aliexpressLast week, my brother received his slick iphone case ordered online for Rs. 300, which was real value for money deal. There is nothing unusual about ordering online these days, but here the case was ordered on aliexpress.com and shipped from China with no shipping charges by China post, the only things he had to bear with was the delivery took 4 weeks, he had to pay in advance only by credit card and any additional duty levied by Indian authorities would have to be paid to the courier. In his case, there was no duty charged.

If the home grown e-commerce companies – snapdeal and flipkart are having sleepless nights after amazon started in India, they now have to also compete with a company whose global revenue (including its parent – Alibaba) is more than that of amazon and ebay combined. Agree, aliexpress Continue reading

Raising funds for your startup? Get the right capital structure

Many startups in India do not have an idea of how the capital structure of their company will affect them and their company. Adding debt can be a smart way to retain a higher ownership of the company and meet government regulations in certain sectors (Flipkart and Myntra received ED notice for allegedly exceeding the foreign equity stake holding beyond what is permitted). Companies must use debt to finance capital equipment/expenses and expensive venture equity for product development and as a bridge between operational income and expenses. Raising debt is more challenging and may require collateral and personal guarantees, but is worth the extra effort.

Sources of debt Continue reading


I believe every individual and business must focus a percentage of their resources on moonshots. Moonshots are experiments that strive to achieve what almost seems foolish to pursue, but if they succeed, it will not only make the experimenter a rockstar, but also further mankind’s quest for knowledge. Google uses a part of its resources for such projects, the driverless car and the Google glass can change the way we live in this world.

These investments are risky and enough knowledge and research needs to be done before jumping into your next product development, business expansion or alternative investments in real estate, art, angel investing and derivatives, but it is worth the effort for you and the society.

Online or Offline: Business Basics to thrive are the same

Most online businesses are very clear why they exist – to solve a problem for their customers. If they have raised funds (internally or through an angel/VC) they have convinced their stakeholders of their business model, passion of the initial team/founders and potential of their business/idea. However, the basics of business to thrive remain the same whether online or offline. Below, I’ve attempted to highlight the top 3 measure that must also be considered before deciding to start up or invest in a business.

Cash flows

My first lesson on joining business was that cash flows decide if you will exist in the next financial period. Cash flow from the core business is a vital sign of the health of the business, but if the business requires high capital expenditure every year then it must be weighed against the cash flows from the core business. Despite having low profitability companies like Amazon.com or Tesco UK have large net positive cash flows due to positive working capital and command large valuations.


One of the biggest challenges for companies is to find the right talent to execute plans of growth. Very little importance is given to human capital Continue reading