2018 predictions — from an Indian VC


I’m new to the predictions game, publicly stating them is risky business. But I have been building up my courage for this. So here goes. (These predictions are for the India startup ecosystem — startups, investors and macro. )

Consumer startups

  1. The Hot — Brands —India is a brand starved country — brands stand for quality and trust. Segments like food, fashion, services — the quintessential consumption basket begets new brands. For tech VCs omni-channel brand models look attractive to invest in. Companies like Wrogn, Lenskart, Fabhotels and Bira — are interesting ones to learn from. The innovation is on product - the customer is very discerning and has ample choice, get the quality and price right. Focus on building the right distribution model, try and get unit economics in place — read gross margins 40%+, don’t plan on raising too much capital. Build a dhandha.

  2. The Warm — Digital Content — Gaming, OTT Video & Vernacular — with the implosion of data prices, explosion of data usage, increasing data speeds and high penetration of smartphones — the stage is set for an inflexion point in India’s digital story. Apps have appeared with more than 200M+ MAUs — Youtube and onward we march towards with 100M+ DAUs apps like Whatsapp. Consumers are learning to pay through the mobile, though paying for content is still couple of years away. So consumer engagement is here and present, hopefully the money will follow. Build a great product, get loads of engagement, go for scale, conserve cash for the monetization moment to arrive.

  3. The Cold — Education, Healthcare, Consumer Lending, Hyperlocal — for variety of reasons like bad content/infrastructure, need/convenience, capital inefficiency or hyper competitiveness — these sectors have been very difficult to build a scalable business model. Winners are few, but typically outsized — the likes of Byjus, Portea, ?, Urbanclap, Swiggy are some examples. You are driving new customer behavior and this is a service business more than products. Keep your customers very very happy, get your NPS high, build the right processes, scale city by city. So the journey is long and hard — and you will need capital by the truckloads, but a big prize in the end.

B2B/SaaS startups

  1. The Hot — Vertical SaaS, Agri-tech — the former is a global theme and the latter a local theme. Make in India and monetize in US — yes US,other markets don’t count, no you shouldn’t build for early adopters in India, yes there are lot of Vertical SaaS plays possible from India to US. I’m constantly on the hunt for the next FreshDesk, Carestack, Zenoti. Agri-tech — the moment is now what happened to Indian e-commerce 10 years ago is happening now — with access to internet and smartphones the farmers market is open to business — and those who will win will create a win-win ecosystem look at Ninjacart, Agrostar, Sammunnati in our portfolio.

  2. The Warm — B2B Lending, B2B Marketplaces —I believe the play for horizontal platforms in these segments is limited, you need to specialize in industries, make custom products for your segment. There are enough big spaces in India in the B2B markets — Bizongo, Power2SME, Moglix, Indifi, Blackbuck — there are quite a few of those we have done and there are many more we can invest in. Pointers here would be to have contribution margins ideally 10%+, working capital less than 15 days and get to negative as soon as you can, and figure out why the supplier and customer stick to your platform. For lending businesses getting to high NIMs, high leverage and sorting the collections process is key — and of course boatfuls of capital too.

  3. The Cold — Retail-tech, Blockchains, AI/ML (definitely chatbots) — over the last couple of years these have become more buzzwords than actual businesses. These are technologies looking for a business model — find that business first before you use the buzzword.


  1. Early stage — Increased activity from micro, small and early stage VCs like Blume Ventures, Kae Capital, Stellaris Ventures, Bharat Fund — have great GPs who get it and are a delight to work with. New desi-money funds like 021 Capital, 3one4 Capital, JSW ventures — are bringing in new pools of capital to the Indian ecosystem, and I hope we get 10x more of those. Fancy from international investors — especially Japanese, Chinese and Korean funds — BeeNext, M&S Partners, Incubate Fund, Recruit Japan, Shunwei Capital, Rebright partners — has kept watering the Indian startup scene healthy and fertile the last couple of years. And the number of angels active in the Indian ecosystem tends to double every couple of years — startup founders are a welcome and very sought after addition to the list — Girish (FreshDesk), Mukesh (CureFit, ex-Myntra) — to name a few. On my wishlist though is more deeper and better advice by everyone to seed stage companies — so for startups weighing good advice vs more money — is not a choice you should make.

  2. The valley of death — Series B — from my perch I see new players coming into the market and so if you are looking for a ~$10M cheque for your Series B outside the top 3 of Indian VCs you need to start your “arrange marriage” process aka spread your net wide and it will take time. But don’t lose hope. BCapital, Iron Pillar, Bertelsmann, IFC — are a few who are specifically looking at the Series B stage. And then there are a lot of international VCs who evaluate it on a more more deal specific basis — the challenge for these though is how much will participate in following rounds. Advice for startups looking for Series B — you need to prove your key metrics, positive unit economics or in absence of that decent scale or unique IP.

  3. Growth stage — Less activity from Softbank and more from the big three — Flipkart, Amazon and PayTM. First I believe, that given the nature of Softbank’s investments they have put money in most of the scale players in India — so there are hardly anymore left in India right now to consume that kind of capital. But, the fun thing is more and more India startups are doing M&As — a trend fueled by the funding drought last 24 months — so the mindset of I will build everything myself is shifting to grow bigger faster. Advice for startups — get your EBITDA positive and growing, have a clear strategy for growth.


  1. Rise and Rise of India economy — I’m an eternal optimist here, and for me the key moment I’m waiting for is India’s per capita GDP to cross $10K (link) — the Cambrian moment where enough discretionary income is available to have a wide variety of capital efficient models become sustainable. I believe (hope) an 8% GDP growth in last quarter of FY19 is possible and could get us there in sub-5 years. Then next stop to be $15K. The current startups target the middle income and above households, with income expansion a much much wider set of consumers would become addressable. Government has take a number of structural, corporate and fiscal reforms in the right direction — GST, insolvency code, bankruptcy code etc etc. These should make the markets and the corporate world more professional and more efficient. The big will become bigger, but then hopefully the rising tide will lift all boats. We will see a number of startups this year benefit from this economic growth if not in revenue terms, then in terms of able to raise more capital easily — since more investors would look to invest in the Indian growth story.

  2. Rise of data and smartphones —need to thank Jio, Xiaomi, Oneplus, Google, Facebook, Whatsapp etc for this one. My 5-year old uses Alexa and Google voice to browse internet and Netflix. And our cook uses mobile banking and works for an on-demand startup for cooks in free hours. Access to cheap data and new technologies is creating new usecases that satisfy various customer needs. More desi-usecases — those targeting the next 200M Indian users will come to fore this year.

  3. Indian startups go IPO — This is a touchy topic but the next 24 months are going to herald in a new era of exits in the VC ecosystem. In 2017, we saw a couple of IPO exits — though small in size, but still real cash. This should become a cascade now. Some due to need — a number of funds are nearing expiry of their fund life, and some because it just makes sense — companies that are $50M+ in revenues and have 20–30% EBITDA margins, with healthy growth. We should see some of these $200–300M market cap IPOs happen, though the liquidity is small — but they are the baby steps for bigger IPOs.


Looks to be an exciting 2018 — with lot of new startups in new areas, lot of new funds and new funding to come in and with the Indian economy growing fast — most startups should scale well.

This post originally appeared on 2018 predictions — from an Indian VC – Noteworthy — The Journal Blog.