Investment market’s fierce tiger — New York-based global hedge fund Tiger Global — is making its return to the Indian startup ecosystem increasingly aggressive, not just in terms of the number of deals but also the capital. And the return is not exactly onto the path that it mostly treaded — consumer internet, e-commerce or largely business-to-consumer (B2C) startups — before 2016 funding slowdown when it backed over 73 startups in India beginning with Flipkart in 2010.
Hunting in Clouds
Tiger Global has made close to 10 investments in startups focusing on India in just around seven months after a virtual freeze of close to three years. Interestingly while most these investments have been of around $6 million or less, Tiger Global’s $90-million bet on agritech platform Ninjacart reflects large cheque sizes that it wrote earlier.
However, the businesses that it has been backing in its new avatar have mostly been on the business-to-business (B2B) side, particularly in the enterprise or cloud space including CheckMate — a startup that helps restaurants in managing multiple food ordering apps, facilities management software startup Facilio, expense management software Fyle, connected workforce platform Innovapptive, mobile marketing startup Clevertap etc.
“Such businesses are better scalable than B2C wherein you first acquire customers and then build a business model around it. In B2B or enterprise businesses, the possibility of expanding it faster is not restricted to local geography. Hence it offers a much wider market to exploit. As long as the market is large enough, any investor like Tiger Global would be interested in getting exposure in this kind of opportunity,” Founder and Managing Partner at early stage fund Unicorn India Ventures Anil Joshi told Financial Express Online. The fund has backed software-as-a-service (SaaS) startups including Boxx.ai, Clootrack, and Pharmarack.
B2B startups including Freshworks and InMobi have proven that if such startups are able to crack a model which is replicable in India then they can go rapidly scale to other countries.
Nonetheless, SaaS businesses’ initial expenses are quite high. While a startup might have as much as 10,000 customers but its incremental revenue remains too low to provide sustenance to business over a period of time. “Hence, you have to spend in making that platform work even as spend on technology, marketing etc. However, once you reach an optimum level then you can attract a large round of capital, added Joshi.
Coming to B2B platform Ninjacart that connects farmers to businesses helping the two with problematic part of the supply chain that includes collection, fulfilment, and distribution — the model to which it pivoted after starting as a grocery delivery B2C platform in 2015. The startup had in March 2019, expanded beyond its South India presence to Delhi, Mumbai, and Pune.
While operations in Delhi and Mumbai began with onboarding around 300 farmers and 600 retailers on its platform along with 180 farmers and 360 retailers in Pune, Ninjacart is expected to grow to over 2,000 farmers and more than 4,500 retailers in Delhi and Mumbai and over 1,200 farmers and over 5,000 retailers in Pune in coming six months, the company said in a statement last month.
Ninjacart’s CEO and Co-founder Thirukumaran Nagarajan declined to comments on the fundraising. “We will be coming out with more details around it on Friday.”
“Tiger Global’s cutting large cheques ($90 million in Ninjacart) is good for the entire agritech sector that was not there earlier. This might trigger other investors to look into this sector,” Jinesh Shah, Managing Partner at agri-focused impact venture fund Omnivore Partners told Financial Express Online.
Comments from Tiger Global will be updated as and when received.
Omnivore Partners, which has been raising its second fund, on Thursday said that it has secured $97 million for the same from global limited partners including the Dutch development bank FMO, UK’s CDC Group, Belgian Investment Company for Developing Countries, Swiss Investment Fund for Emerging Markets, Germany-based fund manager Sonanz Japan-based Mistletoe, BASF Venture Capital, and family offices.
“We would continue to focus on agri-sector while we have already made five bets from this second fund. B2B startups will form a significant chunk of the fund,” Jinesh said.
While Tiger Global’ expansion on the B2B side and foraying into new pockets such agriculture might drive more capital into the sector but domestic investors would still likely to have an edge in the market backed by their local understanding of the market, believed Shah.
“Global funds will come but challenges in agri space across the world are solved by people within the same country because you understand agriculture of that country more than other country’s agriculture while this doesn’t guarantee success,” said Shah.
The Second Home
Tiger Global had raised $3.75 billion in October 2019 for its latest fund — Private Investment Partners XI to invest in businesses in areas including consumer internet, cloud, and industry-specific software markets along with consumer brands companies in China, India and the US.
We believe the internet is the defining economic theme of this generation, Financial Times had quoted the fund saying in its investor materials. Without a substantial percentage of one s assets allocated to this theme, we believe it will be difficult to outperform.
Importantly, India has remained Tiger Global’s second largest market after the US — attracting more than 30 per cent of its total reported investment deals since its first fund, according to deals tracker Crunchbase. While the US had 37.4 per cent of the total reported, China remained at a distant third position with just 11.1 per cent. Tiger Global was launched in 2001.