Dev Khare, Managing Director at Lightspeed India Partners Advisors, talks about their focus on being the first institutional investor in startups
“What is your view of the Indian market? What stage do you invest at and what has been keeping you busy?” These are some of the common questions we get asked many a time. So I decided to give a brief snapshot that will hopefully answer these questions:
- There is an expanding technology opportunity that we like: India is now home to nearly 100 million real internet users. This is believed to expand further with a common tax code (GST), a common financial stack (UPI, Aadhaar, eKYC) and expanded internet access (Reliance Jio-initiated data price war), which is all underscored by a steady GDP growth. To cap this, India now has thousands of newly blooded (and bloodied!) founders, thanks to the tremendous expansion in new venture financing in 2014/2015.
- The trick is not to lose heart by just focusing on shortcomings: Though painful, downturns in growth financing are a normal part of the cyclicality of the financial environment. The financing market will come back, along with exits. And the ecosystem that is made of founders, investors, employees, consumers will all learn from the last couple of years about what it means to build a fundamentally sound business for different segments of Indian consumers and businesses (large corporates, SMEs, traders, individual service providers).
Within the context of this expanding opportunity set, Lightspeed in India has been expanding steadily over the past five years, with a focus on being the first institutional investors in startups.
What do we mean by first institutional capital?
During a seed round, we usually are the first institution to invest, after founders, informal angels, and HNIs. The amount of each seed investment generally ranges from Rs 3 crore to Rs 6 crore (or $500,000 to $1 million). During the Series A round, we generally are the first large institutional cheque and come in pre- revenue, pre-launch or early revenue stages. And the range for Series A investments is between Rs 12 crore to Rs 35 crore (or $2–$5 million).
We tilted significantly toward first institutional capital in 2011
Before 2011, close to 75 percent of our deals were Series B or C on a small base of four investments. As of 2011 onwards, we have done nearly 20 investments, of which approximately 50 percent have been seed deals and approximately 85 percent have been as first institutional capital (seed or Series A).
From 2015, we accelerated our investing pace with a new India-dedicated fund and five new investments. In 2016, our investment pace increased with five new commitments in the first nine months of the year. We have also expanded our team significantly — more on that in a later post.
Active investments where our first cheque was a seed cheque include Craftsvilla, Oku Tech, Oyo Rooms and Limeroad, among others. Active investments where our first cheque was a Series A cheque include FreshMenu, Indian Energy Exchange, Magicpin, OneAssist, and others. Our active Series B/C deals include Byju’s, Shuttl and ItzCash . We also have our fair share of companies that have not worked out.
We’re optimistic about the future; case in point — we have several undisclosed early-stage investments that we made in 2016. Going forward, we are looking at consumer technology investments in financial services, digital media, health, and education. We are also looking at business technology investments in areas such as B2B marketplaces, payments and enterprise software.
Let’s go build big companies together!
~ The Lightspeed India team
Please note: This article first appeared on Medium