Shailesh Vickram Singh is an Executive Director, Partner, and Investment Manager at SeedFund Ventures, which is an early stage venture capital fund. He is known for his deep understanding of the Indian startup space, and that’s why his views are respected widely.
Vikash Kumar talked to him at length about the Indian startup ecosystem and a range of related issues.
Startup valuations have become pricey. People are talking about bubble in the market. What’s your take on it?
I don’t think so. If startups are getting high valuations in the market, it means buyers see a value, otherwise they won’t buy them. It’s all about demand and supply. Everything that does not confirm to the law of demand and supply will naturally correct itself over a period.
The situation is very similar to technology boom of 1999…
It’s wrong. There is a fundamental difference between these two times. I am not sure whether you were there at that time or not, but I had started my business then. I had taken 20 kbps Internet connection at INR 20,000 and now I have 8 mbps at INR 2000 per month. This, in itself, shows a great difference. One of the biggest differences is that during the technology boom, public money was involved, and when things started going awry, they panicked. As a result, the stock market crashed and people lost their money within no time.
In the current situation, private people are active and they are doing it knowingly. They understand what they are doing. They are long-term players. VCs invest only after understanding the business and they also know the company management well.They don’t easily panic as they understand their market well.
In what kind of startups you are interested?
We are interested in any startup space we understand. We pay a lot of emphasis on understanding the core business. However, we don’t invest in real estate because of the lack of transparency and issues related to black money. Other two sectors we avoid are pharma and biotech, as we don’t understand them.
Why do you stres a lot on startups having founders as techies?
The simple reason is that if startup founders are techies or programmers, it is a clear sign that they understand their product better. If founders are not programmers, then product is not their core strength. Marketing can be improved in the later phases of growth, but product understanding is a really rare advantage.
Do you think the deep discount model of e-commerce will be sustainable?
The point to understand is that every company has its own business model.They do it strategically. People are also buying things without any discount. I have bought a lot of books in the last couple of years without any discounts. These companies, too, understand the importance of generating profits. Everybody understands that such models can’t be sustainable in the long-term and profit has to be generated.
Many startup founders have indulged in a valuation game. They don’t believe in scaling up their company.
I don’t think so. Take example of Paytm, InMobi, Zomato and many such companies. They have successfully scaled up their businesses. If a startup is not successful, it will not get the valuation it seeks. They become pricey only when they are successful.
Another thing is that the size of Indian market is not that big. Even a company the size of Reliance Industries is one-tenth of the size of ExxonMobil. Thus, Indian companies have a lot of room to grow. As the size of market and economy grows, these startups will also grow.
What are your expectations from budget 2016?
Not much. Any Government is ultimately run by the bureaucrats, who have a set working style. The current government is much more startup-friendly when compared to the last UPA government. This is a much better government than the erstwhile Manmohan Singh’s UPA government. Top people in the government are receptive. What has happened for startups in the last couple of years had not happened in the last 14-15 years. Now we have a Prime Minister that talks to startups. It was unheard of and that’s why I consider this a very encouraging scenario.
How do you rate the success of SeedFund?
Globally, the success rate is very low. It’s close to 10 percent. However, our success rate is around 30-40 percent, which is really satisfactory.
It’s rumoured that SeedFund exerted a lot of pressure on the Red Bus management to sell at desired valuation.
It’s not possible. We are just coaches that can shout from the fence. It’s up to the company management to run the show. We invest in a company from a long-term perspective and we truly seek a long-term relationship.
As far as pressurizing the Red Bus management is concerned, it’s nothing more than a rumour. We have a very cordial relationship with the management and they have also invested in one of our portfolios.
What’s the most interesting trend you see in the startup space?
India looks really exciting. Wherever I go, I feel excitement. Had somebody left his job in 90s, he would have been foolish. Now the situation is drastically different. Even Tier-II and Tier-III cities are bubbling with excitement. Things look really bright from here.