When we started in 2013, India was sitting on a pool of wealth but lacked the crucial understanding of investing in alternative asset classes.
The first few years, from 2013 to 2018, were like a lab experiment – about evangelizing, working with the regulators, and laying the groundwork to make people aware of the nuances of private markets. This included offering the official definition of ‘accredited investor’ to SEBI, along with other ecosystem influencers, and conducting numerous workshops and masterclasses about investing in startups, among others. With our platform, we have brought more transparency, removed all the information asymmetry, and made startup investment more accessible.
In a way, we have co-created the early-stage ecosystem in India.
A decade later today, we continue to remain India’s largest private market investing platform in both early and growth stage investments. Through LetsVenture and trica – our growth stage investment platform for family offices – we have enabled over 1000 rounds of funding worth $250 Mn in early to growth and pre-IPO startups.
The past year was not easy by any means for founders, investors, or anyone in the ecosystem. However, I would still call it a good year for the ecosystem because it pushed us all to move away from the norm and value the toil it takes to build a business.
It segregated the entrepreneurs out of all the founders today; I maintain that all entrepreneurs may be founders but not all founders are entrepreneurs.
The biggest perk of running LetsVenture is that I get a front-seat view of the ecosystem.
Here are some of the trends and concerns I saw this year:
On the investing side:
1. Investor commitment trends: This year at LetsVenture we have seen a further tightening of commitments from investors in H1 and H2, though we have started to see signs of revival in the last few months. As a team, we have been very selective in our curation process, and have double-indexed on investing into portfolio founders. Writing cheques is far easier than continuing to support founders. So don’t judge investors by the number of cheques they write.
2. Sectors that saw interest: While healthtech and fintech are evergreen sectors, more and more investors are scouting for deals in cleantech such as EV and renewable energy, deeptech startups, including artificial intelligence, drones, and spacetech. We found most of the deeptech startups emerge from Bangalore while SaaS startups prefer to be based in Chennai, and D2C startups in and around Delhi.
3. Beyond the metros: The wealthy in small towns in India are ready to invest in startups due to greater awareness of the asset class. They prefer investing in and promoting local founders as their first and easily accessible means to the ecosystem.
4. Lead investors' role in the angel stage: The last two years have seen more fatalities and founders struggling to survive. We have seen founders struggle to reorient to the new benchmarks of funding readiness and continue to stay relevant. Interestingly, many lead investors are absent at the time of crisis to manage their commitment to their syndicate backers.
5. Portfolio-based investing: Funds continue to be the path for investors who lack time or the interest to deeply analyze deals. There will be more innovation around portfolio-based investing (as we are doing at LetsVenture today).
6. Founder-turned-investors continue to be the best profile of investors. Their ability to understand founder challenges and provide support seems more natural. As an investor, try and find such champions to work with.
7. Patient capital from family offices: This was the year when family offices came to the fore, whether it was digesting large quantums of pre-IPO start-up tech stock or actively participating in the profusion of bridge rounds that took place at pre-Series A to pre-Series B stages. This activity is significant in the absence of VCs deploying the dry powder they are sitting on. Since this capital comes with a strong ‘dhanda’ ethic, I think companies that have digested this capital will take a pragmatic approach to business building, a departure from a typical growth led model. I see this capital unlock as a strong foundation setting for the next decade.
On the founder side:
1. At times of crisis, relationships trump. Investors are willing to give another chance, provided they are not taken by surprise. Founders who are very transactional don’t succeed and don’t find the support they need. Lack of transparency with investors is not treated well in the investor community.
2. At a time when capital is difficult to come by, serial entrepreneurs are playing it smart by focusing on maintaining a healthy runway of at least two years. Their strategy is to raise with about 18 months of runway to gain better negotiating power. On the other hand, several first-time founders tend to hold on to their last valuation raised, which cannot be justified in today’s market. Many are going into ‘survival’ mode or shutting down.
3. Equity distribution still not understood by founders. We continue to see startups dilute high amounts of equity for small capital raised in early rounds, and equity given away to advisors early on. With such over-dilution in the initial stage, startups are struggling to raise further rounds.
More than 650 startups have raised funding with LetsVenture. We’ve also opened the door to startups and private market investment to over 20,000 investors. Though the journey has been meaningful, the work continues to be arduous and complex in India.
In 2023, we recorded 169 deals across cleantech, deeptech, enterprise SaaS, and fintech, among others on LetsVenture and trica.
2023 is also the year we saw a significant increase in the interest of domestic capital allocators to participate in secondaries - both GP-led continuation vehicles as well as direct secondary investments in tech startups. This is in line with what we are seeing globally - in 2023 and early 2024, Blackstone and Lexington closed record breaking secondary fund vehicles at $22.2 Bn and $22.7 Bn respectively. With the bid-ask price further reducing in 2024, as macros remain under stress and the ‘golden tap’ only opens a fraction, I see the action in the domestic secondaries market only picking up further.
Our vision remains intact: To ensure that investors (angels, UHNIs and family offices) have access to the best entrepreneurs and to make fundraising and liquidity easy and transparent for founders.
LetsVenture completed 10 years in May 2023. It takes a village to build a company and some more to set up an institution like LetsVenture. My gratitude to the team and everyone who has joined me in organizing India’s private market in the last 10 years.
(More insights on The Great Metamorphosis: LetsVenture’s Private Market Investing Outlook, Insights & Projections 2023-24. Get the full report here)