1Mby1M Virtual Accelerator Investor Forum: With Rajul Garg of Leo Capital (Part 2)

Sramana Mitra: On the B2C side, the Indian investors are investing in mostly India-facing companies. Is that also your preference or are you also doing global B2C? The counterpoint of that is when it comes to SaaS, we see Indian investors mostly interested in doing global-facing companies and not so much the India-facing companies.

There may be validation level work in India but the Indian VCs have decided that when it comes to enterprise or B2B, they prefer the global-facing SaaS.

Rajul Garg: Pretty much guilty on both counts. The domestic market of India is very large. Growing internet penetration and middle class makes it very attractive to a consumer play. It’s difficult sitting in Bangalore to do a play for Western Europe or for US in the consumer market. Indian market tends to be tiny.

There are only few examples of companies that have achieved any scale just in India. Most investors gravitate towards plays which are more global. The Indian IT services industry is fairly mature over the last 30 years. There are plenty of people there who have sold to global companies. It’s not something that is alien to us as Indian entrepreneurs to be able to sell to global enterprises. It makes it a little bit easier also to find people.

Sramana Mitra: Talk about what trends you see in your deal flow. Let’s look at 2017. How many deals have you seen? What are the highlights in terms of trend lines in that deal flow?

Rajul Garg: Almost every deck that I’ve seen of any substance tends to have AI and machine learning. It may not necessarily have AI inside but it has AI on the label. If you go back 2014 to 2015, it was the year of consumer investing going crazy. There was a huge amount of investment that happened in India particularly in consumer market.

In 2016 to 2017, I don’t think there is a clear theme like that. It’s become a little bit more bottom up. Some of the things that everyone sees is logistics as a sector. We see a lot of players there. But this is a very fragmented market. FinTech is a very large market because Indian is under-lent. The need for credit is very large for both consumers and enterprises. It’s not a winner-take-all market. It’s like a service market.

You see definitely see a lot of lending stuff. Global SaaS for sure. As consumer fell out of vogue, there’s a lot more play on global SaaS in the last couple of years. Those would be the top three that we see. Then there’s a tail of all kinds of different things. Among the investments that we’ve done, we’ve done ed tech and health tech.

Sramana Mitra: You are comfortable investing in all of those trend areas?

Rajul Garg: I don’t know if you can be totally comfortable but we do invest in all those areas. We are a sector-agnostic fund but we take a very bottom-up approach.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rajul Garg of Leo Capital
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