1Mby1M Virtual Accelerator Investor Forum: With Rahul Chandra, Managing Director at Arkam Ventures (Part 1)

Rahul Chandra, Managing Director at Arkam Ventures, is a veteran of the Indian Venture Capital industry. This discussion spans historical context to the current Unicorn mania. Great analysis!

Podcast:

Video:

Transcript (2.11 to 40 of video)

Sramana Mitra: Rahul, you were with Ashish at Helion in the very beginning. You’ve been at the Indian venture capital scene for a long time.

Rahul Chandra: Absolutely. In fact, even earlier than that. The first-ever India-dedicated fund that was done by Walden started in 1998.

Sramana Mitra: In that case, why don’t we start with a historical view of the Indian venture capital ecosystem. You’ve had a long view. Can you take us through what you think were the major milestones in that evolution?

Rahul Chandra: There are three notable cycles in the Indian venture capital. The early ones are now almost insignificant. In 2000 when the dot com happened in the US, there was a quick formation of smaller funds in India. Then 2006 was when Matrix and Helion came about with the backing of long-term US LPs. For the first time, quality backing came.

The other notable change in India was the whole chicken-and-egg problem of the device and access to computing for consumers. Of course, there was no data. VCs were struggling. There were a couple of VCs who came from the Valley thinking that Indian customers are ready to go primetime. Still, things were quite slow. Things started changing with Jio. End-user growth started growing in millions. That’s when things got interesting.

The landscape has much larger funds. A lot of the founders have gone through accelerated learning than they’ve done in the past because of the really high-velocity funding exit and growth learnings percolating very quickly. Suddenly, things are sprouting all over.

Sramana Mitra: Some of the learnings on our side that come alongside your learning is what is working and scaling. In the first phase, it was India-facing B2C. For us, global SaaS has been very productive. Freshworks came out in 2011. Nutanix, Druva – these are the beginnings of the early product companies. That trend has taken a good hold. There are lots of Indian companies coming out with global ambitions and a global go-to-market strategy. That’s been a very healthy growth.

The India-facing consumer business has continued to be a big factor. The one that took a while is the Indian SME-facing business applications and services. That is starting to accelerate. Then India-facing fintech, health tech, InsurTech. In January, we did a big overview of 20 Indian unicorns. There were a few that I thought were not overvalued. By and large, these unicorns have to backfill their valuations. These are not reasonable valuations.

On one hand, you have a public company. Then an Indian unicorn is valued higher than that. It is not a reasonable comparison. Let’s come to Arkam Ventures. You are a veteran of the business. How are you positioning your fund? What is the investment thesis?

Rahul Chandra: Arkam is dedicated to finding the right companies in markets that are disrupting the old structures. These companies have consumers in middle India. There is an affordability question here. In reality, it’s more about ease of payment. I’ll give you an example.

Mostly, the banking structures in developed and developing markets are built with the same design. Every new consumer is going to put pressure on the bottom line via the lower margin. This is because the structures have been designed to cater to smaller markets and countries. In India, there are 400 million people on UPI now. The structures are not going to work.

There is a complete unbundling of the banking system from savings, investments, and fixed deposits including inter-country transfers. Today, I heard someone talking about the challenges of making global transfers. The reason is simple. The traditional banking system has created a massive gap in service quality and response times. It just leaves a fantastic opportunity for a tech-first solution to come. It’s blowing the customer experience out of the water. We are now 11 companies strong.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Rahul Chandra, Managing Director at Arkam Ventures
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