1Mby1M Virtual Accelerator Investor Forum: With Chandrashekar Kupperi, General Partner of Peaceful Progress Fund (Part 3)

Sramana Mitra: Do you want to act as a feeder into these humongous rounds? Small funds like yours get diluted heavily. The game that the Tiger’s and Softbank’s are playing is putting in huge amounts of money in the later rounds.

Some of the smaller funds that we have brought in say is it’s not so easy to play that game. You can’t really do pro rata at those levels. Let’s say a large Series C comes in. The small funds take an exit. How are you processing this dynamic of very large funding rounds downstream?

Chandrashekar Kupperi: We look for an exit because the larger funds would not want smaller funds to be there. That’s also the idea behind being in the early stage. Clearly, it will be very difficult to continue because you’ll lose the liquidation preference too.

Sramana Mitra: Exactly. Is that what’s happening across the board in the Indian small funds?

Chandrashekar Kupperi: Yes. You’d be surprised that India has got 900 funds. The early-stage funds are also increasing. They feel that they’ll be able to get an exit on a Series B or C round.

Sramana Mitra: It makes sense. You split the business-building into two phases. You take the early stage with the smaller funds and then everybody exits as the company gains traction. This game of very large funding rounds starts to kick in gear. There are challenges to that very large funding round game.

Chandrashekar Kupperi: What happens at an early stage is, as you’re investing and you have co-investors, you can do a follow-on round which is easier for the entrepreneurs because they already dealt with you. If they have to go for the larger funds, the thinking is, they have to raise a bigger amount.

Sramana Mitra: Yes, you need traction to justify that. There’s only so much you can do. There are limitations on how much you can do and how much follow-on you can do.

Chandrashekar Kupperi: We co-invest.

Sramana Mitra: What other trends are you seeing in the Indian startup ecosystem right now that are worth discussing?

Chandrashekar Kupperi: I’ll focus on consumers because that is the other focus area of this fund. We are seeing that a lot of product personalization startups are coming. There are startups that ensure that there are DNA testing kits that help find out what is the requirement of the consumers and that personalization is becoming quite big.

The second is sustainable businesses. It has to do with natural and organic. The other area has something to do with supplements like skincare or haircare. Finally, we are also looking at the virtual try field. You have an e-commerce platform that can give you a virtual try of products.

Sramana Mitra: In the B2C world, the first wave of e-commerce startups we saw were targeting the affluent population. Then Jio came. We started seeing the lower end of the Indian consumer becoming more accessible because they had a device. Where does that stand from where you sit?

Chandrashekar Kupperi: It’s a very important question. I come from a consumer background. I can tell you that there is something called the bottom of the pyramid where you see significant potential. Thanks to Jio, it’s happening.

What has led to startup growth is, they’re looking for spaces in tier-3 and tier-4 cities. There are startups that focus on tier 3 and 4 where they see that the consumer traction is even more significant. Sometimes even the loyalty. The trends that we see are stickiness and the ability to ensure that they can use a smartphone to buy a product. More importantly, because it’s a little close community, they refer the products easily to others and that increases the buying propensity.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Chandrashekar Kupperi, General Partner of Peaceful Progress Fund
1 2 3 4