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Rajan Anandan, managing director at Sequoia Capital India.
Rajan Anandan, managing director at Sequoia Capital India.

India’s entrepreneurs have responded to crisis quickly: Rajan Anandan

  • ‘If you are a global tech firm, being and winning in India is a huge priority as we will have 1 bn internet users by 2025'

NEW DELHI : The first two months of the covid-19 crisis were very difficult for startups as they had to take tough decisions, but Rajan Anandan, managing director, Sequoia Capital India LLP said he was surprised at how quickly Indian entrepreneurs responded to the crisis. In an interview, Anandan, also president of TiE Delhi, a non-profit organization for startups, discussed the start-up ecosystem and the Indian Internet economy being at a tipping point. Edited excerpts:

How are startups re-imagining themselves in the post-covid world?

We are four months into covid, so start-ups that are secure or will continue to be in business until 2021-end, have extended their cash runway by looking at their cost structures and getting rid of products that didn’t make sense. Secondly, by focusing on fundamentals, thinking deeply about unit economics, improving their products, reimagining go-to market channels, rethinking supply chain, some start-ups have turned the corner on profitability or have a clear path to profitability.

Thirdly, we have seen acceleration in several segments like edtech and e-commerce, like online groceries, with the emergence of new segments like tele-consulation and digital health.

Lastly, while funding activity was slow in March-April it has picked up in May, especially at the early stage level. So in parts of the ecosystem, funding activity has come back but investors are clearly looking for different things today. If you are a company that has strong unit economics and you’ve got customer love, your ability to raise funding is strong. The first two months of covid were very difficult for companies as they had to take tough decisions but we have been amazed to see how quickly Indian entrepreneurs have responded to the crisis.

With Facebook and Google investing in Indian firms like Jio, where is India's Internet economy headed?

India today has more than 500 million Internet users who consume 16 gigabytes data per user, per month. By 2025, we will have 1 billion internet users which means we will be neck-on-neck with China in terms of the largest internet user market. If you are a global Internet company, being and winning in India is a huge priority because what is at stake is 1 billion internet users, on 4G or 5G. India is a must-win market for any global tech company. In 2010, India had less than a few thousand startups, there were no Indian unicorns, and India had less than a billion dollars of venture capital funds. Fast forward to 2019 and we have more than 40,000 Indian start-ups, 30 unicorns and $14.5 billion in venture capital money so the investments Facebook, Google and others are making here is not surprising.

What does this mean for start-ups?

This is fantastic because what this is doing is what I call build the rails or the highways (the physical infrastructure). Companies like Jio have triggered the mobile broadband rails that allows consumers to get access to 4G, Amazon and Flipkart have built the logistics infrastructure and spent billions of dollars on consumer awareness and discounts as well as what the government has done in terms of UPI and Aadhar enabling digital payments. Today, 150 million Indians pay using digital payments. What all this capital has done is put in place the underlying digital infrastructure and enablers. I like to give the analogy of until you have world class highways, you can't have fast cars.

Why does all this matter? Take a company like Byju's it became the world’s most valuable edtech unicorn out of 17 edtech unicorns in the world. If we didn’t have millions of Indians online, if we didn’t have digital payments, broadband you couldn’t build a company like Byju’s.

What do Indian start-ups need to become global?

We have a lot going for us in terms of strong founders, enough capital, connected user bases, developed ecosystems.

What the government can do is create a regulatory framework where Indian startups can list on international exchanges. This will enable some of our largest technology companies to go public and raise capital. We also need to continue to make sure regulatory frameworks remain favourable to start-ups and innovation. But the single biggest thing not only for start-ups but for all of India is economic growth, the faster the Indian economy grows the bigger the addressable market becomes and chances of a larger company emerging from India is likely.

The pandemic has triggered a contactless revolution for kiranas. Is this here to stay?

Covid has created an inflection point in many sectors and digitalization of kiranas and SMEs is one of them as they realized during the lockdown how important digital was going to be for them. Kiranas are beginning to build digital fulfilment capabilities. We have 13 million kirana stores and over the next 2-3 years they will be fully digitised and be using digital tools. On the consumer behaviour side, 150 million Indians use digital payments today and by 2025 this number is going to double.

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