The partner at SAIF Partners said the fund is bullish more than ever on early-stage investing and has already doubled its investments this year compared to 2019
The covid-19 pandemic might have forced several big startups to look at diversifying and increase financial efficiency, to survive, but for early-stage businesses the ongoing pandemic brought in new opportunities. SAIF Partners, an early to growth-stage venture capital fund, has seen renewed focus in categories like edtech, telemedicine, direct-to-consumer brands as well as online entertainment platforms. In an interview, Deepak Gaur, partner at SAIF Partners said the fund is bullish more than ever on early-stage investing and has already doubled its investments this year compared to 2019. Edited excerpts:
With the covid-19 being a long-term reality, what are the interesting trends SAIF Partners is excited about?
The covid-19 has forced companies to look internally and figure whether they really have a product-market fit. Alongside, we have seen companies also reengineering their product market fit, and bring in efficiencies by reducing their cashburn.
Since there is distancing, digitisation is no longer a discretion or choice but has become mandatory and that has led to fundamentally change in trajectory of several businesses.
We have seen the tailwinds in sectors including gaming, education, especially the test preparation space; remote diagnostics and telemedicine. There is further digitisation in Indian small-and medium enterprise (SMEs) space through digital customer relationship management tools (CRM), retail analytics or digitising ordering systems.
On the consumer side, we have seen a strong online push coming from online, and we have seen that in e-commerce. Our advice to our portfolio companies was that they should not look at covid-19 as a short-term impact, and not plan for a post-covid world either, but rather build for the immediate opportunities in hand.
How has your investment strategy changed?
As a fund, we definitely have been more active this year versus the last year. This year alone we have signed 15 new investment term sheets, as compared to seven term sheets for the same period (January to July) last year. Most of these investments are in new companies which are pushing digital penetration.
Currently, sectors like consumer grocery whether it is companies which are enabling the buy of these products or are direct consumer F&B brands are a focus. Similarly, education, healthtech, social gaming and even enterprise software-as-a-service (SaaS) are receiving a positive push. But we continue to catch them early and be a part of their journey at growth stages.
Our confidence is just growing since startups are also becoming more resilient and working towards building for the new opportunities, which the pandemic has poised and improving financial efficiencies.
For sectors where there is structural impact, like travel, and are against the tide, we have taken a pause, and are struggling to find conviction to invest in these businesses. Same applies for businesses where there is a high-discretionary spend.
Will uncertainty in the market will lead to a slowdown in startup funding?
When it comes to early-stage, there is unlikely to be any slowdown in activity, owing to the capital efficiency, which startups are adhering to, and the new opportunities which are emerging for newer businesses to disrupt.
But late-stage capital is definitely expected to be more selective, and will be judicious to invest only in companies which have a strong product differentiation and outlook. Since, late-stage investors are expected to be selective, we can witness some consolidation in the late-stage space.
With Jio entering the space, how does it impact your investment philosophy?
With Jio entering, it will only expand the market multi-fold. Jio proved that earlier by expanding the data adoption network, which ultimately led for startups to craft solutions.
However, if there are any large companies competing head on with Jio, dynamics will be differently.
From our vantage point large companies entering will only help the startup ecosystem, which has lacked large strategic exists.
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