Online businesses in India are all time high – experiencing unprecedented faith from investors and consumers as well. In last 8 to 10 months it has been witnessing aggressive investment appetite from all quarters of funding spectrum be it – PEs, Vcs and angle investors. Talking on the entire online funding ecosystem in India, Mukul Singhal, Vice President, SAIF Partners opines structural change along with strong exits visibility fuelled investors confidence in the market. In an exclusive interaction with Iamwire Singhal shared thoughts behind SAIF Partner’s funding of recently founded Zovi and shed light on various aspects of funding in online business.
1. In last 8 months there is a bubble in fund pouring by investors in Indian online industry. What are the reasons of such unprecedented faith of investors in Indian online industry?
I would not say it’s a bubble. At SAIF; we have seen strong momentum in some of the online companies. Our portfolio companies like JustDial and MakeMyTrip also witnessed structural changes in online market in India. This coupled with exits visibility like MakeMyTrip listing at NASDAQ gave lot of investor confidence in the market.
2. What trends you have read as investor in Indian online industry so far this year?
Ecommerce is getting a lot of traction across nation including tier two and three cities. Categories like electronics and books are leading, jewellery and apparels are still at evolving stage. Apart from ecommerce, I have seen user adoption for online entertainment content like videos and games. At present Video consumption rate is growing significantly in India. However, it has some challenges in monetization but can be solved if addressed seriously.
3. What is the ticket size of investment in overall online businesses in India?
As far as overall online industry in India is concerned the market has significantly grew in last 10 to 12 months. Initially it used to be anywhere between 350 to 400 crore. However, recently fund raised by Flipkart, Snapdeal and Big Shoe Bazaar drove the overall investment landscape beyond 400 crore.
4. Do SAIF Partners follow any specific policy for investment in India in contrast of China?
On macro level it remains the same. There can be differences in sectors and stages depending on the macro view in China or India.
5. How do you foresee the scalability in an online business enterprise before investing?
Primarily we see the market size of the products and services launched by business enterprises along with potential of team’s ability to build a large business.. At early stage typically we invests in technology driven business like internet, mobile and platform oriented services.
6. Recently SAIF Partners along with other investors funded start up Zovi.com, a pure play online retailer which offers only two products in its portfolio. What made you to show such faith in Zovi?
ZOVI is a back integrated manufacturer and seller of apparels. It sells its own brand on internet. We have a similar business model company in China, Vancl which has done exceptionally well. We studied Vancl model for India and realized that it can be a very strong business model for India as well. Hence; we incubated the business.
7. What safeguards SAIF Partner has with its investments in online retail against big entrants like Amazon which is set for Indian debut?
Ecommerce business has big localization elements. For Example: India is not a card economy like US. So how do you build your service around ‘Cash on Delivery’? Fulfillment service is broken and unreliable. Any new entrant like Amazon has to work on all these challenges and transition may not be smooth. Unlike areas like Search and Social network; ecommerce has greater more local elements to work on.
8. Do you feel the need of government regulation for PE & VCs funding in online businesses in India?
I do not think so
9. What would be your suggestion for online retailers looking to attract funds?
Viable and innovative business models along with committed teams to manage post production operations would surely gather investor’s eyeballs.
10. How do you perceive the transition of entrepreneurs like Deep Kalra of makemytrip and Sajeev Bikhchandani of Info Edge as investors?
It is good for Indian online industry as entrepreneurs understand the every aspect of scaling up of businesses. Their professional acumens will definitely guide incoming entrepreneurs in different ventures and entire ecosystem as well.