Lightspeed venture on start-up ecosystems and investment prospects in India

According to a venture capitalist, investors are betting on Indian startups and taking more risks, thanks in part to improvements in Indian infrastructure.

Dealmaking in South Asia’s largest economy rose in the first seven months of 2021, as did many overseas investors with big pockets flushed Indian start-ups with fresh products.

“There is a lot of capital flowing into India right now,” Vaibhav Agrawal, partner at Lightspeed Venture Partners, told CNBC.Road signs Asia” on Friday.

As many as 828 venture capital financed deals were announced in India between January and July, with a total disclosed value of $ 16.9 billion, analytics firm GlobalData announced last month. The marked a 40.8% increase in deal value compared to the whole of 2020.

All of this creates precisely the “perfect storm” that allows everyone to take more risk, from early stage to late stage investors.

Vaibhav Agrawal

Lightspeed Venture Partner

Agrawal said three things drove capital inflows into the country.

First, a noticeable improvement in Indian infrastructure has enabled startups to create more value and grow their businesses faster.

As an example, he cited India’s United Payments Interface (UPI) – a system developed and used to, by India’s premier payment processor, the National Payments Corporation of India, Facilitate digital payments in the country.

As a result of the coronavirus pandemic, which shifted a large part of daily consumption online from grocery delivery to shopping, many companies also benefited from improved production costs per unit of goods, according to Agrawal.

“We only see higher order values, for example in e-commerce, a higher order frequency, for example from grocery retailers,” he said. “That only gives investors around the world a lot of confidence.”

Zomato Food Delivery Partner can be seen on a street in Kolkata, India.

Debarchan Chatterjee | NurPhoto | Getty Images

India is also at a stage where a number of startups have announced plans to go public.

Food delivery company Zomato became the first in a series of prominent names to be publicly performed. Others in the pipeline are the payment giant Paytm, Ride-hailing start-up Ola and e-commerce giant Flipkart.

“The big criticism of India’s capital markets concerns exits and liquidity – especially for late-stage investors,” Agrawal told CNBC.

He explained that Zomato’s successful listing in July helped alleviate some of investor fears about startups and their ability to go public.

“Zomato is followed by about 20 companies that will leave [public]so hopefully they’ll do well, “said Agrawal.

“All of this creates exactly the ‘perfect storm’ that allows everyone to take more risk, from early stage investors to late stage,” he added.

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