Lightspeed Venture on Indian Start-Up Ecosystem and Investment Perspectives

Investors are betting on Indian start-ups and taking more risk, in part thanks to improvements in Indian infrastructure, according to a venture capitalist.

Transactions in South Asia’s largest economy increased in the first seven months of 2021, as many foreign investors with deep pockets flushed Indian start-ups with fresh funds.

“There is a lot of capital flowing into India right now,” Vaibhav Agrawal, partner of Lightspeed Venture Partners, told CNBC’s “Street Signs Asia” on Friday.

No less than 828 venture capital-backed deals in India were announced between January and July, with a total disclosed value of $ 16.9 billion, analyst firm GlobalData said last month. This marked a 40.8% jump in transaction value from 2020 as a whole.

Agrawal said three factors were boosting capital inflows into the country.

First, a noticeable improvement in India’s infrastructure has allowed start-ups to create more value and grow their businesses faster.

He cited the example of India’s United Payments Interface (UPI) – this is a system created by India’s leading payments processor, the National Payments Corporation of India, which is used to facilitate transactions from digital payment in the country.

In the wake of the coronavirus pandemic, which has shifted much of daily consumption online from food deliveries to shopping, Agrawal said many companies are also benefiting from an improvement in the cost of production per unit of merchandise. .

“We’re just seeing higher order values, for example, in e-commerce, higher order frequency, for example, in food trading companies,” he said. “It just gives investors a lot of confidence around the world.”

India is also at a stage where a multitude of start-ups have announced their intention to go public.

Zomato food delivery company became the first in a list of important names to go public. Other ongoing projects include payments giant Paytm, ride-sharing start-up Ola, and e-commerce giant Flipkart.

“The big criticism of Indian capital markets is for outflows and liquidity – especially for early stage investors,” Agrawal told CNBC.

He explained that Zomato’s successful listing in July had helped allay some of investor fears about start-ups and their ability to go public.

“Zomato is followed by twenty companies which will go [public], so I hope they will do well, ”Agrawal said.

“All of this only creates the ‘perfect storm’ that allows everyone to take more risk, from newbie investors to advanced investors,” he added.