Sramana Mitra: Sapience was our portfolio company as well. What about the more recent ones? What have you invested in the last couple of years?
Padmaja Ruparel: There is LogiNext which is in the logistics space partnered with Sapience. If you look at FarEye, they are tracking logistics. This is a completely real-time tracking system. They partner not only with e-commerce players but a lot of other B2C players. There are companies in the agri space that have grown.
In India, the marginal farmers don’t have money for capital equipments. Companies are bringing the equipment on a lease model. The small farmers are able to rent out these equipments by the hour. It’s like Uberization of farming equipment. It’s very interesting and growing very rapidly. We have robotics for example for educating young engineering students. They’ve broken the whole engineering concept and literally created tangible working simulated models.
We have an architecture company SmartVizX that brings the architectural plan onto a platform in such a way that it is sliced and diced in 3D though the virtual reality platform. It saves so much time and money that it’s really taken it to the next level. In biotech, we’ve invested in a company where they are doing simulated human livers for drug testing. We’ve invested in stem cell research like a company that is looking at breaking down stem cell for cancer.
There is another company that is in manufacturing. Just like you have a coffee-vending machine where you press a button and get your coffee, you press a button and you get a dosa. You even have a choice as to which dosa you want. All of this is now coming to play.
Sramana Mitra: I’m going to ask you another trend question. This is a bit different in India than what we see in the US. In the US right now, there has been a tremendous surge in micro-VCs and angels coming together and creating funds. I think the 2013 number was 70,000 seed-funded companies, but the Series A number still remains quite small.
In Silicon Valley, there is a big Series A gap that has opened up. The India story is different. In India, there is not that much seed capital in the system. It’s very difficult actually to get seed money. How do you see the seed to Series A equation in India?
Padmaja Ruparel: You’re right. When IAN started, the gap in the market was half a million dollars. After an entrepreneur’s friend and family round, it was hard to get any money. That was the gap that IAN was trying to plug by bringing in angel investing. Today, angel investing is established. That gap is starting to get plugged. The growth of angel investors in this country has been pretty sharp, but the gap today that we see is more in the $1 million to $5 million funding.
Companies are finding it extremely hard to find that kind of round. Number two is to get money from quality investors who can still hand hold them. The government has put in a fund for startups and a couple of other ministries have put in money. It is very difficult for companies to get that $1 million to $5 million. Many companies are falling off the cliff because of delayed funding.
Sramana Mitra: Let me just comment on what you said. In India, yes, companies are growing fast. For venture-scale growth, that is hyper fast growth that VCs look for to invest in companies and to demonstrate the ability to grow at that kind of accelerated pace is not easy, especially for companies that are facing the Indian market. India-facing companies don’t reach that level of growth rates.
That is one of the issues that is causing gap between the seed and Series A in India. That is a different reason and a different analysis of the market. As you know, I’m a big proponent of bootstrapping. Indian entrepreneurs are good at bootstrapping.
Padmaja Ruparel: I get your point. We encourage companies to bootstrap. I know of a company where they were raising about $150,000 about three years ago. When I looked at their cash flow and projections, I said, “Why don’t you try and bootstrap?” I’m a big proponent of bootstrapping.
To your point, what I would also like to point out is that these companies need mentoring. Many funds are not really entrepreneurs in their earlier life. Guidance is not there. IAN is a very interesting fund in the fact that companies will not only be able to raise money from us but now we have 470 investors on our platform whom we can access for domain expertise, mentoring, market network.