Sramana Mitra: The India e-commerce market is an active market, but it still operates on this cash-on-delivery mode. Are there indications that this is going to change and people will feel more comfortable with providing credit cards on the internet? That’s going to accelerate the trends.
Sasha Mirchandani: It has to change. It’s a mindset change more than anything else. It’s hard to scale without credit cards. You can’t have cash-on-delivery going on forever. Credit card is going to chip away at COD over the next couple of years. It’s something that we’re going to live with for longer than I would have liked. It’s inevitable. It has to happen.
Sramana Mitra: In your investment thesis, are you putting any kind of assumption on when that changes? That will significantly change the dynamics of the market.
Sasha Mirchandani: We try to guess, but we really don’t have the answer. We try to see if the business can be built on COD. If the answer is no, then we’d rather not do the the investment.
Sramana Mitra: The other sector the you mentioned is SaaS. Are you investing in SaaS as it pertains to Indian consumers or Indian businesses?
Sasha Mirchandani: We do SaaS only for global. It can start with a few Indian customers for a year. Very soon, we make sure that the founders are the in the US, because we want to serve a global audience. B2B for India is still very small. You can think of India as a very unique market.
For B2C, India is a big enough market. You see big companies build out Flipkart or Ola. On the other hand, they’re like Israel where the B2B businesses have to quickly move over the US. In China, everything happens in China. Think of India as a combination of China and Israel.
Sramana Mitra: Essentially, your message to entrepreneurs is if you’re doing B2C in India facing the Indian market, you can get funding. If you’re doing B2B on a global basis, you can get funding. If you’re trying to do India-facing B2B in India, you’re not going to get funding. There are a few exceptions.
Sasha Mirchandani: There will always be exceptions, yes.
Sramana Mitra: There is an excellent company called Knowlarity that has raised funding in the B2B SaaS mode from India facing the Indian business community. Anything else that you want to share?
Sasha Mirchandani: With the market slowing down, it’s a great time for entrepreneurs more than for the investors. The best companies always get built in downturns. The entrepreneurs are more frugal and think 10 times before spending more money. In the long run, these are the companies that come out stronger. You have to grow, but it has to be well-rounded. We are very excited. We can see that the better entrepreneurs in our portfolio are focused on the point that I mentioned. Many will die.
Sramana Mitra: This correction that is underway right now was very necessary. The market has gone completely out of whack. When you move far away from fundamentals, entrepreneurs get very confused.
Sasha Mirchandani: I always blame myself as an investor if the company is not doing well because it’s my responsibility to guide the entrepreneur in the right direction. We have to be on the ball with them. If we’re not, we can’t blame the entrepreneurs.
Sramana Mitra: Yes and no. When entrepreneurs are offered huge amounts of money at ridiculous valuations, getting them to say no is not an easy task even if you’re on the Board unless that entrepreneur has internal discipline.
Sasha Mirchandani: My point is not to say, “Don’t take the money.”. Just to use it judiciously. There are very good VCs that add value.
Sramana Mitra: Thanks for sharing your perspective.
It’s very interesting how things are evolving and maturing in the Indian market. Hopefully the exit situation is going to fall into place. The other missing block that you’re pointing out is the Series C and Series D money for the B2C India-facing companies is also missing. That needs to come together. I’m sure that’s going to come together in the next few years.