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1Mby1M Virtual Accelerator Investor Forum: With Brij Bhasin of Rebright Partners (Part 5)

Posted on Tuesday, Jul 10th 2018

Sramana Mitra: If you look at the later-stage SaaS market, there are tons of companies that have scaled nicely. There are a lot of $150 million to $200 million SaaS companies that are looking to grow. They may have grown on top of one product line.

To be successful in the public market, they cannot be one-trick ponies. They’re going to need five other product lines to be able to generate fast-paced growth. This is a market opportunity into which India should play really hard. How do you parse the unicorn mania?

Brij Bhasin: There was a rush to help companies scale as quickly as possible to get them into the unicorn club. A lot of money was raised. At the same time when you have too much money, there isn’t as much focus on building strong fundamentals and foundation. The reality is the India market has a lot of issues that are not fully solved the way they are in developed markets. Those issues do take time for any type of a company to solve them.

You generally cannot just put money behind it. More money will not solve it at a faster rate. The companies that are smart continue to solve these foundational problems and are now starting to scale up. At the same time, there have been companies that weren’t so capital efficient and will now be struggling.

From an India market perspective, there has to be some sort of a rationalization on what timeframe we expect for companies to reach unicorn and hold on to unicorn status.

Sramana Mitra: Frankly, it’s unnecessary to focus on this unicorn as a goal. What the Indian market needs to focus on is a healthy entrepreneur environment with good investment at every stage and good exits. That’s a nut that needs to be cracked.

Brij Bhasin: You have to put it in the context of the type of investment funds that are investing. For a micro-fund, maybe a $50 million exit still moves the needle significantly. But if a marquee global VC fund with $0.5 billion to $1 billion were to be deployed in India, you need a couple of companies to get $2 billion or $3 billion in market cap. Otherwise, you won’t be able to make enough to account for the companies that didn’t work out.

Sramana Mitra: The global deep technology stuff is going to seek that unicorn style company building in the US. People are going to build to a certain point, get enough validation, and get customer traction just like Druva has done. These are companies that are scaling internationally. They’re scaling nicely. These are companies that do have a legitimate shot at being unicorn companies.

On the B2B side, it’s going to use India’s deep bridge with Silicon Valley and do their exits out here. I don’t know if you’ve read the Economist’s expose about the Indian market and how the Indian middle class is actually non-existent in the sense that we keep seeing presentations of this billion population and 300 million Indian middle class. The truth is the Indian middle class is very small.

The entire Indian market that actually buys things online is a very small market. Maybe 50 million. That is equivalent to more of the smaller European countries. These are not the countries that are churning out unicorns every day. They produce unicorns once in a while. That’s the rationalization that people need to come to terms with. We have to walk before we run.

Brij Bhasin: I’d like to differ in opinion on that. We have these western media coming up with statistics and trying to educate us in India on what really is the size of the market and how it is working or why it is not working. What we are really seeing on the ground is how the public in India and the larger population is using these services.

We have our own data point in terms of how the consumption of data and content is blowing up in India. We have data around how data services are being bought across the country from the smallest of the towns and the villages. We don’t necessarily have to go with just macro income numbers that Economist pulls out from government reports. We do have almost 400 million smartphones today.

Data plans have exponentially grown content consumption in India. The consumer story in India is extremely strong. The monetization aspect of it is something that is catching up.

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Brij Bhasin of Rebright Partners
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