Sramana Mitra: When you look at the Indian geography, what is the distribution of deal flow that you’re seeing? Is there a bias towards Bangalore? I know Chennai and Pune have done well.
Ben Mathias: It’s pretty scattered. Bangalore, for sure, is the leader in terms of the number of companies. We do see a lot of companies coming from Chennai, Pune, and also from the NCR. Recently, we started to see a lot of startups in Hyderabad as well.
Sramana Mitra: What about the Series A gap? You just said that there are a lot of companies that are able to get to a million dollars ARR. How much of that pool is getting the Series A funding? What percentage is selling into the Series A gap?
Ben Mathias: There are probably about 10 to 15 active Series A funds here in India. I’d say that’s just about enough at this point. I don’t think we have a shortage in Series A. All of us interact quite a bit. We share deals. We co-invest on opportunities. But the gap is in the Series B and C.
On the consumer companies, there are a lot of Chinese investors who are investing in the later stage rounds. If you’re not able to get one of those investors, you’re stuck for the later rounds. For enterprise companies, to get to Series B and C, you really need to start going outside of India.
Sramana Mitra: That’s really not a big problem. If these companies are trying to go global and if they have the metrics, Silicon Valley or elsewhere in the US is not that difficult. Are you in agreement with that statement?
Ben Mathias: That is true. One of the roles that we play is to help the founders get established in North America. We’re finding that they don’t necessarily move to Silicon Valley. We’ve got some people moving to New York. To get them settled and introduced to advisors sometimes takes six months to a year.
Sramana Mitra: What is your analysis of unicorn mania? We’ve settled down a little bit here in the Valley. My sense is in India, the unicorn mania seems to have settled down. How do you parse the happenings of the last three to four years?
Ben Mathias: It has settled down here as well. I don’t think we’ve added to the list of unicorns beyond the initial list that we’ve had a couple of years ago. There are companies that are getting to the multi-hundred million dollar valuation. The good news is that the companies that are getting there are the companies that really have good cash flows and are stable companies.
We have a company in our portfolio that’s getting to that range. They’re close to cash-flow positive at this point. What has gone away are the companies that are losing millions of dollars every month and are just getting funded for no reason. I think things have definitely become a lot more sensible right now.
Sramana Mitra: The bidding war that happens to get to these billion-dollar valuations were driven by a few funds. How has the behavior of those funds changed?
Ben Mathias: They’re still active in India. You still see funds like SoftBank, Tencent, and Alibaba writing large checks in India. The behavior in the last year has changed. It’s the really high quality companies that are raising the hundred million dollar plus rounds right now. Another example of a company that just raised a large round is BigBasket.
Sramana Mitra: The competitive bidding is not happening? How do you check the valuations?
Ben Mathias: The competitive bidding is not happening right now. The other thing is, there isn’t a very large pool of investors that are able to write these hundred million dollar checks. There are just a handful of them.