Sramana Mitra: The other piece of this equation is let’s say you can invest quarter of a million to $2 million per company on funding. What does the rest of the ecosystem look like around you to build brand companies? What are they looking for in terms of proof points to want to come and play with you in deals like these?
Kanwaljit Singh: That’s a great question. That was one of the motivators for us when we started the fund. There really doesn’t exist a very diverse ecosystem in India for supporting these kinds of plays. What we have been able to do in a short span of time is start the process of building this ecosystem.
Interestingly, one emerging investor group that we work very closely with is Indian family offices. Like I mentioned, the investors in the fund itself are interested in co-investing with us. As you rightly assumed, they want to come in at a stage where the company has already established the proof of concept and already has an existing business. Typically, for a Series A where the company may be looking for $3 million to $5 million, we can bring in one portion of it and we can source the rest of it from the family offices.
Our whole fund model is based on this belief that we can heavy-lift the businesses from very early stage to the point where they have established a basic model in the market. That’s when we can partner with some of our own investors and some of the other investors out in the market to help the company raise the growth capital. That tends to be $3 million to $5 million.
Sramana Mitra: That almost precludes the existing venture capital ecosystem in India. Is that correct?
Kanwaljit Singh: Not preclude. It is also a matter of evolution of the venture system in India. Most of the venture capital funds or the institutional players are still very much focused on tech plays. One of the gaps we saw in the market was that since nobody was looking at this space of consumer brand, we felt that the opportunity is exciting. It doesn’t preclude them. We work with most of them. Since they are not looking at this space, we had to look for alternate sources of capital to be able to help these companies.
Sramana Mitra: Part of it is, what they’re comfortable investing in is not necessarily early stage consumer brands. Maybe late-stage consumer brand is a whole other matter. In the evolution of the technology venture capital industry, it’s typically the VCs who do early stage and the corporates do later stage. What you’re describing is you want to bring in the corporates in the earlier stages and bring in VCs, maybe, in the later stages.
Kanwaljit Singh: If I can just paraphrase that a little bit, it’s not so much the corporate as in the family offices who are coming in. Corporates are interested but typically, they would look at acquisition kind of opportunity or more mature businesses with a path to acquisition.
Sramana Mitra: Good point. I don’t think family offices in the typical technology venture capital ecosystem even thinks about coming in in the early stages. What you’re doing is tapping into people who have experience in consumer brands and have some comfort level.
Kanwaljit Singh: Absolutely.