Sramana Mitra: What about technology trends? I’m sure you’re immediately going to say AI. I know AI is a big trend. Is there anything else that you’re seeing out there that is worth highlighting?
Venu Pemmaraju: I was just going to add that. The other thing that we’re also seeing is most of these companies are trying to focus on automation, ease of use, and bringing in a consumer experience into some of these enterprise plays. Also on a very different level, the round sizes are much bigger now than what it used to be. Perhaps, it’s a reflection of the maturity of companies that Biplav was talking about even at an earlier stage. It’s also a reflection of more capital needed now to compete. There are quite a few companies in each segment.
Sramana Mitra: If it’s a venture-fundable segment that has been identified, it’s flushed with competition. In a way, less
competition is in the segments that are not venture-fundable that are niche and smaller segments.
Biplab Adhya: That is correct.
Sramana Mitra: Very interesting. Anything else that you would like to add?
Venu Pemmaraju: You talk to a lot of entrepreneurs and other investors. What should strategic investors do more? How should we be thinking about investments that align with what entrepreneurs would like us to do?
Sramana Mitra: Here’s my one take which is a bit of a continuation on what I just said just now. Venture capital is interested in these billion-dollar opportunities. By saying that you are only going to invest in companies that have significant institutional investors in the deal and you want to come alongside them or after them, you’re bracketing yourselves to just those kinds of deals that are these billion-dollar TAM kind of deals. They tend to be highly competitive.
For any strategic, a $200 million to $500 million opportunity is actually a significant opportunity. Let us say you have a company that is focusing on a particular vertical with a very deep domain knowledge and a solution that solves the problems of that vertical and can rapidly get to a $300 million business. It’s not going to be a billion-dollar company, but it’s still a very meaningful business from the point of view of a strategic.
If your goal is to acquire a bunch of businesses, I would not skip these opportunities that do not have large VC support but have good solid mid-sized TAMs. I actually think those are better opportunities for strategics than trying to get into the same space of VCs. That’s where you’re going to run into a lot of competition both from the investors as well as there’s going to be a lot more players. Whereas the heavy domain knowledge niches are very interesting opportunities that people are not paying much attention to.
Biplab Adhya: Market size is one consideration for us. What is also important is are these sustainable businesses or not. At the end of the day, what we want is sustainable businesses that we can take to a large number of customers rather than businesses that are quick flips.
Sramana Mitra: I think you’re underestimating how many very interesting multi-hundred million dollar businesses can be built in the niches. Niches have very domain-specific specifications around which people need to build businesses. It’s domain knowledge heavy opportunities. For a company like Wipro, I would not ignore those.
It was great speaking with you. Thank you.