1Mby1M Virtual Accelerator Investor Forum: With Vikas Choudhury of Pivot Ventures (Part 4)

Vikas Choudhury: Entrepreneurs today are either second-generation or second lifecycle. They come to us after having tried something on their own, so we do believe that they will just look at the funnel that is out there.

You have tens of thousands of new companies in India. Less than 1% get angel funding. Less than 1% of that go into venture capital. We’re simply making sure that we are able to pick up companies that have their foundation risked out.

Sramana Mitra: The question that I think about when I think about India and the next generation of companies is the velocity question. Traditionally, VCs have wanted to go from zero to $100 million in five to seven years. That’s not necessarily the velocity at which companies grow in India. Can you comment on that?

Vikas Choudhury: Absolutely. You’re right. India actually has a velocity of consumer adoption. You will see companies go very quickly into what I call consumer adoption but not necessarily paid adoption. You are seeing a hundred million consumers, but you’re not necessarily seeing the revenue growing to $100 million. That, of course, to my mind is a clear indication of the size of the Indian market and economy relative to the US economy. You neither see that in the startup valuations nor in the trajectory of revenue growth.

It takes a little while for Indian companies to monetize their consumer traction into revenues from a margin perspective. Gross margin in this country is low. It’s highly competitive.

On top of that, India is actually a country of 27 different states and 5,000 different cities. You need a lot of execution to build out to leverage economies of scale. When you get to scale, that is when you start turning on both the revenue and profitability engine.

Sramana Mitra: What have you invested in from Pivot Ventures that is interesting and worth discussing?

Vikas Choudhury: In Pivot Ventures, we like the domestic consumption story. We like the entire mobile data and app growth story. The third thing we like is the ability to leverage Indian talent to build out global product services and businesses out of the country.

In those areas, let me give you a couple of recent examples in the consumption space. One company that I’ve invested in is a retail pharmacy chain called Wellness Forever. It’s a large, regional play in India. Healthcare is a bellwether business. Pharmaceutical retail is growing significantly. A lot of generic drugs are manufactured in India. It is extremely cost effective. There is, of course, a large population.

What’s interesting is, there are over several million unorganized pharma chains across the country. There is a clear opportunity to standardize the product and services. This is one of those companies in the hundred million dollar theme.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Vikas Choudhury of Pivot Ventures
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