 "If there is a market to invest in the world, it is India: Lightspeed exec")
At a time when foreign investments in Indian startups have slowed significantly, global venture capital (VC) firm Lightspeed Venture Partners is bullish on sectors like consumer tech, fintech, enterprise tech, artificial intelligence (AI), climate tech and electric mobility, an executive at the firm said.
“Between 2022 and 2023, venture capital funding in India dropped by over 65 per cent. We, however, continue to remain balanced in our pace of investing in India. The number of investments remained roughly the same in the two years. We made between 20 and 25 investments over the last year, remained consistent and will maintain the pace,” said Rahul Taneja, partner, Lightspeed India. The firm has invested in Oyo, Sharechat, Udaan, Pocket FM, and Byju’s, among others.
According to data from market intelligence platform Tracxn, overall foreign investments in the country declined 66 per cent year-on-year (Y-o-Y) to $7.7 billion in 2023. It is down from $23 billion in the previous year. Despite this, Lightspeed’s investments have remained relatively consistent.
According to data from market intelligence platform Tracxn, overall foreign investments in the country declined a substantial 66 per cent year-on-year (YoY) to $7.7 billion in 2023, down from $23 billion the previous year. Regardless, Lightspeed’s investments have remained relatively consistent.
Lightspeed made as many as 13 equity investments worth $698.4 million in 2023, up from nine totalling $251.1 million in the previous year. It has made two equity investments worth $55.3 million, as of the first quarter of 2024.
At the same time, investments by other large global VCs like Accel, Peak XV Partners, SoftBank, and Tiger Global, fell by as much as 85 per cent, Business Standard had reported earlier.
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“If there is a market to invest in the world right now, it is India. There is some rebalancing of capital allocation across the world. A number of limited partners (LPs) are reassessing their exposure to China and increasing weight to India,” Taneja said.
He added that Lightspeed’s consistent pace of investments is a product of taking a long-term view with its bets.
“We believe in investing, not deploying. Investing is about backing the right founders in the right markets, in order to deliver superior returns for our LPs,” Taneja added.
Taneja said Lightspeed’s investments are not based on short-term spikes.
“We stay invested in companies for an average duration of 8-9 years. When you’re invested for that long, you cannot invest on a short-term spike… Just because the market is heating up, we will not go and make 35-40 investments in a year. We don’t optimise the number (of investments), the number is an outcome,” he said.
Lightspeed, which invests in both early- and growth-stage, began making investments in India in 2007 through its global fund. Since then, it launched its first dedicated fund for India and Southeast Asia in 2015 with a corpus of $135 million.
The firm went on to launch two more funds for the region, one in 2020 worth $275 million, and its latest and largest fund in 2022 worth $500 million.
“We have been deploying from LSIP IV for around a year now. It is our largest fund till date, and being invested into both India and Southeast Asia. We do not have a specific allocation between Southeast Asia and India,” Taneja said.
Within India, the firm is investing in companies that “are building for India, or building in India for the world,” across sectors like enterprise software-as-a-service (SaaS), fintech, cross-border commerce, and consumer tech.
“AI is a very large area where we are investing now, both globally and in India. Globally, in the last 18 months, we have invested close to about $1 billion in AI. In India/Southeast Asia, we have invested in multiple companies – Sarvam, Thena, Portkey, Marqo and Gushwork,” Taneja said.
The company’s investments will be focused on early- and growth-stage capital.
“The early-stage market (seed to series B) has continued to remain active over the last two years despite the so-called funding winter. If anything, it is a great time to be investing in the early-stage because now pricing expectations are very different versus what they were two years ago. Founder quality is also very different, compared to when money was easier to come by,” Taneja said.
Growth investments, on the other hand, are expected to pick up steam during the second half of this year.
“We are already starting to see signs of some big deals happening. And, that will progressively become better. That part of the market is still a bit dull, but it will improve,” Taneja added.
The funding winter, he said, has made business models and valuations more realistic. As such, overall funding for Indian startups is expected to improve compared to the previous year.