Economy couldn’t have been poised much better: Anup Jain, Managing Partner of Orios Ventures
What factors in a company compel you to invest in that company?
First factor is of course a great team. Secondly, a large addressable market size. Which everybody calls a TAM (Total addressable market). If you are addressing a very small market its natural that you’ll end up building a small business. If you have a large market then you have the option of making mistakes, coming back and having the option of working with a large set of consumers. Because the market is so large. Also creating a large business in the next 5 or 6 years. Because VC’s always invest in high growth businesses. So the market has to be large. Thirdly, the model. How capital efficient the model is, what is the strategy? How does the team plan to execute it? What is the early evaluation of that from the traction they’ve had? As teams usually come to us after a little bit of traction.
Tell us a bit about the macro indicators in the economy? Is it optimistic ?Domestic consumption in India cause investments to happen in India. The investments by venture capitals last year were more than the investments in IPO last year. This tells you the size of the investments that the world is willing to do in the India consumption story. Now with the expansion of mobile phones with Jio etc. This has now become an investable market to a greater extent. We don’t need to have the same cost to setup a business. You don’t have to bleed for 20 years to make a profit. Success of companies like Ola, Uber, Zomato is telling you that the consumers are very quick to adopt things and stick to that, once they experience it. The economy is showing great signs. What we have to do is that make sure investment is in place. In the right places for infrastructure in the right sectors so that growth continues to happen. One sector to look out for is agriculture. Unfortunately or fortunately that’s not where VCs are currently focused there are few funds which are focused on that. There is tremendous opportunity in infrastructure related to agriculture. Infrastructure related to crops. A lot of farmers lose their crops because of pest and weather. Which is not predictable. So there has to be something done over there. Also, there is a high degree of wastage. Almost 10-30% of agricultural produce is wasted while being transported from farm to eventual consumers. Cold storage facility infrastructure facilities are not there. Cold transportation facilities are not there. Logistics is about 14% of GDP. In most developed countries it’s 7-8 % of GDP. When you make a laptop 14% of the cost on an average basis is transporting the various parts of laptop and the laptop itself to its eventual consumer.
Is there sufficient growth in the market to generate returns with current fundamentals?
The economy is poised very well. Economy couldn’t have been poised much better.The only condition is that we need an even greater ease of doing business from the Government side and we need investments. Private investments in the form of Venture Capital and Private Equity are certainly flowing in the country. Mutual funds inflow tell you that 2 billion inflows happen every month. There is a lot of appetite for investing in stocks which are listed or about to be listed. There is appetite in HNI’s for VC. The foreign capital raised in 2019 will be higher than the foreign capital raised in the past years. There is a lot of interest from Chinese VCs. They are finding their own way. They’ve set up offices in India. There is interest from developed countries where the return on capital is virtually zero. So, unless you invest in markets like India you are not going to get a return. Overseas capital is coming in.
What are the common mistakes when valuing, investing, or growing a new or an emerging technology?
The biggest mistake you can make is you undervalue it, which means you didn’t think that it will take off in the way that it did. Therefore as an investor you find that investment that you made in the early stage was not sufficient enough to give you a return which is enough. You should’ve invested more. But now the stock has become expensive because the company has raised its valuation given that they are very successful. The other mistake you could make is overvaluing the company. You think that this particular technology is going to take off but it doesn’t in the way you imagined. Or a new category creation or a massive change of habit that the consumer is not willing to do. Or it comes with a high price. The pricing here is key. In India pricing is the biggest factor when adopting something new. As long as you’ve got the pricing right the consumer will want to experience something new and change their habits.
Tell us about your investments in the past and their performances?
Our marquee investment out of our first fund has been in a company called PharmEasy. We expect that PharmEasy will be a rainmaker for the fund. That is ecommerce and Pharmacy it came in and changed all that. Second investment is Country Delight which is also disrupting the world of milk. It’s a consumer brand which is direct to home it is digital first mobile first. You order it from home, you can’t get it in a shop. It has its own proprietary distribution. Just launched its white bread. Stands for fresh and pure. This a consumer brand which is in the making. Again, one of our most promising investments. GoMechanic another investment which is transforming the world of ‘auto after’ market. Whether it’s is insurance or insurance driven repair, servicing, cleaning your car, maintaining your car. These companies received follow on funding rounds. Big funds participated in them for future growth. Beato is another example. Beato has already raised significant funding between seed and pre series A funding from us and Blume and Leo capital and it is operating in a large market of chronic diseases which is about 30 billion dollars. Out of that diabetes alone is 7-8 billion dollars. This is what diabetics spend on their entire lifestyle including medicines and food etc. This is virtually creating an electronic medical record for a diabetic on one platform.
Will India ever catch up with China in terms of Venture Capital environment and size?
It will take 10 years. Between 1995 and 2015 is when most of the growth in China happened. The growth was in double digits. In 1995 China was 30% Urban and the 70 % Rural. In these 20 years they’ve added 40% to urban and consequently have become 70% Urban and 30% rural. You need double digit growth for the next 20 years. The moment it touches 10% you will start seeing money in your bank account. Because GDP per capita is not impacted unless that growth happens. When your basic needs are met everyone will start investing money. That GDP per capita threshold has to be crossed. That’s when investments start getting into banks, deposits and disposable income starts getting into holidays, cars etc Then economy will boom. That is what will be required for India to catch up with China. You’ll need sustained double digit growth. People are not feeling changes in their lives. Smart cities has been conceived but you need investments for that.
