My Funding Picks For Last Week (W28)

Every Monday, I sit with my team to review the funding activity of the previous week. From that list, I pick out three companies that I would have loved to invest in or find founders that are doing similar things. Click here to know about my rationale behind this weekly exercise.

 

For the past several weeks, the ecosystem is plateauing at barely double-digit transactions per week with 10 startups raising $36 million (amounts raised for the last 4 weeks: $65m, $31m, $27m, $92m). Early-stage investors have clinched their purses due to the lack of cool-down in valuations despite a marked tempering in funding interest. How can founders fix that? Stay tuned for my post on the subject next week.

Out of the 10 deals, 8 were in the early-stage rounds (compared to 11 last week), which made the cut for my weekly analysis. After sifting through the news (aggregated from Tracxn, Inc42, and YourStory), I pick these three as my favorite funding news from last week!

 

Name: BRB Chips

Amount Raised: $1m from Secocha Ventures, Globvestor, First Cheque, Kashyap Deorah and Vijay Sivaram

What do BRB Chips do?

Edited from Tracxn: They are a brand of extruded snacks offering chips as a snack.

Why do I like BRB Chips?

There is a lot of branded packets food plays, and while there’s no defensibility to vacuum fried chips, the list of entrepreneurs that decided to start this venture is impressive. The co-founder’s credentials include ex-Bira co-founder, ex-Forbidden Foods co-founder, ex-Coca-Cola, and ex-Schlumberger. As this team raised a significant amount of startup capital, I believe they can build an alternative snacking brand that would fold into a larger FMCG player. The key will be meticulously managing working capital and judiciously investing venture capital.

 

Name: Bold Care

Amount Raised: Undisclosed from Rajesh Ranavat, Abhishek Shah, Kabir Kochhar, and Mohit Satyanand.

What does Bold Care do?

Edited from Tracxn: Provider of an online doctor consultation platform for sexual health

Why do I like Bold Care?

I met a prominent Silicon Valley angel investor last year who increased my interest in the men’s sexual healthcare space. It’s a significantly taboo subject in India, but on average, about 5% of men above the age of 40 have erectile dysfunction. Many quacks (read: hakims) and online platforms sell glorified multi-vitamin tablets in the name of cures. Whether a company like Bold Care can get the sexual health conversation started could be a differentiator. Combining a thoughtful content strategy with the right product mix would reap great rewards from India’s untapped market.

 

Name: Inspekt Labs

Amount Raised: Undisclosed from Rajesh Ranavat, Abhishek Shah, Kabir Kochhar, and Mohit Satyanand.

What does Inspekt Labs do?

Edited from Tracxn: Inspekt Labs provides AI-based solutions for a car damage assessment. It provides an AI/ machine learning API that automates the car assessment. It offers solutions like damage detection, text detection, claims assessment, and fraud detection.

Why do I like Inspekt Labs?

Due to the way their technology works, they can quickly identify errors and emissions with a (claimed) 98% accuracy rate. I see a big space for this technology in insurance, product QA, to name a few. As their algorithms improve with more data collection, there could be future applications in food packaging and warranty repairs. I am especially thrilled to find an Indian startup come up with Indian deeptech with commercial applications. Their growth will only be accelerated by companies looking for new solutions due to the restrictions enforced upon them in the post-pandemic world.

 

I have purposefully left out Piggyride’s ₹3.50 crores raise from Artha Venture Fund last week (round led by JAFCO). However, you can find out Why We Invested in Piggy Ride.

Predicting 2019

Brad Feld, Fred Wilson and BillGates’ new year blogs inspired me to write this post today.

To the cosmos this is just another day but to humans this is that time of the year where they expend a tremendous amount of energy in planning, changing and predicting how the next 365 days are going to be. I did not see the value of this futile exercise until last year when I put my goals down on paper and then announced them on my blog and all my social media handles. I know for a fact that I have missed out on achieving several goals that I had set out for, but the ones I did achieve had a different sense of achievement.

While I introspect on the reasons behind the misses, one of the serious flaws in my goal setting was the lack of thought in predicting the status of the economy and events in 2018 and how they would affect my goals. For example, if I would have predicted that there would be a slowdown in venture funding due to the collapse of the angel investment ecosystem, I would have known that achieving 10 new investments for AVF would amount to nothing but a pipedream. Not foreseeing that set me off by 80% on that goal. Therefore, this year it made better sense to put down my predictions first and then plan my goals with those predictions in mind. So here goes:

I believe that 2019 will be a fantastic year for India, (that is) if India continues to enjoy a single party majority after the May 2019 assembly polls. I would prefer a strong leader like Narendra Modi to continue to lead the country instead of a council of ministers with their own agendas clouding the judgement of the prime minister.

The chances of Modi’s return are high as there are strong signals that the economy has gained momentum and is continuing to grow much better than what was expected post-GST implementation. Banks have seen better recovery from NPAs than what was predicted and with stronger balance sheets they will be out lending once again. There is also a good chance that the RBI will reduce interest rates due to lower than expected inflation on the collapse of crude prices. These events could flood the market with liquidity which is an ideal scenario for the incumbent party before an election because it improves the views about the incumbent in a short-lived public memory. With all this in mind, I believe that Indian GDP should grow at 8% in 2019.

The uncertainty over global trade wars have reduced significantly, and a buoyant Indian economy would lead to a record year for the stock market indices. I believe that this would percolate to the start-up ecosystem through an increase in M&A activity and many Indian corporates would setup CVCs to keep up with innovation and justify their high valuations. I believe that the government will bring in clarity to the use of Aadhar verification which will help to revive Fintech activity and implement guidelines for bringing cryptos back to India. The guidelines may not be along the lines that crypto purists would appreciate, but it will be a significant step ahead in comparison to the current situation. This is also going be a pivotal year for the start-ups raising money as we will see a rise in the number of active funds looking for deals and that will quickly fill the vacuum created by the angel networks. The better-informed entrepreneurs will avoid the “large” & distributed format angel investment networks and instead choose to have closer relationships with their funding partners. Entrepreneurs will seek funding partners like professional investors like VC funds, super-angels and family offices and we should see in rounds that have a smaller number of “professional” investors but with a larger investment per investor, and this trend will continue. The loss of good investment opportunities to professional investors will drive out the marginal angel investors that make up the bulk of India’s angel networks. These marginal angels will also experience their first round of write-offs which many of them aren’t prepared for, so they’re going to leave in droves.

The serious angel investors will demand much better deal flow and portfolio services to continue to invest their capital, something that will be difficult for marginal angel networks to achieve since they have not built these capacities. I believe that the angel networks will start to shut down – marginal ones at first and the larger ones becoming marginal, eventually ceasing to exist in following years.

When it comes to the overall Artha portfolio I believe that LenDenClub, Coutloot, ChaiBreak, Fynd, Karza Technologies, BabyChakra and X-Prime to have a headline sort of a year which will firmly put them in “pole” positions in their respective spaces. If they do not convert this year of opportunity into something substantial, then I believe a golden opportunity would be lost, forever.

In terms of where I would like AVF to invest, I am excited about the prospects of e-Sports and its growing popularity across the globe and in India. I think it would be interesting to evaluate an esports company for investment as I believe that this format can generate massive scale in a country where the average age group will be below 30 for the next 10 years. 

Statistic: India: Average age of the population from 1950 to 2050 (median age in years) | Statista
Find more statistics at Statista

I would also like to see founders developing sustainable business models from the opportunities that the Ayushman Bharat health insurance scheme provides for rural healthcare. Healthcare has been a very small portion of Artha’s portfolio and this year could be a good time to increase our exposure in the space.

So, here are my predictions for 2019.

I wish you and your loved ones a very happy 2019!

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