Tiger Global fuels India's startup boom with deal-making spree
SoftBank Group Corp. and its Vision Fund, for instance, have invested in Delhivery, and in Ola, converting both into unicorns.
Tiger Global Management has examined at least a dozen deals with Indian startups in recent months, according to multiple people with knowledge of the talks, illustrating global investors’ fierce interest in the country’s technology ecosystem.
The ultra-secretive New York-based hedge fund has closed investments in at least half of these startups -- nearly all of them in fintech or enterprise software segments. Hedge funds, venture capital firms, and the likes of South Africa-headquartered internet group Naspers Ltd. are also chasing India’s rapidly growing consumer internet and enterprise software firms.
The rising interest in India occurs as investment in China’s recently booming startup sector faces a steep drop-off. It’s a radical progression from just a few years ago when global investors worried about the prospects for India. Fewer smartphones and expensive wireless-data plans restricted internet access to a tiny user pool in a country of 1.3 billion people, pushing investors to chase the handful of entrepreneurs building consumer internet startups. Now cheap Chinese smartphones and inexpensive data rates offered by the aggressive telecom giant Reliance Jio Infocomm Ltd. and its rivals are luring millions of users online every month.
There’s buoyancy also because India’s recent decisive election assured political stability, said venture capitalist Vani Kola, managing director at Kalaari Capital Advisors Pvt, prompting international funds to get back in the investment game. “Investors like Tiger Global are enthused that the market is stable and has reached a certain maturity,” she said. “There’s confidence in the depth of the market.”
This year is already being dubbed Tiger Global India redux by some. The influential investor is renowned for its early bets on high-profile Indian consumer internet startups like Ola, and its triumphant exit last year from most-valuable Indian startup Flipkart, which netted a $3 billion return. In the first half of 2019, Tiger has already funded 13 Indian companies, according to researcher Tracxn Technologies Pvt, compared with 8 investments in 2018 and 6 the year before. The spigot remains open, according to the people, who didn’t want to be named as the deal signings are ongoing.
Tiger’s new focus on enterprise software services coincides with management changes. Lee Fixel, the 39-year-old co-head of private equity for the technology-focused fund, recently departed the firm and Scott Shleifer, a partner, took over the portfolio. Schleifer, 41, best known for turning a $200 million investment in Chinese e-commerce platform JD.com Inc. into a $5 billion return, went on a whirlwind trip to India recently to meet entrepreneurs.
The newest bets by the deep-pocketed hedge fund are mostly in the sub-$50 million range. They include logistics-management startup Locus, agritech provider Ninjacart, expense-management software provider Fyle, and Zenoti. All are spearheaded by Schleifer, the people said.
India’s historical strength in IT services is also spawning thousands of software-as-a-service and business-to-business companies, a natural evolution given the expertise of the labor pool.
“Investors are excited to see India’s transition from an IT services powerhouse to a rising B2B solutions hub,” said Sudheer Koneru, founder and chief executive officer of Zenoti, where Schleifer led a round of funding last month. Services can be virtually served on the cloud to customers anywhere in the world, making it viable to build SaaS startups in low-cost India.
“Not just Tiger -- other global investors too are waking up to the exciting surge of B2B startups coming out of India,” said Koneru.
Koneru’s Zenoti provides business and customer management and software services to beauty and wellness businesses, including spas, salons and gyms. Its 340 workers in the southern city of Hyderabad engineer the product, generate leads, and offer tech support to customers. After initially serving Indian businesses, nearly two thirds of Zenoti’s customers are in the U.S., and it’s doubling revenues year-on-year.
Investments in Indian startups from other global names have also gathered pace in recent months. SoftBank Group Corp. and its Vision Fund, for instance, have invested in logistics provider Delhivery, and in Ola earlier this year, converting both into unicorns. India’s leading fintech startups are also in fund-raising mode.
“Investors are finally seeing numbers, and the market is looking very very viable,” said Neha Singh, co-founder of researcher Tracxn.