The first fund with a corpus of Rs 750 crore has invested $14 million in seven firms. The reason is simple. The fund is more entrepreneur-friendly from a regulatory, compliance, and angel tax perspective. And, it will also enable the company to supplement its own capital with that of other limited partners if needed.
There is method in the madness of investing money. For instance, Info Edge
has invested $6.3 million for a 17.8 per cent stake in Bulbul, an online social commerce platform — a business that has attracted the attention of Flipkart, Paytm, Facebook (through Info Edge Ventures), and even Reliance Jio. It is a curated marketplace for tier-I and tier-III cities and for consumers who are comfortable with Indian languages. It involves many micro influencers who create content using demos and live videos. Consumers can order these products as they do on any e-commerce platform.
According to BofA Global Research, this is a market of 25 million customers (100 million dependents) who are not very comfortable with English but use smartphones and do not shop much online. Then there is its investment in agritech via Gramophone, an online platform that provides actionable agronomic insights and last-mile delivery of quality agricultural inputs to farmers using tech. This is an area that many experts say will become big as retail firms look at direct linkages with the farm. Once again, big players like Jio are also eyeing this sector.
“These sectors are underpenetrated as far as the role of the internet and technology is concerned and the investee companies
in these sectors continue to innovate and grow,” said Bikhchandani, explaining the logic of investing in these areas.
Unlike traditional private equity funds with exit routes of between five and seven years, his strategy is different. “We have architected our fund to have a life of 12 years extendable by two. We are patient capital. In India, it often takes a decade or more from company inception to scale, profits and a possible IPO. In the West, these lead times are shorter,” said Bikhchandani.
He also pointed out that his fund had the capability of holding on to a good company forever (for instance, it has not exited any of the unicorns, except for partial exits to get in new investors). And, he generally invests in the same company in multiple tranches, as he did in PolicyBazaar
where he first invested in 2008 followed by two subsequent rounds, and then again in 2017 and 2019.
Info Edge is also very flexible about the stage at which it puts in money. The funding could even be made available pre-launch, if it believes the team is great and is solving an unsolved problem. The strategy is to deploy 35-40 per cent of the fund in the first cheques and keep the remaining for follow-ons so that the support is continuous.
What Bikhchandani is clear about is that he prefers to take a meaningful level of minority shareholding. Yet, he is equally clear that he is not looking at running the company. “Nobody becomes an entrepreneur because he or she is looking for a new boss. The worst kind of investors are micromanagers who are seeking to fulfil their own unfulfilled entrepreneurial ambitions through the start-up they have invested in,” said Bikhchandani, who himself is a first generation entrepreneur.
The hands-off approach does not mean that the firm does not provide the start-up with support. When it comes to connecting to new investors, brainstorming on marketing, discussing critical aspects of company-building, sharing business development opportunities, and helping with top-level hiring, Bikhchandani’s team is there.
Which start-up investment does he expect to become the next unicorn? Bikhchandani is not ready to hazard a guess: “We invest in firms where we believe that there is an opportunity to build a large and sustainable business in the long-term. It’s very difficult to comment on future valuation potential.”