Diversification key to VenturEast’s silver innings

The company with $350 mn in Assets under Management (AUM), counts Portea, ekincare, 24 Mantra, Gland Pharma, Richcore, among its investments.

In an interaction with DTNext, Srikanth Sundararajan – Partner, says it has been nurturing enterprises since 1997, especially the underserved segments in the context of India. From the likes of marquee brands DesiCrew to OceanSparkle to Dodla Dairy and Gland Pharma, the entity has consciously been investing in start-ups in tier II and III locations.

“Our target is the 300-400 million smartphone users and the 10 million SMEs as we go about identifying firms that use technology as a differentiator,” he says, citing the example of backing a start-up that was into hiring for call centre operations.

With ventures pertaining to financial inclusion, ecommerce, education, healthcare, the effort is to fund technology-driven businesses, where emphasis would be on realistic valuations.

The lack of transparency, the hype and the stupendous valuations do not bode well for the venture capitalist (VC) industry, Sundararajan says as he explains the evolution of companies seeking funding over time.

“We started with brick and click deals and as we grew, we saw the quality of start-ups too has improved. In 2008, there were a bunch of VC firms but from that nascent stage, there was some movement in 2013, when exits and the concept of good companies emerging became the order of the day.

Thereafter, we have seen that the leadership has improved, reflecting a more robust ecosystem for the start-ups,” he says, noting that this change during the period has spelt good for attracting investments into the country.

Coming with over 25 years of innovative software and entrepreneurial experience and more than eight years of investing with leading technology firms in India and the US, Sundararajan is a firm believer of leveraging technology as a disruptor. Micro insurance coverage for aggregating mobility brands or digitally-powered education and healthcare ventures are among those receiving attention from VCs.

He also said VenturEast has seen 50x returns in some startups like StyleCraze, a fashion portal, which eventually got sold off to Facebook, which Sundararajan considers as a big-ticket deal. Some deals have slipped out its hands too.

Seeing itself as a Series A and B player, VenturEast partner says though the Centre’s attempts to boost investment through initiatives such as Make in India, Skill India and Start-up India are appreciable, the lack of clarity on investments, angel tax, investor taxation and other regulatory aspects posed big hurdles. For the ecosystem to become more effective, regulations are needed to create a level-playing field.

This will ensure healthy competition unlike the prevailing scenario when smaller players get snuffed out.

“The segment itself gets destroyed,” Sundararajan seeks to point out, as the game of valuation results in unrealistic expectations, thereby harming all the stakeholders. However, he is positive a turnaround will happen that will correct the anomalies in the start-up space.