For almost a decade, Tiger Global has been a prominent startup investor in India. In 2019, though, the New York-based firm’s been exceptionally aggressive.
In April, it plowed $89 million (Rs619 crore) into Mumbai-based agri-tech platform Ninjacart, making this its largest first investment in an Indian startup.
In addition to this investment, Tiger Global has backed several other companies in India in the first few months of 2019. Between January and April this year, the investor has participated in almost as many funding rounds as it did in each of the last three years.
Despite the faster pace, as of now, Tiger Global is nowhere close to the peak of 40 deals it had done in India in 2015. But that might change in the coming months.
There is buzz about at least six more investments in the works.
On April 29, the Mint newspaper reported that Tiger Global is likely to invest in five software-as-a-service (SaaS) companies in India in May, including logistics management software company Locus. And yesterday (May 01), news portal VCCircle said it is leading a $50 million round in Zenoti, a software provider to salons and spas, a media report said.
What’s changed?
The past few years were not the best for startup funding globally, and it was no different for India. Struggling to find healthy exits in their existing investments, and amid concerns about valuation bubbles, many investors stayed away from smaller ventures and backed only the big names.
So behemoths like ride-hailing firm Ola and hotels group OYO hogged most of the funding in 2018, young startups struggled to find backers.
But things changed last year when India’s largest home-grown e-commerce firm, Flipkart, was bought by the world’s biggest retailer for a whopping $16 billion. The deal lifted investment sentiment for the entire ecosystem and particularly for investors like Tiger who made significant money out of the deal, according to experts.
“They (Lee Fixel and Tiger) were considered the pioneers of the investing ecosystem in India,” Grant Thornton director Kovid Chugh told Quartz. ”In 2009, when Tiger first backed Flipkart, there was only a handful of institutional VCs in India. Most of these firms were small outposts of reputed US VC firms and had funds in the range of $100 million to $200 million to deploy in India.”
The Walmart-Flipkart deal filled Tiger’s pockets with $3 billion, according to Bloomberg, which could be the reason why Tiger can splurge in India this year.
And besides just Flipkart, through 2018, Tiger had several other exits, too.
Beyond just making money, big exits like Flipkart also boost investors’ confidence in backing a country, experts say.
“Previously, Tiger was investing across stages (from very early startups to mature companies) and industries,” said Kartik Hosanagar, professor of technology and digital business at University of Pennsylvania’s Wharton School. “The most important of those investments (Flipkart) has worked out for Tiger and that explains Tiger’s interest in returning. But I think their approach might be a bit more focused. Doing large, late-stage deals is better suited to a fund of that size.”
Maturing market
Now is a great time to be more bullish than before on the Indian landscape, experts say.
There’s a lot working in India’s favour right now, including, increasing mobile penetration, rising per capita, and a slowdown in China, among other things, Vidhya Shankar Satyamurthi, who heads strategy, policy and corporate development at computer software firm SecurelyShare, said. And “the valuations are relatively cheaper (in India) than China and the US,” he added.
In addition, Indian startups have evolved, too, moving beyond just e-commerce.
“Advanced technologies start-up, logistics, artificial intelligence/machine learning, and similar startups make Tiger interested in India,” Yugal Joshi, vice president at Texas-based consultancy Everest Group, said. “I think Tiger will go beyond B2C consumer internet and will expand horizons to B2B products much like its earlier investments in Freshdesk (now Freshworks) which has also multiplied Tiger’s investments.”
In addition, experts say, there is a shift in the stage at which Tiger Global is entering Indian startups.
Already, Tiger’s portfolio in India is pretty diverse:
For Indian startups, Tiger’s enthused return is both good and bad news, according to Everest Group’s Joshi.
“Investment by Tiger Global is a double-edged sword. They can shape the market quickly and disrupt it. Many other investors take lead from Tiger Global and almost imitate what Tiger Global is doing,” he said. “Also, Tiger Global can become very hands-on when it wants to as evident in its active role in CEO shuffle at Flipkart earlier. Therefore, startups need to be very careful and must understand Tiger Global’s mandate and strategic intent.”