Anand Lunia needs no introduction in the Indian venture capital (VC) ecosystem. Known for his contrarian bets and an India-first investment approach, the Founding Partner of India Quotient (IQ) has seen the industry up, close, and personal for over 15 years now.
Ask him, what has changed with time, and pat comes the reply. “The definition of what is possible in India has changed,” he tells Business Today.
“Ten years ago, we thought people in rural or small-town India would not be able to pay online, would not have broadband, and would just watch simple content. Hence, ShareChat [one of IQ’s biggest and most successful bets that fetched 500x returns]. But today we are seeing small town and even rural consumers buying Kuku FM audio packages, or software like Vyapar for their business,” he explains.
India Quotient invested in podcasting and audio streaming platform Kuku FM in its early stages in 2019. Today, the Series B start-up is aiming to reach 10 million-plus paid subscribers by the end of 2023. Vyapar, meanwhile, is an SMB-focused accounting platform that raised a seed round from India Quotient back in 2018, and went on to be valued at $118 million in 2022.
Both investments typify IQ’s association with start-ups — it spots companies solving unique Indian problems, and backs them early by often cutting their first cheque.
In more than a decade of its investing journey, IQ has racked up a host of successful portfolio companies, from ShareChat and SUGAR Cosmetics to LendingKart and Pagarbook to LoanTap and WebEngage, and more. But there have been some misses too.
Lunia shares, “We missed some good opportunities like OYO, which was a category creator. More importantly, some of our companies like Belita and Grabhouse did not do well after great starts. I wish we had more money to support some of our initial bets that didn’t survive.”
Bengaluru-headquartered India Quotient’s maiden $6 million fund, which started investing in 2013, returned 5.9X to its limited partners (LPs). Subsequently, the homegrown VC went on to raise three more funds with corpuses of $20 million, $60 million, and $115 million, respectively. IQ looks to raise its fifth fund later this year. “After achieving some baseline returns for our funds, we are now confident of making some really bold bets, as we now have the license from our investors to go really aggressive in our approach,” Lunia says.
But has early-stage investing gotten more competitive now, given the growing interest of large investors like Tiger Global and Sequoia Capital in the segment? “Yes, it's competitive for the obvious good deals. But our job is to find the stuff that’s not obvious,” Lunia says, adding, “We are specialists and we have done this for 15 years now. So, we are confident that we will find enough that the big guys will miss now, but will like later.”
Despite the funding slowdown of 2022, with VC investments in India dropping 35 per cent to $24.7 billion, early-stage deals continued its growth momentum. India Quotient is of the view that downturns are the best times to invest in. “Creation of new ideas can happen at any time, but recessions are the best times, and we invest much more by volume and money in the dull times,” Lunia states.
As for companies struggling to stay afloat, he has a simple word of advice: “Founders need to find both growth and efficiency, and if that’s not likely, they should exit while they have some runway left.”
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