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Lightspeed partners examine right-sizing VC funds in India, spectrum of startup investing and the country’s prospects in the global AI race
Over 150 investors , include Singapore ’s self-governing fund Temasek and Malaysia ’s Khazanah , gathered at Mumbai ’s five - star Trident Oberoi hotel on a late Friday for speculation business firm Lightspeed India Partners ’ “ Lift Off ” summit .
The two - daylight issue calculate to trip partnership by enabling “ in a short windowpane , many views , idea and investment to be share between nC2 connections ( every permutation and combination ) , ” described Karthik Reddy , co - founder of Blume Ventures .
The event build on the success of last class ’s initiative Lift Off , which helped spur deals and networking , including pave the way for Singapore sovereign fund GIC ’s investing in business concern - to - business market place Vegrow by and by in the year .
The upbeat standard atmosphere this class reflected India ’s rebound in startup funding over the retiring three to four months . But the lavish scope could n’t dissemble pressing questions still facing the industry .
Byju ’s , once India ’s most worthful inauguration at a $ 22 billion valuation , is seeking new capital through a rights issue that wouldslash its valuation by a whopping 99 % . Paytm , once the placard minor of India ’s inauguration dreams that went public at a $ 20 billion valuation in 2021 , has seen itsmarket jacket crown shrivel below $ 3 billionamid the tech marketplace butchery and regulative upset .
Many previous - stage startup remainwedded to their peak 2021 valuations . And many highly value 2021 seed deals are floundering without follow - on backing . At the same time , Native American VCs are currently sitting on a record$20 billion in dry gunpowder , kick upstairs skepticism among many investors about extra fundraising .
On VC fund size
“ ride here in early 2024 , with the benefit of discover 2023 investment bodily process stratum as well as the pace of startup founding , I think the answer is yes , ” react Lightspeed partner Bejul Somaia when asked whether Indian VC firms have over - raised , amassing more funds than they can responsibly deploy .
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“ The current vintage of fund were raised in 2021/2022 , when activity levels and investment dollar were considerably higher than 2023 . In 2021 , $ 33 billion of speculation capital ( early and late stage ) was adorn in India . In 2023 , this number was $ 9 billion . So we have to keep in brain that fund raised in 2021/2022 were sized for an chance that was pensive of that time , ” he excuse .
“ If you look at the phone number of investments , the number was 2,200 in 2021 and some half of that in 2023 . Now , that does n’t mean the market place will not accelerate again in two to three years . . . market cycles do happen . So 2023 is also not necessarily brooding of the venture market opportunity in India , ” he lend .
Lightspeed Venture Partners India — which hadreturned over $ 1 billion to LPs by mid - year in 2023 — was unco restrained during 2021 ’s period of hyper - ebullience when deals closed in twenty-four hours with inflated valuations and inordinate founder - friendly terms — a hysteria Somaia hopes the market never revisits .
“ environs like 2021 make me quite anxious . Investment opportunity move tight and at high Mary Leontyne Price . . . and growth , hype and salesmanship set forth count more than building durable companionship . Even as our mark - to - market functioning was looking incredible , that ’s perhaps one of the few years at Lightspeed when I had the most anxiousness . On one hand , these valuations were market - shape ; on the other they did n’t jive with our judgment of the business , ” he said .
“ So how do you bed who is right ? Does the grocery know something we do n’t ? Fortunately we stayed with our convictions for the most part through that fourth dimension . ”
Over the past three years , many India - concentrate venture capital house have raised solid raw funds that shadow their previous vehicle — Peak XV hasamassed $ 2.5 billion for the regionacross late closes , while Nexus Venture Partners pulled in $ 700 million , Elevation raised $ 670 million , and Accelgarnered $ 650 million . Lightspeed , which begin investing in India more than 15 year ago , and later formed consecrated investment firm for the country , unveil a $ 500 million fund , its fourth for India , in 2022 .
“ With respect to Lightspeed India ’s most recent fund , I consider that is sized at the lower end of our peers . This size is a calculated choice , ” said Somaia . “ That said , perhaps our peers see an opportunity that we do n’t , or have a more expansive investing strategy — and we are always queer to con . But we want to defend against the risk of too much capital resulting in strategy drift . ”
Somaia say he anticipates many firm , include Lightspeed , to take three to four years to deploy their funds instead of the distinctive oscillation of two and a one-half years to three . “ We call for to have top - tier returns to our LPs , who have become accustomed to a certain kind of coming back from a firm like Lightspeed . We will never compromise that to put money to work , ” he say .
India in the global AI race
With AI progression soar in Western hub , India islagging in foundational researchas very few of its startups attack to build tumid language models .
Lightspeed meet parallel to the business firm ’s early investing in Indian Energy Exchange — building a power trading platform whose analogue did n’t exist in westerly market . “ My perspective is that right now we are at a phase with AI where a lot of the infrastructure , and some tooling , is being built . This is chiefly occur in Silicon Valley . It has really been a reminder that the concentration of proficient gift in Silicon Valley is unparalleled , ” said Somaia .
“ In the sentence that we have been investing in India , we have observed special core technical infrastructure invention . Most of the opportunity tend to be at the app level — for consumer and enterprise . There are many reason for this , including market dynamics and the investor residential district , where we have few technically - potent investors . . . so it ’s a bit of chicken and egg , ” he added .
Hemant Mohapatra , a partner at Lightspeed , focuses on mysterious tech and has backed startup like Rephrase , one of the early generative AI startup , andlarge spoken language model AI startup Sarvam .
Mohapatra agree that access to top - grade AI talent is constrained globally . But similar to the cloud computing shakeout , he promise integration around a few AI applied science and business paradigm once current hype subsides . Given India ’s engineering bench strong suit , targeted AI opportunities could still emerge locally even if Silicon Valley retains its general innovator ascendancy , he said .
The patient capital
A worry held by many investors in India is that several late - stage startup continue pushing for up - rounds , use up their runways before swallow post - downturn reality .
Anuj Bhargava , Lightspeed MD and caput of India Corporate Development , told TechCrunch he view progress toward alignment with the public marketplace . “ I call back this is the year where the financing that will happen will be in more sync with the public markets . For ontogenesis companies , the private market have been dull . But for the figure that have really improved their PnLs , have dilute the burns and are on sustainable whole economics , I imagine the public market offer a great opportunity , ” he said .
India has also attract growing sovereign monetary fund interest over the past three year at a scale it never has before , he say , adding he was optimistic that they will invest in many late - stage inauguration . “ We had a pile of funds not based in India but investing in India because of the chance the country offered to them outside their own . A lot of company ended up raising money that did n’t justify their ordered series or advance . In the last few year , some of the momentum investors have has not been invest as much in India , make a void , ” he order .
“ That void has been fill by patient capital letter — sovereign funds were very placid in 2020 and 2021 ; pension pecuniary resource [ that ] were either quiet and likely had n’t invested much in India to begin with ; and the growth weapon system of the secret equity funds , many of which earlier were n’t clothe much in technical school . So these three pockets of capital are matured , long - term and patient and I anticipate we will see more activities from them going fore . ”
While late - stage funding continue tightened substantially , some investors see bright musca volitans in India ’s other - stage ecosystem . Peak XV , Lightspeed , Elevation , Accel and Nexus signalize over a dozen early - microscope stage deals in the month of January alone , concord to a individual familiar with the thing .
“ While many in the ecosystem are busy approximate when winter will be over , we however trust there is no time like now to construct ( and for us to clothe ) , ” said Lightspeed partner Rahul Taneja .
The skilled natural endowment and eager capital remain approachable at early degree , he said . “ father quality is much better — the kinfolk who are leave their jobs truly think in their musical theme , and are willing to take the dip in what most would call a ‘ slow year . ’ Access to high - quality gift is much better , and capital allocators have been waiting to make bolder bets . Every single day , we get to fulfil prodigious laminitis at the earliest degree of venture instauration — and recognize how favorable we are to be in a position to support India and Southeast Asia ’s digital increase . ”
