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4 takeaways from 2021 from Harsha Kumar of Lightspeed Venture Partners

Written by Moulishree Srivastava Published on     3 mins read

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Investors in India caught up to new emerging sectors, invested earlier, and dealt with tough competition, Kumar said.

Harsha Kumar, partner at Lightspeed India Partners, which invests in early and growth-stage technology companies in India and Southeast Asia, started coding when she was 13 years old.

While Kumar began her career as a techie in the mid-2000s, she worked for several startups, including cab-hailing giant Ola, where she shaped their products. Then, in 2016, she refocused and became a venture capitalist.

Kumar spoke to KrASIA about India’s changing startup ecosystem as a deluge of VC funding sloshes through the country. She believes that in 2022, large volumes of capital will continue to flow into the country, check sizes will become larger, and more startup IPOs will take place.

The following interview has been edited and consolidated for brevity and clarity.

KrASIA (Kr): How did the Indian startup ecosystem change in 2021?

Harsha Kumar (HK): We saw a large number of companies start this year as COVID-19 gave people time to sit at home and think about what they wanted to do with their careers. A huge amount of capital flowed into the country because of a drop in interest rates in the US. Usually, less capital is available for Series B and Series C startups, but that changed completely in 2021. As a result, many startups became unicorns in a short time frame.

With the influx of growth-stage capital, many venture funds that were Series A investors started writing seed and pre-seed checks, because check sizes grew. That also led to more people starting businesses because additional capital was available at early stages. Even pre-product companies were funded.

Lastly, the number of companies that have gone public and are lined up to go public is phenomenal for the startup ecosystem. For many years, the biggest question is whether we are going to see exits in the country. As more companies go public, the Indian venture ecosystem will become even more attractive for global investors.

Kr: How do you think local startup founders’ mindset changed in the past year?

HK: Many startup founders started building global companies, partly because they realized they could have remote teams, and partly because they have sufficient funds. They understand whatever works for urban India will likely work for a global audience. Many of them are using their capital smartly.

Before the pandemic, companies would think about global expansion at later stages. Zomato, Ola, Byju’s, and Oyo are examples. But today we are seeing more and more early-stage consumer companies expanding globally.

As women empowerment became a central theme in the startup ecosystem, more early-stage startup founders became conscious of gender balance. Usually, it is the growth stage and pre-IPO companies that think about gender equality.

Kr: How did the VC community in India evolve this year?

HK: With more liquidity in the market, larger funds were raised. Many VCs launched separate early-stage funds or started programs to back new startups. When you make seed and pre-seed investments, you need to be more hands-on, as these companies need more support. A lot of funds are now building operational bandwidth and recruiting people with functional expertise so that they can support these early-stage startups.

Startup founders are now thinking beyond capital and are focused on what their investors bring to the table. Going forward, the only way to succeed as an investor is to have a lot of depth and experience in whatever you pick up.

Kr:  What themes are you excited about for 2022?

HK: Prosumers—professional consumers. I think more and more people will have side income. Prosumers will not build just for India, but for the global audience. Similarly, India-to-global companies, as a category, are also exciting.

Crypto will remain front and center. Investors will require deep knowledge if they want to contribute meaningfully as backers of crypto startups. I think there will be more specialized crypto funds coming up. We might also see local VC funds specializing in crypto. Lastly, both with crypto and fiat money, we will see a new format of games pick up in India. As online spending in India and around the world continues to grow, the gaming sector is going to become more attractive.

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