Early-stage venture capital firm Orios Venture Partners has both eyes on India’s future unicorns. The South Asian nation, after all, houses the world’s third-largest startup ecosystem, as well as the third-largest number of unicorns in the world—25 startups that are valued at more than 1 billion dollars.
While the Mumbai-headquartered VC firm has backed early-stage startups since 2014, the company is now taking its game up a notch as it looks to breed unicorns from its herd. So far, the seven-year-old fund has a portfolio of 30 startups, which include medicine ordering app PharmEasy and dairy products delivery company Country Delight.
The company, which invests across health tech, fintech, direct-to-consumer brands, marketplaces, social commerce, and content and media companies, raised its maiden seed fund in 2014 worth USD 50 million. Four years later, it closed its second seed fund at USD 75 million. Now, it is in the process of raising the third fund for higher rounds.
Anup Jain, managing partner of Orios, said in an interview with KrASIA that although some of its portfolio companies were negatively impacted and had to suspend operations for about two months due to COVID-19, most of them saw a surge in business.
“Thankfully, 80% of our portfolio is in the essentials category. So we continue to grow, and grow much faster,” he said. For instance, PharmEasy and Country Delight saw an uptick in business, he added. Similarly, Gully Network, a B2B tech startup that digitizes neighborhood stores, also experienced a 30% increase in transactions. As the COVID-19 crisis reshapes India’s startup ecosystem, Jain is all set to help the foals of its seed funds grow into unicorns in the next two to three years.
The following interview was edited for brevity and clarity.
KrASIA (Kr): What is Orios Venture Partners’ investment philosophy?
Anup Jain (AJ): We are an early-stage tech fund. We do look for tech enablement in whatever we invest in. We are an India-focused fund, so our understanding of the Indian consumer, we feel, is good. We look at large spaces, solving large problems in India. For us, a large space has to be worth at least USD 2 billion. A large problem, thus, would involve a significant disruption in the current market.
We look at creating a company that influences or impacts at least 25% of this market over the next five years with its proposition and business model. Our investment philosophy is to work with these metrics, and look at founding teams, which can create tremendous value and a win-win for different stakeholders in their sectors, and therefore create a sustainable business model that is attractive to everyone. We don’t do certain sectors that have a regulatory overhang, such as gambling or cryptocurrency.
We also have our unique Misfits acceleration program, where we take our companies through a regimen of scaling up, getting the right team metrics, the right strategy, and then finally showcasing them to follow-on funds. Our companies thus are able to hone their plans and make them pitch-ready with a product-market fit in six to 12 months.
I think, for us, it is all about creating value. We aim to invest in one out of every ten Indian unicorns. So, if there are going to be 30 unicorns in the next two years, we’d like to hold stakes in three of those unicorns. That is our key focus, and that is our investment philosophy.
Kr: Which of your portfolio companies have the potential to become unicorns?
AJ: A very clear, breakout company for us is PharmEasy, which is a medicine delivery app. They just did a large round, so they are already valued at about USD 850 million. The next round should be taking them to unicorn status.
The second company that we think could create tremendous value is Country Delight. It’s in direct-to-consumer, fresh and pure dairy products, which is essentially how it connects with agriculture. They started off with milk and bread, as well as eggs.
The third company that can create a tremendous value is GoMechanic. They are in the auto aftermarket space, where they are reverse-franchising mom-and-pop, stand-alone garages, and giving them a standardized service experience format, digitizing them, making them omni-channel and discoverable to get the demand coming in. They are solving their supply and demand issues and creating a brand out of that.
The fourth company is BeatO. It is a digital healthcare company that makes an IoT device to monitor the blood sugar levels of diabetes patients. The product collects the reading, connects to a smartphone, and stores all of your data for lifelong purposes. It connects you to doctors, gives discounts on medicines, and also offers private label products in the healthy food category. It creates value by providing much-needed and difficult-to-get insurance cover for diabetics.
While Country Delight would be valued at about USD 200 million, GoMechanic is at around USD 60 million, and BeatO is close to USD 24 million.
Kr: As an early-stage investor, you are aiming for startups that will become unicorns. How do you nudge them along?
AJ: If a company is doing well and is breaking out, we continue to invest and support it. Our first check is at the seed stage, up to USD 1 million. And then along with other lead funds, we invest in A and B rounds. So we participate normally up to the Series B stage, writing checks up to 4 million dollars.
Beyond that, it becomes difficult for a seed fund to invest. So, we have a third fund called Orios Select Fund I, which we are raising cash for now. And out of that, we invest in the follow-on rounds of some of the winners from our seed funds. We have already invested in the follow-on rounds of three of our existing portfolio companies into Series B rounds and beyond. That is another strategy that we have.
Kr: What is the size of your Select Fund? Is there a target closing amount?
AJ: The fund is currently being raised. At this point in time, it’s hard to predict. The fund is backed by both new and old investors. With the pandemic, some of the conversations have slowed down for natural reasons. So we are looking at different possibilities.
Kr: Going forward, what is your strategy for India?
We will remain focused on India. Indian consumers and the Indian market is where a pot of gold lies. And that’s where our expertise lies. We will stay focused on the early stage. Our Select Fund provides yet another vehicle for some of our LPs to gain venture class returns. Usually, seed funds, all across the world, have a ten-year outlook. But in India, seed funds tend to be smaller and have a seven-year view. That does not give enough time for the company or the fund to raise enough money to support a portfolio company in its seventh, eighth, ninth, and tenth year. And that’s where the Select Fund comes in handy.
Kr: Has your focus changed due to the COVID-19 crisis?
AJ: I do not think our focus has changed. Everyone knows that the discretionary spending on products is going to drop for consumers, and therefore, one will not see too much spending, so we do not see any investments going into retail and F&B, such as in tea outlets or coffee chains or biryani chains. In lending, we have invested in a few companies, but that will take a backseat. Apart from these, our focus on health tech will increase. We have yet to make education tech investments, so we are definitely looking at education. We are also looking at the agriculture space for farm-to-fork startups diligently.
Kr: As a veteran of the retail and FMCG (fast-moving consumer goods) segment, do you see startups innovating in this space?
AJ: There are some special segments associated with health and wellness that use tech to engage consumers. That will see an uptick. But for food chains and new brands, there won’t be new ones because there will likely be consolidation. There is definite pain and hurt in that sector right now.
Brands like Nestlé, Britannia—they’re already launching new products that are marketed as immunity boosters. It’s all indicating there is a health and wellness trend in some of these product categories. And obviously, we would be very interested in the health and wellness, direct-to-consumer space.
Kr: What is your outlook for the Indian startup ecosystem?
AJ: The general outlook is that companies should conserve cash, and that they should hang on to their core team. They should restructure their businesses for the new normal and new methods of working. They should scale down their physical offices and have more and more staff operating from home, because it is well known that India has not reached its peak of the pandemic.
Kr: Which sectors are you excited about?
AJ: I think the digitization of grocery stores and small format, traditional trade shops is a very exciting segment. Digital healthcare is an excellent segment.
No one has actually addressed the micropayments made by the lower middle class that live beyond the top cities, let’s say in a place like Dhule or RanjanGaon or Dhanbad, where INR 10–30 payments are made for shared auto rides and eating puri aloo on the street. All the companies, foreign and domestic, like Paytm, Amazon, or Google, are all fighting for the same users, living largely in the top cities. So that’s an exciting segment.
Kr: What about the B2B tech space?
AJ: Businesses—small, medium, and large—have all realized the need for digitization and automation. Earlier, the mindset in India was not to pay for technology. But now I think they would see value in it, and in certain cases, they will have no choice. Labor is not going to be as available as before because of reverse migration. Not many will actually return to take a job. The ones who return would charge more. And if the pricing goes up, then a company would rather pay for automation than pay more for the same person with no extra skills. It will accelerate the process of adopting technology in the overall economy on the B2B side.