For a decade, Taxmantra Global (TMG), a Kolkata-headquartered tax and legal advisory firm with offices in Singapore and the US, observed the evolution of the tech startup ecosystem in India. Behind the scenes, the company aided startups in their funding processes—vetting investment agreements, carrying out due diligence, incorporating entities, filing tax and regulatory documents, and connecting with investors.
The company has helped over 150 startups, including food delivery platform Swiggy, fintech platform Niyo, and conversational AI platform Niki.ai raise a total of USD 180 million from global investors.
This year, as the pandemic accelerated digital adoption in India, TMG saw an opportunity to take its game to the next level. The 37-year-old firm decided that it was the right time to become a startup investor, moving beyond its role as an enabler.
TMG set up its investment arm, ProfitBoard Ventures, with the aim to create and manage a large syndicate fund, Alok Patnia, managing partner at TMG and ProfitBoard Ventures, told KrASIA in an interview.
By October, TMG brought on board a consortium of global investors who pooled USD 100 million to back early- to growth-stage tech startups in India and Southeast Asia.
The following interview has been edited for brevity and clarity.
KrASIA (Kr): What is the idea behind ProfitBoard Ventures?
Alok Patnia (AP): As a legal and tax advisory firm, we have been active in the tech ecosystem in India and Singapore. We wanted to create a standalone investment and investment banking arm. We decided that our investment and investment banking activities will happen through ProfitBoard Ventures, headquartered in Singapore.
The idea is to deploy our USD 100 million fund in 100 startups over the next 18 to 24 months. We would write checks between USD 500,000 and USD 10 million. Fifty percent of this syndicate fund will be utilized in India, 25–30% in Singapore, and the rest will be for Indonesia and Malaysia.
In the last three months, through ProfitBoard Ventures, we have invested in three startups and are in the process of giving seven more startups term sheets. We are evaluating two to three startups every day. We want to ensure that we get the right startup at the right time.
We enter at a point where startups have some traction, a minimum viable product, and a business model. We do not look to invest in startups at the ideation stage, although there could be exceptions. Post-angel up to Series A is where we invest.
Kr: What is your business model?
AP: Our investments happen through ProfitBoard Ventures, which anchors the fund. We have our own capital, and we have a syndicate fund through our consortium of 200 investors, which include high net worth individuals, C-suite executives, family offices, micro VCs. Whenever we write a check, we invest 10% of that amount from our resources. The rest comes from the syndicate fund.
We know which startups each investor is interested in. Every startup has a different pool of investors.
Kr: What are your key areas of focus?
AP: Technology adoption has moved forward by at least a decade because of the pandemic. Our focus is any tech-enabled startup that automates business solutions using artificial intelligence and machine learning. We are open to startups in B2B, enterprise, edtech, fintech, health tech, and logistics and supply chains, as well as startups that help small businesses organize and scale. We are looking at companies that can become very large in five to seven years.
Kr: What is your strategy across India and Southeast Asia?
AP: There are many interesting tech solutions in Singapore, but the size of the market is small. We are talking to four to five startups to see if their technology can be brought to India.
One of them is a logistics startup that has done great in supply chain automation. We just helped them open their office in India. Another is in edtech and offers on-demand tutors. We are also looking at e-sports companies, for which India can be a huge market. We will write checks for some of these startups.
Overall, Singapore is a diverse market with a lot of mature startups. India, with a user base of 1.3 billion, is a great lab where they can experiment.
In India, we expect to see a lot more product and enterprise startups because of increased tech adoption in small and medium enterprises. The country is now ready for the kind of companies that we see in Silicon Valley. We will see more Zohos coming out of India in the next five to seven years. We are evaluating several deals, including two enterprise solutions and one supply chain platform.
In Indonesia, fintech is still lagging, so we are looking for interesting fintech startups. In Malaysia, we are in talks with an edtech firm and a fintech startup.
We are also working toward collaborating with dedicated funds, startup mentoring programs, as well as independent VCs in the US and Israel to expand their portfolio in India and Southeast Asia.
Kr: How do you think the startup ecosystems of India and Singapore are different?
AP: Singapore is a mature market in terms of technology adoption, products, and entrepreneurs. For instance, if you have four startups building some solution, two of them will be mature companies that are already thinking ahead and have a product ready. In India, out of ten such startups, you will only have two or three mature companies, because tech adoption is still low.
It is easy for companies in Singapore to raise money from global investors. The country is ranked second in ease of doing business and it welcomes disruptive ideas. Small investors like angels and micro VCs are more open to investing in a company directly in Singapore, unlike in India, where they are still a little apprehensive about local laws. Unlike large VC firms, they do not have the support of legal firms.
It is very difficult for someone in the US to put USD 500,000 in India because they may worry about the problems that may arise when they decide to cash out from the investment. But India is bridging that gap slowly. It has done well in the last five years. It has jumped to the 62nd position from 142nd in the rankings for ease of doing business.