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‘We are the VC fund that has engineering meetings every week’: Madhu Shalini Iyer of Rocketship.vc

In August, the Silicon Valley-based early-stage VC firm raised USD 100 million for global investments, specifically in emerging markets like India and Southeast Asia.

Source: Rocketship.vc

Early-stage venture capital firm Rocketship.vc went global, chasing trends based on insights gleaned from their data sets. Founded by a team of data scientists and entrepreneurs in 2014, the Silicon Valley VC firm uses data to drive investment decisions. The company boasts one of the largest startup databases in the world, but its analytical models that are built on top of its data are what matter the most, Madhu Shalini Iyer, partner at Rocketship, told KrASIA in an interview.

“We did not start out as a global investor. The only thing that we had was worldwide data. And we decided to just go with what the data told us,” said Iyer, who was chief data officer at Indonesian ride-hailing giant Gojek in one of her previous stints.

The Los Altos-headquartered Rocketship closed its USD 100 million second fund last month, with backing from Vulcan Capital, Adams Street Partners, the family office of Marc Andreesen, who is a co-founder of venture capital firm Andreessen Horowitz, as well as Chris Dixon, general partner at Andreessen Horowitz.

Rocketship’s first fund, which was worth USD 40 million, channeled investments toward 44 companies in seed, Series A, and Series B rounds, with 46% of them outside the United States. The firm entered India in 2016 and has invested in startups such as online real estate platform NoBroker, B2B e-commerce firm Moglix, digital ledger app Khatabook, and shared mobility company Yulu.

Rocketship plans to use the new fund to continue building momentum for its global investments, specifically in emerging markets such as India and Southeast Asia.

“We are seeing a lot of activity in Southeast Asia and India, just in terms of good companies, which is why we are very excited about that entire region,” said Iyer. According to her, the firm will back ten to 15 companies this year, writing checks in the range of USD 2–5 million.

KrASIA recently sat down with Madhu Shalini Iyer, Rocketship’s newly appointed partner, to hear her thoughts about the how data can drive investment strategies.

The following interview has been edited for brevity and clarity.

KrASIA (Kr): Rocketship.vc is known for leveraging data to drive investment decisions. Could you give us a glimpse of how this works?

Madhu Shalini Iyer (MSI): When we began the first fund, we chose to bring data into the mix. We curated a startup database and built models on top of it. Now we have one of the largest startup databases across the globe. And we use it to see the deal flow.

When we started, we did not make the conscious decision to become global investors. We just wanted to make great investment decisions. But we were able to catch international trends before it started becoming really apparent to many other VCs. That’s how we became global. We went wherever the trends were, based on the data we got.

Because of the way we curate our deal flow, we are also sector-agnostic, so we are part of B2C deals, B2B deals, and deep tech deals.

Our data science models can pick out trends based on deal activity, the momentum of downloads, hiring activity, and scores of other things. We have been able to pick up some edtech trends that are happening across the world now, especially in the emerging markets, as well as digital health trends. This all started happening in April and May.

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Kr: When did you begin curating the startup database? What data does it contain?

MSI: We started in 2014. There are a lot of sources for publicly available data, so we are not getting something that nobody else has. We compile data about what rounds are being done, the founders’ information, the teams’ information, and other typical things. It is not really what secret data you have available that others don’t have, it is more about how you clean it up and how you use it and make inferences from it.

Everyone at Rocketship is a data scientist, including all employees and partners. We are the VC fund that has engineering meetings every week to discuss data and how to keep building on our models.

Every business is a data-driven business at some level. So we are able to provide a lot of value to our portfolio companies and also our prospective investments, which makes it exciting at this moment, with so much data available. That is what really differentiates us.

Kr: Which sectors are you betting on more than others in India?

MSI: We are investors in Khatabook, which is an Indian B2B2C company. We just closed an investment in a company called Apna, which is a platform for gray- and blue-collar workers in India.

We are speaking to companies across edtech and digital health. We have been seeing a lot of activity in B2B as well. Indian companies are building great B2B businesses, and they have a global market for it right now. We also find fintech really interesting. We have seen trends in grocery, and have certainly spoken to a lot of companies there.

What I am saying about India is certainly true for Southeast Asia as well. We have seen a lot of similar activity in Southeast Asia. So fintech, edtech, e-grocery, digital health, B2B, gaming, cloud, and collaboration software—we are seeing activity in India and Southeast Asia in all of those things. In fact, even in Latin America, there are similar trends.

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Kr: What similarities do you draw between India and the Southeast Asian startup ecosystem?

MSI: I have had the pleasure to spend time in both those places. The population in India is of course larger, but Southeast Asia is very much like it in terms of being an emerging market that is home to a young population with smartphone access and penetration. All the other similarities are hinged on those two trends, especially for B2C. For instance, similar to Khatabook, you see BukuWarung or BukuKas in Indonesia. You see those similar trends for small kirana stores.

We have also spoken to companies in India and Southeast Asia for agritech. The trends are very similar because the needs and the diaspora are similar.

There is a lot of tech talent from India that has worked in all the unicorns of Southeast Asia, like Gojek. That is of course a lot of investment in India from Southeast Asia.

There are many Indian companies that are now incorporating in Singapore, as well as others that want to go from India to Singapore. It is such positive news for the overall economies of both regions. They are similar in terms of heterogeneity. Southeast Asia is so many different countries, and India is a large country with different languages. And India really does have a lot of tech talent and a way of building B2B businesses and taking it across the globe. Southeast Asia also has great talent, and I have seen B2B picking up in Southeast Asia as well.

Another similarity between Southeast Asia and India is that both have tier-one test markets. Singapore has always been used as sort of a testing ground for some Southeast Asia companies, similar to Bangalore or Delhi.

Kr: Although Southeast Asian companies like Gojek depend on Indian tech talent, they generally do not expand operations to India. Why do you think that is the case?

MSI: Gojek has gone out of Indonesia as it builds a logistics-heavy business. There is a great amount of penetration in their home country and they built out operations in Singapore and Vietnam. That itself is a big win.

No country is like another in Southeast Asia. It seems like a homogeneous market, but it really is not.

If you are building a very operations-heavy startup, most times there is not even cross-pollination between tier-1 and tier-2 cities—that is difficult to get right. So expanding from one country to another is difficult.

If it is a logistics-heavy business, it is sometimes good to stay closer to home. With that said, never say never. I think it is just the beginning.

Then there are other types of startups like those in B2C edtech. I would argue that you could build something in Southeast Asia that can be valid in Europe, the US, and India. You can build an edtech or medtech startup in India that has a market in Southeast Asia. Similarly, an agritech startup that has cracked Southeast Asia might have a market in India. Because there are similar problems across these borders.