Wings of Opportunity in Tech Startups - iSPIRT VC Thesis

1. 1
India as Product Nation: 30 Year
journey from zero to hero
Wings of Opportunity in
Tech Startups

2. Topics
❏ ‘India as a SaaS’ Hub Theme
❏ ‘Unlocking the Missing Middle’ Theme
❏ 30 year journey from zero to hero

3. India as a SaaS Hub
Theme 1

4. Software Renal Model - Software As a
Service (SaaS)
Software can come from anywhere in
the World
Software Sales is Moving from Field Sales to
Online Sales
All of software is moving to Cloud
Global Software Product Industry
Disruption Ahead
4

5. Desk Marketing and Selling is to
Indian SaaS as Global Delivery
Model was it India IT Services
Early Demonstrated Success from
India already happening (Zoho,
Druva, Freshdesk, etc.)
Many Category winners are being
created for SaaS targeting
mid-and-small businesses (find them
at PNgrowth and SaaSx bootcamps)
India can do in SaaS what China did in
manufacturing
India Advantages
5
Thanks to MNCs, great
Product/Engineering talent that
creates 2X value at ½ the cost

6. SaaS Talent | Engineers & Product

7. Significant margin advantage
costs as % of total revenue for a typical SaaS company
Source: Google-Accel SaaS Report
Better EBITDA
Margins by
3-4x

8. Expanded addressable market in SMB and Enterprise
$40
per agent
/month(1)
$100
per agent
/month(2)
$300-700
per month(6)
>$1000
per month(7)
Note: (1) Estate Plan billed annually (2) Enterprise Plan billed annually (3) Professional & Enterprise plan billed annually (4) Lightening Professional &
Enterprise plan billed annually (5) Price comparison for a 100 room property billed annually (6) Pro & Advance plan billed annually (7) Base Plan
Source: Company websites; Industry reports
$20-35
per user /month(3)
for CRM
$75-150
per user/month(4)
for CRM
$100-120
per month(5)
for Channel Manager
$150
per month(5)
for Channel Manager

9. $740 mn+ VC/PE Capital Invested In Last 2 Years
(CY15 & YTD CY16) - 105% Growth Over Prior 2 years
Note: (1) YTD as of Nov’16
Source: Venture Intelligence
in USD mn
$360mn+
across 72 deals
$740mn+
across 74 deals
2x
$90
$60
$55
$51
$50
$45
$30
$23
$15
$15
Top 10 India SaaS Deals in Past 2 Years (USD mn)

10. Global Majors taking notice
Chinese Investor
Consortium
AcquiredAcquired Acquired Acquired Acquired Acquired
AcquiredAcquired Acquired Acquired Acquired Acquired
$900 mn$130 mn
$200 mn$136 mn

11. Unlocking the Missing Middle
Theme 2

12. Elite (11M HHs, 4%)
>$37k annual gross HH income
Wealthiest class in India
Affluent (26M HHs, 9%)
$18.5k-$37k annual gross HH income
Top 6-10% of highest income HHs
Aspires (66M HHs, 23%)
$7.4k-18.5k annual gross HH income
Middle Class- Looking to trade up & aspire
to upgrade (Disposable Income - 60%)
Next Billion (103M HHs, 500m, 36%)
$3.3k-$7.4k annual gross HH income
New Consumers- HHs have some
disposable income (33%), total spend $1 T
Strugglers (80M HHs, 28%)
<$3.3k annual gross HH income
HHs with the majority of spend on basic
needs such as food, shelter, power & water
India 2020
India 1
Elite, Affluent and Aspirers (Current Opportunity)
India 2 Next Billion (New Opportunity)
India 3 Strugglers

13. The Missing Middle
Large informal economy
> 45% of GDP
Informal employment
80% of workforce
Low per capita spending
97% of population
lives on < US$10 per day
Lack of data
Only 3% of population
pays taxes

14. Unlocking India 2 (Bharat) Potential in 3 Steps
India Stack
Technology backbone for
presence-less, paperless
and cashless economy
Financial Inclusion
Payments, Lending, Savings
2nd Derivatives
Healthcare
Entertainment
Consumer Cleantech
Supply Chain Tech
…

15. Digital Identity
1 Billion have Aadhaar
Mobile
200 M smartphones
350 M have internet
25 M smartphones sold per quarter
India is changing
GST
70 Mn entities with digital
invoices. Pulling in smaller
enterprises into the formal
economy

16. PRESENCE-LESS LAYER Aadhaar Authentication
Unique digital biometric identity with open
access of nearly a Billion users
CONSENT LAYER National Policy on Data Sharing
Provides a modern privacy data sharing
framework
PAPERLESS LAYER
Aadhaar e-KYC,
E-sign, Digital Locker
Rapidly growing base of paperless systems
with billions of artifacts
CASHLESS LAYER IMPS, AEPS, APB, and UPI
Game changing electronic payment systems
and transition to cashless economy
COMMERCE
(GSTn)
SUBSIDIES
(DBT)
BILLS
(BBPS)
OTHERS
INDIASTACK
TOLLS
(ETC)
JAM Jan Dhan, Aadhaar, Mobile
India Stack

17. Source: UIDAI, NPCI, TRAI Website, Conversations with NPCI, eMudhra, Deity officials. Updated 18th Nov 2016.
3 Bn
Authentications of
500M unique ids
1.075 Bn
Enrolments In 6 years since launch
340 Mn
eKYC in 3 years
75 Mn unique ids
349 Mn
APB Accounts Linked
1.2 B Transactions worth 4.5 B USD in 3 years
>2.5 Mn
e-Sign in 15 months
>0.8 Mn unique ids
2.9 Mn
Digilocker users &
15 months
4.8 Mn
Uploaded Docs
2M+
UPI VPA in
Just under 2 Months
252 Mn
Jan Dhan bank accounts
200 Mn
Smartphones
1060 Mn
Phone numbers
Jan Dhan Aadhaar Mobile

18. Time
Winning ‘Next Billion’ Consumers needs new mindset
PenetrationS-Curve 1 focused on India 1
S-Curve 2 focused on India 2 (Bharat)
Almost fully penetrated
Created winners like FK,
Amazon India, HDFC Bank
Copy-paste business models
Sizeable discretionary spending power and appetite:
- Consumption Spend is $1T in 2020
- Unrecognized profit pools
- China scale: 36% of population = ~500M people
Unknown and unverified business models
China or US Copy-paste business models won’t work

19. India 2 | Financial Inclusion
India Stack
Technology backbone for
presence-less, paperless
and cashless economy
Financial Inclusion
Payments, Lending, Savings
2nd Derivatives
Healthcare
Entertainment
Consumer Cleantech
Supply Chain Tech
…

20. 2.0x86% 690M
Payments
Currency in
circulation
withdrawn
Card base now
activated. 2.5x card
transactions in 1 month
Digital transactions
are up 2x. Share of
payments 3x
Total value of digital payments by 2020 is estimated to be USD 1 Trillion

21. Consumer Lending
Debt penetration remains low, with
<30% households having any form of debt
Overall household debt to GDP is < 20%,
with banking sector consumer loans to
GDP at ~10%
High Degree of Financial Exclusion
http://pn.ispirt.in/ispirt-the-india-stack-pilot-commercialization-o
f-techno-creative-innovations/

22. ● 79% of enterprises in India have < 10
employees
● Lending to smaller enterprises is at a
significantly higher rate
● With increasing digitization, share of bank
lending should increase and cost of
lending should come down
● Consumer and SME loans to grow 5x over
the next 10 yrs.
SME Lending
High Degree of Financial Exclusion
93% of MSMEs are reliant on self
finance or no finance
Institutional
Sources 5%
Non-Institutional
Sources 2%
Self-Financed
93%

23. India 2 | 2nd Derivatives
India Stack
Technology backbone for
presence-less, paperless
and cashless economy
Financial Inclusion
Payments, Lending, Savings
2nd Derivatives
Healthcare
Entertainment
Supply Chain Tech
Consumer Cleantech
…

24. Opportunity
is large...Healthcare
India needs 4x doctors and
2x nurses to serve the
population
Entertainment
Local language internet users set to
cross 500 Mn by 2020

25. Supply Chain Stack
Use Cases
Public Platforms
Fleet / Remote Asset Monitoring
Aggregators
Engine Tech
Food/Dairy, Pharma/Medicines, Manufacturing

26. 40m to the next Billion
Homegrown solutions are finding success
tapping this opportunity and attracting
capital
Technology unlock has raised
India’s consuming class to ~
350mn people vs < 60mn earlier
Inflection point in growth for
solutions that leverage this tech
infrastructure

27. Putting it in Context
27

28. Three types of ecosystem players
For a long term sustainable ecosystem
30 yr Architects
10 yr Planners
5 yr Doers
• Think Tanks
• Universities
• Research Labs
• VCs
• Policy Makers
• Missionary entrepreneurs
• Bootstrapped entrepreneurs
• Mercenary entrepreneurs
Interplay and
mutual respect
across these three of
players is important!
Public goods

29. Market Scalers
- Playbooks
- Thesis based Funds
- M&A Catalysts
Arrival of Challengers
- Evangelization (aka ‘WhatsApp
Moment in Banking’)
- iStack Hackathons
Unlock transformational change
- Drive Regulatory change
- Catalyse through Grand Challenges
India Stack
Incumbents Wakeup
- Embrace Non-Linear Change (aka FTLC)
- Partner with startups (aka InTech50)
- Adoption Sprints and Pilots (aka Alt.
Lending Pilot in Apr’16)
Public Goods at work: New Sector Journey
Financial Inclusion

30. 30
Thank You