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Wings of Opportunity in Tech Startups - iSPIRT VC Thesis


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Wings of Opportunity in Tech Startups - iSPIRT VC Thesis

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Wings of Opportunity in Tech Startups - iSPIRT VC Thesis

  1. 1. 1 India as Product Nation: 30 Year journey from zero to hero Wings of Opportunity in Tech Startups
  2. 2. Topics ❏ ‘India as a SaaS’ Hub Theme ❏ ‘Unlocking the Missing Middle’ Theme ❏ 30 year journey from zero to hero
  3. 3. India as a SaaS Hub Theme 1
  4. 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. 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. 6. SaaS Talent | Engineers & Product
  7. 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. 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. 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. 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. 11. Unlocking the Missing Middle Theme 2
  12. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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 f-techno-creative-innovations/
  22. 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. 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. 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. 25. Supply Chain Stack Use Cases Public Platforms Fleet / Remote Asset Monitoring Aggregators Engine Tech Food/Dairy, Pharma/Medicines, Manufacturing
  26. 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. 27. Putting it in Context 27
  28. 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. 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. 30 Thank You