Investor’s Corner. ‘Supply chain is everybody’s problem now’

“Supply chains will determine how a country responds to any crisis — be it war, drought or Covid. Resilience hinges on how strong the supply chain is,” declares Rohit Bhayana, co-founder and managing partner of Lumis Partners, an operating investment firm based out of Gurgaon.

“This is the part that is physically broken in India, but we believe we will leapfrog and build a digital supply chain,” says Bhayana, describing how Lumis’s investments are going into solving this problem. The 13-year old firm has deployed $240 million worth of capital. They say they have created value in excess of $450 million from $100 million of investments in about 20 plus companies. 

Now with vaccine distribution looming ahead, it is deepening focus on the supply chain. “Before Covid-19, supply chain was an industrial problem; now consumers know how it affects them,” he says. Excerpts from an interview:

Operating investment firms are fairly new in India, though globally well established. Typically capital chases time-bound goals and becomes acquisitive capital. It becomes short-term swappable capital with an expiry time. But we are the exact opposite. It’s not about the capital and how it is pooled. It starts with a problem and solving it. The problem determines the patience, the time, the stage of the company we are investing in.

We are in supply chain, we are in human capital, we are in technology. These three cut across every industry. Our investments are deployed across ageing (senior care), future of work, healthcare and education. Ageing is one of the deepest spaces we are focused on. Here we are building businesses from scratch. In supply chain, we have deep-rooted properties such as the Supply Chain Lab. So we have different structures for different problems.

We call it a fellowship. We pick one per cent of the start-ups that apply to us. Typically 500 to 1,000 apply every year. We pick seven to ten of the start-ups each year and give them $100,000 and run them through a six-month programme, making them scale-ready. We are working with some 20 or 30 global leaders in supply chain, from Shell to Amazon, and institutions like MIT on this programme.

Supply chains are mission critical for a nation. What we have started doing is encouraging start-ups to look at how they manage supply chain of food — not in terms of reaching vegetables from place A to B, but from viewpoints of authentication. As we go forward, the price premium of a product will come from aspects like is it GMO-free, production process and so on. Supply chain technology should be able to authenticate these.

We are very deep in there. There are four parts to the vaccine story — discovery, manufacturing, distribution and consumption. The last two is where we are. What is going to happen, we think, is the rich countries would order three times the number of vaccines of their population. Poor countries will be left with none or get spurious stuff unless they put in place technologies.

Since we cannot create concrete warehouses at once, we are talking about drones for distribution. We are looking at AI and blockchain-based solutions.

We are identifying two companies in each of our batches, but not limiting ourselves to these cohorts. Beyond the companies we select every year, we could look outside. Everything gets down to the problem. If we cannot find the company that can solve the problem we may even go and incubate one.

There is Statwig, which provides a blockchain-enabled track-and-trace technology. There is Qzense, which has an olfactory sense in IOT devices capturing internal quality metrics of fresh food to provide insights on ripeness, spoilage, brix and shelf-life. There is Koinearth, which uses blockchain and AI to eliminate data silos in supply chain.

We have taken deep stakes occasionally, but usually it is sub 25 per cent.

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