Tiger Global fuels India’s start-up boom, even as as others line up with funds

Bloomberg Bangalore | Updated on July 11, 2019 Published on July 11, 2019

Representative image

The hedge fund has invested in 13 Indian companies so far in 2019

Tiger Global Management has examined at least a dozen deals with Indian start-ups in recent months, according to multiple people with knowledge of the talks, illustrating the global investor’s fierce interest in India’s technology ecosystem.

The ultra-secretive New York-based hedge fund has closed investments in at least half of these start-ups — nearly all of them in fintech or enterprise software segments. Hedge funds, venture capital firms, and the likes of South Africa-headquartered internet group Naspers Ltd are also chasing India’s rapidly growing consumer internet and enterprise software firms.

Digital revolution

The rising interest in India occurs as investment in China’s recently booming start-up sector faces a steep drop-off. It is a radical progression from just a few years ago, when global investors worried about the prospects for India. Fewer smartphones and expensive wireless-data plans restricted internet access to a tiny user pool in a country of 1.3 billion people, pushing investors to chase the handful of entrepreneurs building consumer internet start-ups. Now, cheap Chinese smartphones and inexpensive data rates are luring millions of users online every month.

“There’s buoyancy also because India’s recent decisive election assured political stability,” said venture capitalist Vani Kola, Managing Director at Kalaari Capital Advisors Pvt, prompting international funds to get back in the investment game. “Investors like Tiger Global are enthused that the market is stable and has reached a certain maturity,” she said. “There’s confidence in the depth of the market.”

This year is already being dubbed ‘Tiger Global India redux’ by some. The influential investor is renowned for its early bets on high-profile Indian consumer internet start-ups like Ola, and its triumphant exit last year from Flipkart, India’s most-valuable start-up, which netted a $3 billion return.

In the first half of 2019, Tiger has already funded 13 Indian companies, according to researcher Tracxn Technologies Pvt, compared with 8 investments in 2018 and 6 the year before. The spigot remains open, according to the people, who did not want to be named as the deal signings are ongoing.

Change in management

Tiger’s new focus on enterprise software services coincides with management changes. Lee Fixel, the 39-year-old Co-Head of private equity for the technology-focused fund, recently departed the firm and Scott Shleifer, a partner, took over the portfolio. Schleifer, 41, best known for turning a $200 million investment in Chinese e-commerce platform Inc into a $5 billion return, went on a whirlwind trip to India recently to meet entrepreneurs.

The newest bets by the deep-pocketed hedge fund are mostly in the sub-$50 million range. They include logistics-management start-up Locus, agri-tech provider Ninjacart, expense-management software provider Fyle, and Zenoti. All are spearheaded by Schleifer, the people said.

Evolution to B2B hub

India’s historical strength in IT services is also spawning thousands of software-as-a-service (SaaS) and business-to-business (B2B) companies, a natural evolution given the expertise of the labour pool.

“Investors are excited to see India’s transition from an IT services powerhouse to a rising B2B solutions hub,” said Sudheer Koneru, Founder and Chief Executive Officer of Zenoti, where Schleifer led a round of funding last month. Services can be virtually served on the cloud to customers anywhere in the world, making it viable to build SaaS start-ups in low-cost India.

Koneru’s Zenoti provides business and customer management and software services to beauty and wellness businesses, including spas, saloons and gyms. It’s 340 workers in Hyderabad engineer the product, generate leads and offer tech support to customers. After initially serving Indian businesses, nearly two thirds of Zenoti’s customers are in the US, and its doubling revenues year-on-year.

“Not just Tiger — other global investors too are waking up to the exciting surge of B2B start-ups coming out of India,” he said.

Other players

Investments in Indian start-ups from other global names have also gathered pace in recent months. SoftBank Group Corp and its Vision Fund, for instance, have invested in logistics provider Delhivery, and in Ola earlier this year, converting both into unicorns. India’s leading fin-tech start-ups are also in fund-raising mode.

“Investors are finally seeing numbers, and the market is looking very very viable,” said Neha Singh, co-founder of researcher Tracxn.

Published on July 11, 2019

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