Emerging Entrepreneurs

Backing ventures that drive the India story

N Ramakrishnan | Updated on January 20, 2020

Anand Lunia, Partner, India Quotient   -  N Ramakrishnan

Seed-stage investor India Quotient bets big on technology and social networking sectors

You talk to Anand Lunia and inevitably the conversation turns to the India outside the metros and even within metros, those consumers who are not part of the elite crowd and who represent a great business opportunity. This was his thesis for starting India Quotient, a seed-stage venture capital firm that bets big on the India story; its investments include Sharechat, a social media start-up in Indian languages.

“We wanted to invest in India which is outside the metros. All the foreign money from private equity and VC funds would chase things which were liked by the top 2 per cent of the country. Even private equity will want to go into a western wear fashion brand,whereas in India they will want ethnic wear. Interestingly, the ethnic wear brands that are selling online are doing more business than western brands,” says Anand.

But then, he adds, everybody was comfortable with that model of investing. Even internet penetration was restricted to that small group. “Our bet in India Quotient was there is an India outside the metros. Not only India outside the metros, there are Indians outside the elite who will get internet access within metros and at some point of time, these people will represent a great opportunity,” he adds.

Social media

India Quotient, which started off with a small fund raised primarily from a close circle of Anand’s friends and acquaintances, initially bet on finance and then on social media. Why social media in Indian languages? Anand says that people in the metros and those who converse in English may be on Twitter or Instagram, but not the others. It is not just the barrier of language, it is also the barrier of culture, he explains. “Our belief continues to be that. Instagram and Twitter, for example, are designed for elite Indians. Hence, the need for investing in social media focussed on India,” he says. It was for this reason that India Quotient was one of the early backers of ventures in the Indian languages social media space. “We focussed on Indian language content and we said Indians have to have their own social media.”

According to Anand, India Quotient decided early on what it will not do. It decided not to look at ventures that are copycats of those in the US or China. For him, it was not about chasing themes, because that is a model that global VCs understand well and there are a large number of investors chasing the next big theme. “We said let us focus on that quadrant where there are businesses that are not being catered to. These people will become big. In the beginning, for two years, we were outcasts.” When others in the industry questioned him on his strategy that he was focussing on a niche segment, Anand’s reply was that he was addressing a large audience. The launch of Reliance Jio changed the dynamics completely. Broadband became easily available at a reduced cost. Besides, Anand says two other developments – the launch of UPI and reliable electricity supply – made businesses more viable.


Thanks to these developments, says Anand, most of India Quotient’s portfolio companies are meeting their targets. When he started the VC firm, if the companies met half the target it was considered good, but now when founders meet 90 per cent of their targets, they apologise for falling short, he says. From the beginning of 2019, he says, companies have started becoming aggressive and dramatically improved their performance. A big change is that when people talk of technology, they are not restricting themselves to the metros.

India Quotient raised its first two funds from domestic investors; the first one was mainly from friends and family and the second one too was mostly from people Anand knew. The third fund of $60 million had global investors, including from China. The VC firm is also raising an Opportunities Fund of $40 million that will help it invest in some of its portfolio companies that need larger rounds and may turn out to be multi-baggers.

Focus areas

According to Anand, India Quotient will continue to focus on the seed stage, but seed stage cheque sizes have themselves increased. From ₹1 crore cheques in the first fund, it went up to ₹2-3 crore in the second fund. With the third fund, the VC firm will invest up to ₹20 crore, going the entire range from ₹2–20 crore. One of the reasons for the larger seed stage cheque sizes is that there are a lot of returning entrepreneurs, who typically start with bigger cheques from VC funds. “For a younger founder to match up and compete for VC attention, he or she needs to prove a lot more.” More than half of India Quotient’s deals are freshers or first time deals, says Anand.

India Quotient picks a 10-15 per cent stake in the companies it invests in and will look for an exit once these ventures cross a certain revenue benchmark. “We want to stay as long as possible. We will invest up to $4-6 million per company. Now, with the follow on fund, we can go up to $8-9 million per company,” says Anand. From the third fund, the initial cheques may be around half a million (₹3.5 crore) and overall $5-6 million and another $5 million from the Opportunities Fund.

Anand says India Quotient will continue with its India thesis, looking at SaaS and tech companies too. “We think there is a lot of juice in India. We feel a lot of innovations are so good in India, that they will become global.”


Published on January 20, 2020

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