Insights and an analysis of their investment portfolio: In conversation with Mukul Singhal from SAIF Partners

SAIF Partners, is a sector and scale agnostic venture capital firm that has made marquee investments in the past in ventures like MakeMyTrip and JustDial. While eCommerce has been its favourite, sectors like education and healthcare are still missing in fund’s portfolio. Why is eCommerce leading the race? Have they considered investments in other sectors? How are the past investments faring? We caught up with Mukul Singhal, Vice President, SAIF Partners for answers. Excerpts from our conversation:

On their portfolio

The portfolio at SAIF is currently is a mixed bag of eCommerce (Firstcry and Inkfruit-Zovi merged business), iStream, the online streaming website, touted to be India’s answer to Netflix and Proptiger, an online real estate brokerage firm. We asked Mukul about their investment decision in each of the companies and their growth potential.

According to Mukul, Firstcry has scaled up really well. He emphasizes, “From a single digit market contributor to a large scale contributor, they are now the biggest player in the market in their category." In terms of numbers, Mukul tells us Firstcry has seen a growth of more than 400% in the last 12 months, and the fund has backed the venture with a $4 mn Series A investment and another round (together with IDG Investors) to the tune of $14 mn.

Inkfruit and Zovi merged early this year and talking about the same, Mukul says: “Early stage businesses take about 6-7 years to scale up. We are focusing on creating a market leader in private label eCommerce, where we see a huge opportunity, since there isn’t a clear winner in this space yet.” Was the merger initiated by them? Mukul says they merely supported the merger, but with two investments in similar capital intensive businesses, and a clear goal of wanting to build the ‘market leader’ in that space, the merger was perhaps a logical step.

iStream, says Mukul, is still at a very nascent stage. “Monetizing is still a problem there. They are working on advertisements, but it's too early to talk about it,” he says, elaborating that ‘iStream is still at a concept stage’. Online video streaming is among the fastest-growing segments in the digital media space, and SAIF is possibly waiting for iStream to get past the initial hurdles like distributing copyrighted content.

The fund invested in Proptiger because the startup had a good team and there was a huge potential they saw in the category. SAIF Partners (together with Accel Partners) is believed to have invested about $5 mn in Proptiger -- to support the vision of the startup trying to solve the problem of the unorganized real estate brokerage space.

Ecommerce industry, is it still blooming or is the bubble about to burst?

Mukul says they are very positive about the eCommerce industry. Despite a number of new entrants in the space, which has caused the money to dry up a bit, Mukul is confident the good players will survive in the long run. He attributes this primarily to two things, ‘consolidation of the market’ and ‘increase in online buying behaviour’. “No matter how much people talk about the crowded eCommerce space, the fact is everyone is shopping online now, and that number is only rising,” explains Mukul. According to him, the primary focus for eCommerce businesses ‘in these times’ should be capital management. “It’s a capital intensive business and the cash situation is difficult now, so one has to learn profitability," says Mukul.

Growth potential of education sector

One of the ‘rising stars’ in the startup space is the education sector, but it’s conspicuous by its absence in SAIF’s portfolio. We ask him if this is by design or have they not found ‘the’ startup, that they want to back? “The education sector has seen some good startups in the last year and assessments seem to be emerging as the winner,” says Mukul, hinting that they would be keen on investing in that space.

He emphasizes that online packaging of scattered content in the education sector is the need of the hour. “For most of us, going back to full time education is not practical, at the same time startups like Coursera (US based) are making it easy for everyone to get access to education,” says Mukul. The main roadblock for these startups, according to him is the lack of a reliable payment ecosystem and logistics, which he says will sort out in the course of the natural progression of the industry. The growing number of students and teachers, the viability to access education through these startups and the importance that Indians attach to educating their children are all indices pointing to a promising market,” says Mukul.

Healthcare industry, where does it really stand?

Finally on the healthcare side, Mukul thinks the healthcare space still has a long way to go. Besides the regulatory concerns, Mukul says, it's also difficult to monetize startups in that space. “Advertising is prohibited and secondly, it is a specialized field with limited resource pool,” says Mukul, explaining that there aren’t as many doctors and good engineers in the country, making the number of healthcare startups significantly lower. While Mukul admits some of the offline services like MyDentist are doing really well, he concludes saying online services in the healthcare industry will take time to make any headway.

SAIF is clearly in no hurry to make sector specific investments unless they see a potential market leader in the business itself. It would be interesting to see their steps ahead.

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