TechSparks 2019: Investment is part art and part science, says Munish Varma of SoftBank
SoftBank Investment Advisers, a venture capital firm specialising in growth capital and late-stage startup investments, has backed numerous successful startups across the world and in India. SoftBank has deployed $10 billion in the Indian ecosystem, including Paytm, Oyo, Delhivery, and FirstCry, among others, and is now one of the biggest investors in Indian tech-enabled startups.
But how does SoftBank decide which tech startups to back?
Munish Varma, Managing Partner of SoftBank Investment Advisers, said: “We look for companies that use data in a smart way and fundamentally change the life of consumers, business, and industry.”
Munish Varma, Managing Partner, SoftBank Investment Advisers
Speaking to YourStory Founder and CEO Shradha Sharma at TechSparks 2019, Munish said that machine learning along with increased and cheap compute power was helping capture the enormous amount of data being generated across the world today.
Once processed, this data can help transform a lot of businesses and industries, and remove pain points for consumers as well as small and large businesses, he said, further specifying what SoftBank considers before investing in startups.
“We look for companies that have products and services that can make a difference to consumers or businesses’ lives. We look at the size of market within and outside India. Finally, we look for qualities like courage, grit, enthusiasm, nature, and energy in the founders.”
The Vision Fund is a late-stage fund and Munish explained they are looking for businesses that have product-market fit and are already doing well in their chosen space. “With our capital, they can accelerate their rate of growth and expand to different geographies,” he said.
He added that IPOs were an important one-time decision in the lifecycle of a company. “The Indian market hasn’t seen many new-age companies getting listed. But we will see them soon.”
Talking about valuation in startups, an issue that has come into the limelight after the botched WeWork IPO and decline of Uber’s share price, Munish said that valuation was just one metric to judge a startup. “Growth rates, contribution margin, EBITDA, revenues, and others are other metrics to judge a company. It is wrong to judge a company just by one metric,” he said.
Bullish on India
Turning his attention to the Indian economy, he said there was no shortage of demand in India, at the right price point. “What India is constrained is by the supply side. There is fragmented supply,” Munish said, adding that if one has a platform that sits in the middle and consolidates the fragmented supply, it would be successful.
“If you go back a few years, business models came to us. Now, business models are getting exported from India. When we find a local solution, we think it can be a solution for the global market.”
When it comes to scaling a company, Munish said the biggest challenge a startup faces is when it plans to hire. “How to hire, who to hire, and hiring different folks at different levels is vital as is preserving the culture of the company,” he said.
He added that a large number of their portfolio companies, including Delhivery and Ola, were able to grow fast because the management was able to hire, recruit, and retain those talents.
Explaining further, Munish said, “We manage money on behalf of our limited partners. Investment is part art and part science. Our job is to try and find companies and businesses solving problems, pick the right entrepreneurs, and back them to grow.”
Munish ended the conversation by saying that SoftBank was “positive on the outlook for India. We are very excited to meet some of the entrepreneurs here”.
(Edited by Teja Lele Desai)
YourStory's annual extravaganza TechSparks brings together the best and the brightest from the startup ecosystem, corporate world, policymakers and, of course, the investor community. Over the past decade, TechSparks has grown to become India's most loved tech and startup platform for knowledge sharing and networking. A big thank you for all your support over the years and a big shoutout to our sponsors.