Despite bleak investment environment, this VC fund is bullish on B2B startups
The coronavirus pandemic, which shuttered businesses worldwide and led to a crash in public markets, has made venture capital funds extremely cautious when it comes to spending.
But even as startup funding slows down in the aftermath of COVID-19, Irvine, California-based Season Two Ventures is scouting for potentially impactful business-to-business (B2B) startups that can help propel a second wave of growth led by technology.
Season Two Ventures is a $100 million early-stage VC focused on deep tech/AI-enabled B2B solutions for large businesses in healthcare, fintech, retail, energy, and utilities. The fund aims to invest between $1 and 3 million in B2B startups and partner with founders who have unique insights, from inception through all phases of growth.
It aims to provide global market access to companies with the potential to solve the unmet needs of 1,000 enterprises worldwide.
“We will continue to invest in Indian B2B startups as [entrepreneurs in] the country have shown growing promise of creating impactful solutions that can be applied for the whole world,” says Sajan Pillai, Founder of Season Two Ventures, in a conversation with YourStory.
Sajan was formerly CEO of UST Global, a technology services company where he is credited with growing the firm from a 20-member team to more than 25,000 people.
Season Two Ventures has already invested in about five startups in India –Technologies, , , Svast - and its involvement typically spans the seed to Series B stages, around four to five years. The fund believes that its strength lies in adding value during the early stages of a startup.
Opportune time for investments
According to YourStory Research data, funding in Indian startups stood at $4.16 billion for the first six months of 2020, a decline of 14.5 percent when compared to the same period in 2019. The real deceleration started in the second quarter of 2020 as COVID-19 made a deeper impact and funding witnessed a steep fall.
But despite the bleak funding environment, Sajan is confident about going ahead with his plan of investing in startups. He believes this is an opportune time to invest in B2B startups in India as these new-age companies have all the essentials to create the right impact.
He says the world is going through a fundamental change due to COVID-19, and consumer behaviour has changed forever, with technology being the only enabler.
“India will become a prominent destination, and come out with solutions in digital services, data privacy, cyber security, and more,” Sajan says. “We might have the second great technology opportunity after the first wave of IT Services.”
Focusing on impactful startups
The key focus areas of Season Two Ventures as far as startup investments are concerned are healthcare, financial services, retail, energy, and sustainability. “We are looking at startups that can deliver impactful solutions,” Sajan says.
The big advantage Season Two Ventures has is that it is headquartered in the US and offers cross-border functionality, giving Indian B2B startups a stronger entry point into a large market like North America.
“Having led a startup myself, I know that entrepreneurship is not only about how to succeed but also about how one recovers after a failure,” Sajan says.
He believes that the experience of the 14-member team at Season Two Ventures, which includes both investment and advisory roles, will be an effective guide for the startups.
Connecting with global enterprises
The critical thing for B2B startups in India is to get access to large enterprises, which is typically a hard nut to crack. Many B2B startups in India struggle to break into the list of global 500 companies and also take a longer time to reach a revenue of $10-15 million.
Typically, a network effect has been seen among enterprises when they adopt or buy a new technology solution. So, executives from a particular industry will rely more on peer inputs than external voices.
Season Two Ventures also bring in the heft of the CXO network connect, making it easier for B2B startups to get access to enterprise clients.
“Only ideas are not enough as the entrepreneur needs to have incredible knowledge of the market,” says Sajan, adding that it is critical for B2B startups to have execution skills.
Sajan strongly believes the timing is right to showcase Indian B2B startups to the world, much like what Israel has done over the last decade.
Season Two Ventures has till now been primarily engaged with startups in Bengaluru, Kochi, and Telangana. It is now looking at other regions such as Mumbai, Chennai, and NCR.
Sajan believes a confluence of things is putting India in a position of advantage, including the digital platform culture, experience of dealing with global enterprises, and large technical talent pool.
“India enjoys a high degree of trust when compared to other nations for overseas investors,” Sajan says.
(Edited by Teja Lele Desai)