Meet early-stage VC fund 8i Ventures that bets on startups building for India
8i Ventures has two main asks before investing in any startup—a scalable business model and a focus on the Indian market.
The Mumbai-headquartered venture capital (VC) firm, led by Vikram Chachra and Vishwanath V, has been backing companies in just two segments - fintech and consumer tech.
The background of these two founders plays a big role in how they go about with their investments. Vikram started his career in the financial services industry and for the last two decades, he has been investing in various kinds of startups. On the other hand, Vishwanath began his career at Unilever and was later with furniture marketplace Urban Ladder.
8i Ventures received the SEBI licence in November 2018 and began investing in 2019.
Its first fund, which was around Rs 100 crore, saw around 12 investments, including Slice that turned unicorn last year, M2P Fintech, and Blue Tokai, to name a few.
Vishwanath strongly believes that India remains a hugely under-penetrated market in terms of products and services and there is vast opportunity for startups.
In a conversation with YourStory, he says, “We look for startups that have strong customer insights and have a model that has potential to scale. However, the scale factor may not be obvious in the early days.”
The two founders are constantly scouting for startups that have innovative solutions to make one's life easier on a day-to-day basis.
In the fintech segment, 8i Ventures is focused businesses building underlying infrastructure that can help others create a digital business. For example, M2P Fintech, which created an API layer to enable all kinds of digital financial transactions.
“We went behind these enablers who built the infrastructure, which enabled small businesses to go digital,” says Vishwanath.
Similarly in the consumer tech or direct-to-consumer (D2C) space, 8i Ventures focused on startups with strong consumer insights like coffee brand Blue Tokai and nutraceutical brand Bbetter.
8i Ventures typically invests at the seed stage as it prefers to be the first institutional investor and it can go all the way up to Series B round. It typically invests around Rs 3-4 crore in the initial stage.
Vishwanath says, “At early-stage, founders need a believer rather than an investor and remove a lot of fundraising headaches.”
Earlier investments are also more about instinct unlike later-stage investments where startups have a certain amount of maturity and business metrics to show.
The firm recently raised its second fund of $50 million (approximately Rs 385 crore), and plans to issue cheques of about $2 million (approximately Rs 15.4 crore) in 12-15 startups, at roughly one deal a quarter.
The current slowdown in funds and increasing layoffs also offers important lessons for the ecosystem.
Vishwanath notes that it is quite easy for startups to build superior customer service for their products or services but it becomes very brutal when it comes to building a profit and loss (P&L) model.
“Building customer experience is easy but going further into creating a sustainable business model is a huge transition,” he says.
He believes that many startups fail to make this big leap as all they are focused on pushing growth without having the “profit tap” with them “which can be turned on anytime”.
“After a certain scale the trick is to survive and a lot of startups do not have the playbook to profitability,” says Vishwanath.
Despite the subdued mood in the startup world, 8i Ventures remains very optimistic about the future due to several factors.
Firstly, this VC firm believes the Indian population is still making do with basic technology infrastructure and there are enough opportunities to provide better quality products or services through certain innovations.
Secondly, Vishwanath has seen a steep learning curve among the founders who are much sharper and more aware of the external environment besides learning fast from what others are doing.
Lastly, the economy is all set to expand further with higher GDP and this is only going to increase the reach of digital platforms.
Vishwanath has this one piece of advice for all startup founders. “Make sure you are funded for a couple of years…one should not be holding an empty wallet when the market is dry.”