Navigating the Indian investment landscape: Insights from Techsparks 2023

As the world's third-largest startup ecosystem, India has witnessed a remarkable surge in entrepreneurial activity over the past decade. And one of the most critical drivers of success is the strategic utilisation of domestic capital. Key stakeholders from various spheres of the startup ecosystem are strategically channelising indigenous resources to empower and uplift the burgeoning startup community. This shift is not only reshaping the investment landscape but also fuelling India's narrative of economic growth and self-reliance.

At a panel discussion titled ‘Putting Indian capital to work for Indian startups' on Day 2 of TechSparks 2023 Bengaluru edition, industry experts shed light on the dynamics of the Indian investment ecosystem and the potential of domestic capital in India. The panel featured Rahul Jain, President and Head, Nuvama Wealth, and Vikram Gupta, Founder and Managing Partner, IvyCap Ventures. The session was moderated by Mayuri Ramanan, Senior Anchor at YourStory.

Strategic utilisation of domestic capital

Reflecting on his journey, Gupta highlighted the abundance of domestic capital available in India, emphasising that institutions, including banks, insurance companies, and SIDBI, actively invest. This foundation led to the strategic decision at IvyCap Ventures to focus primarily on raising domestic capital, leading to consistent success in surpassing fundraising targets.

"Our initial fund target was Rs 200 crore, but we successfully raised Rs 240 crore. Subsequently, for our second fund, aiming for Rs 500 crore, we surpassed expectations by raising Rs 530 crore. We're quite fortunate and blessed actually, to have received support from 27 prominent Indian institutions, including major banks and insurance companies. Additionally, we have cultivated a strong relationship with IIT alumni, serving as our anchor investors," Gupta said.

Jain talked about the evolving landscape driven by behavioural shifts and the transformative role of the internet. The Indian economy, with a savings pool of nearly a trillion dollars, has traditionally favoured investments in real estate, gold, and fixed deposits. However, the paradigm is shifting towards mutual funds, SIPs, and equities, reflecting a growing appetite for newer avenues.

"How does the inflow of domestic capital benefit startups? It aligns with our pursuit of self-reliance or 'aatmanirbhar,' as we reduce our dependence on foreign investments, which currently account for 85% of the total. This trend is set to grow as India is underinvested across various asset classes compared to the global landscape, ensuring a consistent and robust flow of funds,” he added.

Shifting investor paradigms

Speaking about helping clients make smart decisions when it comes to investing with domestic capital, Jain highlighted their approach centred on asset allocation. By offering a spectrum of options like venture debt funds, venture capital funds, and innovative investment products, Nuvama aims to cater to a changing investor profile. This includes individuals seeking higher returns, alongside those preferring stable, long-term investments.

“At Nuvama, we have always been ahead in terms of offering ideas, because the markets have also been dynamic. For instance, back in 2017, we pioneered the introduction of a pre-IPO Fund, providing investors with an opportunity for late-stage investments leading up to an IPO, generating substantial returns. In our present framework, we've diversified our offerings to include venture debt funds and are actively exploring the launch of a venture capital fund,” Jain said.

Jain shared insights on potential industries and segments that hold promise in the near future. From an investment perspective, he pointed to the areas of payments, technology, and fintech. He underscored India's global influence in these fields, citing the widespread adoption and diverse applications. Notably, he identified the untapped market of unbanked individuals lacking formal credit access, presenting a prime opportunity for fintech intervention. Additionally, he highlighted the thriving Direct-to-Consumer (D2C) and consumer brands sector, fuelled by India's robust consumption patterns, with a substantial portion of GDP directed towards consumer spending.

Integrating Sustainable Development Goals

Shedding light on how the Sustainable Development Goals (SDGs) are integrated into their investment approach, Gupta said that IvyCap Ventures not only contributes to a sustainable future but also observes a positive correlation between SDG integration and financial returns.

“Investors who adopt an SDG-oriented approach in portfolio building often achieve significantly higher Internal Rate of Returns (IRRs) compared to those who don't. This revelation challenged my previous belief that sustainability primarily revolves around making a positive impact, potentially at the cost of returns. Recognising this, we shifted our focus towards integrating SDGs into our investment strategies,” Gupta shared.

Both panellists acknowledged the government's proactive approach to seeking feedback from industry stakeholders. While implementation of suggestions may take time, the positive intent bodes well for a more collaborative and innovative investment environment.

The consensus among panellists was clear: India's potential is vast, and with the right strategies and collaborative efforts, it can achieve remarkable growth in the domestic investment ecosystem.