Investments Churning the Consumer-led Market

Date:   Wednesday , December 30, 2009

DFJ focuses on two broad investment themes in India: the first focuses on the customer-led demand space, which includes sectors and large markets with robust growth such as TMT (Technology, Media, Telecom), healthcare, education, retail, financial services etc., and the second focuses on cleantech. The first space includes a broad variety of sectors which are experiencing rapid growth with the end-customers growing the market largely due to untapped potential. This is particularly relevant for India. The second space is a natural bias that DFJ has towards cleantech about a quarter of our portfolio is dedicated to cleantech, including that in India. Apart from the broad investment themes, in India DFJ is targeting companies across different stages and lifecycles. The investment focus is size agnostic and we are increasingly looking at companies which are in the mid-to-growth phase, apart from those in the seed to early stage.

India is still fairly nascent on the high-end IP development and product innovation curve as compared to the Silicon Valley. However, we are seeing some encouraging signs. Companies have come up with solutions directed towards the Indian market and also have a global application. These solutions can be across sectors, removing demand-side or supply-side inefficiencies, targeting consumers and/or enterprises. This is a very encouraging trend in moving up the product innovation curve. Differentiation will play a key role here as multiple companies come up in the same space.

There are three broad metrics, called the 3Ts Traction, Technology and Team, that we internally apply to gauge a company and that entrepreneurs can use to rate their ideas.

Traction: As a company, ample thought should be given to how large the market is, what is the market potential, and how quickly can the solution scale.

Technology: What is the company working on or how will the company scale with the use of technology.

Team: This is the secret sauce that makes all the moving pieces fit together. A complementary and well-oiled team makes the best company tide over the worst of times.

Also, venture capital is not the end-goal in the growth of the company, but a good milestone to have. Nothing can replace the revenue generated from customers and cash flow generated from operations.

Last but not the least, entrepreneurs are compulsive risk-seekers and passionate risk-takers. For every ten people who do not understand and/or support, there will be one person who will. Let the judgment of ten not be a deterrent, and let the sound advice of one be well heard.

The author is Analyst, Draper Fisher Jurvetson India