The genesis of venture capitalism in India has its roots planted firmly since 1986 with economic liberalism. The turning point was when startups in Silicon Valley convinced foreign investors that India had immense talent and could contribute to India’s economic growth. The cumulative value of private equity and investments stood at 232.4 dollars, more than twice the value recorded in the preceding decade.

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Delving deep into the growth of investments at a CAGR of 19% to 47.6 billion dollars in 2020 as compared to the last decade and the evolving role of venture capitalists in India, ‘Building It Up With Bertelsmann’ brings together leaders and industry experts to discuss this and more in a session moderated by Shruti Mishra, Deputy Editor, CNBC-TV18. Our esteemed panels comprise:

Pankaj Makkar, Managing Director, Bertelsmann India Investments

Ashutosh Sharma, Head of Investments India, Prosus Ventures

Deepak Gaur, Partner, Elevation Capital

In 2021, private equity firms and venture capital firms invested 63 billion dollars across 1202 deals in Indian companies, registering a 57% rise over the 39.9 billion dollars invested in the previous year. Talking about the evolving role of venture capitalists from investing in early-age startup ecosystems to generating marquee exits, Pankaj Makkar said the act of venture capitalists has gone through a significant transformation in the last decade. Earlier, there were selected funds in the ecosystem that shaped the space. But now, there's been considerable development. The number of venture capitalists, deals, support to invested companies - increased significantly.

He also sheds light on the rise of venture capitalist valuation. What used to be a valuation at a Series B is now looking as a valuation at Series A. The market has deepened, and the founders of the investment have also seen a 3x increase.

Venture capitalist valuations have surpassed that of China’s in the first quarter of 2021 itself. Talking about capital infusion changing the game for venture capitalists, their positioning, and role, Ashutosh Sharma says that it’s not surprising at all. The India macro story has all the ingredients that lead to an outsized return. Demographics, the proliferation of data, technology, robust entrepreneurial ecosystem, GDP growth has played a crucial role in this capital infusion.

The market is seeking a new equilibrium because of the increase in the supply of capital in the last year. It’s reflected in deal cycles and valuations. As players in this ecosystem, they need to up their game. The risk-reward profile has seen a drastic change. The choice is to accept this new profile or move it.

Elevation Capital invested earlier in their cycle in startups. Talking about the role they play when they come on board, Deepak Gaur shares that when they come in as a seed-stage investor, it’s a formative stage where the product fit has not happened. The best classification would be that they come in as full-scale partners with a comprehensive alignment of interests. They both complement and supplement the founding teams in a big way.

Understanding the product to take it out in the market is what the founding team does. Starting from the hygiene stage - putting governance processes in place, opening the company to their network of founders and investors, leveraging their relationship across a portfolio of experience of how a company can attract stronger talent, build a brand, and introductions to customers is what they bring to the table.

Venture capitalists work closely with their portfolio founders. Giving his insights on this unique relationship, Deepak Gaur said that the relationship is an 8 to 10-year view, if not longer. Apart from the help you provide them, the aspect that stands out of such a tremendous partnership is that you become good friends. Entrepreneurship is a very lonely journey. However, they help the founders if they’re grappling with issues.

Venture capitalists are like professional spouses to the founders. It’s imperative to have the right set of people around you aligned with what you’re building. Enjoy the journey and not just the destination. Have a long-term view and the right mix of people to stay ahead in the game.

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First Published:Feb 23, 2022 12:30 PM IST