Sudhir Sethi, Chiratae Ventures - Focusing On Tech-Enabled Disruptions

Sudhir Sethi is the founder and chairman of Chiratae Ventures India Advisors. Chiratae Ventures (formerly IDG Ventures India) is a leading VC firm advising AUM of $ 470 M based out of Bangalore, India, with offices in Mumbai and New Delhi.

Since 1998 Sudhir and his team have advised on investments into 80+ firms across Digital Consumer, Enterprise Software, Fintech and Healthcare Sectors. Key investments include Flipkart, FirstCry, Lenskart, Policy Bazaar, Curefit, Manthan, Newgen, Nestaway, Agrostar, Yatra, Xpressbees and Mindtree Consulting amongst others.

In 2001, Sudhir was recognized by Red Herring as one of the leading venture capitalists in the country. He has been named among the Top Ten IT Professionals by Dataquest and by Bloomberg UTV as ‘’Visionary Venture Capitalist” in 2011. Sudhir has been featured in Subroto Bagchi’s book ‘’Zen Garden – Conversations with Pathmakers’’, in 2014.

In addition to leading Chiratae Ventures India Advisors, Sudhir has served on EMPEA Venture Capital Council (Emerging Markets Private Equity Association). He has served as Advisor on the Technology Innovation and Productivity Council of the GMR Group. He also served on the Executive Committee of Indian Venture Capital Association (IVCA), Investment Committee of UTI Ventures, on the Board of Ascent Capital and on the Board of Advisors at N.S. Raghavan Centre for Entrepreneurship, IIM Bangalore. With over 30 years of experience, Sudhir has served at various leadership positions at HCL, Wipro and Cyient, as well as Country Head of Walden International India. Sudhir holds a B.Tech in Engineering and an MBA Degree from FMS, Delhi.

In an exclusive interview with AsiaTechDaily, Sudhir says:

"Build a strong team and work culture, focus on achieving a product-market fit and constantly engage with customers to get insights. While interacting with founders, I typically try to identify their passion points and motivation behind starting up. I like to get their thoughts on the size of the market they are targeting, their path towards achieving a product-market fit, the scale that they are envisioning for their business and on building a right team that will drive their startup’s growth."

Read more about Sudhir Sethi, his thoughts on the startup ecosystem, his mantra on investment, and much more.

What background and domain expertise do you have? What makes you turn into an investor?

Sudhir Sethi: A large part of my early life was influenced by multiple cultures, having traveled to about 20 countries with my father, who was a career diplomat in the Indian Foreign Service. This experience in my early years made me extremely adaptable and comfortable with uncertainty and open to global culture. After completing my graduation and MBA in Delhi, I entered the industry at an interesting time when the Indian computer industry was taking off.  I got into software sales at a time when internet and software were becoming big and I worked with HCL and Wipro working in multiple roles over the years while experiencing India grow its IT services sector. I then joined Walden International as the Country head, when they were looking for someone with technology experience to lead their VC Fund in India. At that time, there were only very few of us in the venture industry including Draper International, Citi, and us. During the Walden tenure, we funded Mindtree consulting with stellar returns. 

Spotting entrepreneurial talent, evaluating business plans, asking probing questions, choosing the right entrepreneur to back and helping them scale up, at a time when technology-focused Indian entrepreneurship had just started up was very exciting for me.  Later in 2006, when I set out to raise capital on my own, I got the opportunity to meet Patrick McGovern who was then the chairman of IDG, a publishing behemoth. He had given me half an hour at the Oberoi in Bengaluru but the meeting lasted over two and a half hours. Later he got back and conveyed that IDG had decided to back me and my co-founder, TCM Sundaram with a $150 million commitment. That’s how the journey of Chiratae Ventures began (formerly IDG Ventures)  

What kind of startups/ sectors have you invested in? 

Sudhir Sethi: We focus primarily on tech-enabled disruptions across various sectors. Within the overall gamut of tech-focused companies, we categorize our investment sectors as Consumer Internet, Healthcare, Financial Services, Software, and Frontier Technologies. 

Within Consumer, our portfolio with the likes of Myntra, Flipkart Lenskart, PolicyBazar, Firstcry, Curefit amongst others which capitalized on the wave of e-commerce companies and scaled grounds up to become large companies. Some of our recent investments in the consumer tech space including Bounce (mobility), Nestaway (Co-living) and Rentomojo (rentals), Healthifyme (Healhtech), POPxo (woman’s content and community) and Curefit have disrupted their categories.

Our strong thesis in software has enabled stellar investments like Uniphore and Unbxd, getting their product-market fit right in the USA and other international markets. We have also focused on companies operating in the B2B space with Bizongo perfecting the managed marketplace model in packaging and Agrostar building into India’s largest agricultural inputs marketplace.  Peel-works disrupts the supply chain for FMCG to retailers.

The growing smartphone and internet penetration coupled with favorable Government intervention has created multiple FinTech models many of which are unique to the Indian ecosystem. We have gone on to invest in multiple category leaders in financial services, Policybazaar which has become the largest distributor of digital insurance in India.   Early salary, which is building the de-facto personal loan provider for subprime and new-to-credit customer base of India and Vayana Networks, which is building the largest network of supply chain financing ecosystem in India.

Within healthcare, the likes of Curefit, Healthifyme, and Sigtuple are spearheading the creation of a fitness movement within the country and internationally engaging healthcare from the perspective of wholesome wellbeing of the individual. Be it developing healthy eating habits or using revolutionary breakthroughs in AI and deep learning for medical diagnostics, these companies are taking an unprecedented approach in solving some of the deepest-rooted health problems of the country.

India is introducing increasing deep technical companies. Example – include Emotix (companion consumer robotics), Playshifu (AR / VR) amongst others.

How do you find the startups to invest in?

Sudhir Sethi: In our 13 years of existence, we have interacted with over 20,000 entrepreneurs and have made around 80 investments. We have followed multiple approaches to strengthen the quality of our deal-flow. Our team members are actively involved in engaging with entrepreneurs and other stakeholders in the entrepreneurial ecosystem. A plethora of deals are sourced through this network that the team has established wherein most of the entrepreneurs either reach out to us through referrals or we reach out to them through connects.

We, also keep looking out for interesting sub-sectors and try to build our understanding of newer spaces persistently. As we build conviction around certain sub-spaces, we reach out to different startups who might be addressing the problem through different approaches. Our team keeps on conducting targeted strategic programs and brand building exercises to identify and capture extremely high potential companies at an early stage and invest in them. 

What would be the core factors that you decide “Not” to invest in certain companies?

Sudhir Sethi: We typically engage with the founders and team to know more about their motivation and ensure a fit, do our internal research and meet industry experts to build our thesis around the market and perform extensive diligence on the business, financial and legal side before deciding on an investment. On top of this, we have an investment committee, which acts as the final layer of approval for a company. 

What is Chiratae’ s Investment Strategy?

Sudhir Sethi: Our firm’s strategy has and continues to be to back “Stellar Entrepreneur’’ many of whom are increasingly serial entrepreneurs. These stellar entrepreneurs for us to invest in must build companies by addressing and solving problems endemic to India using technology.

We look at whether the start-up has the potential to dominate India and scale globally.  Today 23 companies have a global footprint. We closely look at the possibility of some leading brands funded by us going IPO. Newgen and Yatra are two such companies who took the IPO route in India and the USA. 

What would be the KPI that you usually check about the startups’ growth? It may diverse in each industry like LTV, CAC, MoM etc. but will be helpful to understand more about your additional investment factors.

Sudhir Sethi: We at Chiratae believe that in early-stage investing, the winning startups are created by strong and decisive leadership teams working on capital-efficient business models while targeting the large and rapidly growing domestic and global market segments. A good business model is one that is rapidly scalable, has robust unit economics that helps the company achieve leadership within a definite time frame, and complements the disruption that the venture brings vis-à-vis competition.

In our conversations with the entrepreneurs, we try to understand a gamut of these aspects and not just a few just metrics to better decide if a business would be a winner down the line.  We have specific leaders for every sector and they have built a strong knowledge and network repository in their respective sectors. This helps both in the decision making as well as in helping our portfolio companies scale. 

What is your typical investment range and how many startups you invest in? Can overseas headquartered startups get funding from you?

Sudhir Sethi: We advise investments across early and late stages. However, the bulk of focus lies primarily in early stages, from Seed to Series A.  We have invested in over 80 companies across Consumer Internet, Healthcare, Financial Services, Software, and Deep-tech sectors. We have typically liked to support Indian entrepreneurs who are building something disruptive, either domestically or internationally from India. 

What are the main factors that startups fail as per your experience “AFTER” getting investment and how can they prevent mistakes in advance from your personal perspective?

Sudhir Sethi: There are times when certain startups may not succeed. This can happen if the disruption of the market or product has not been strong enough, the scale envisioned has not been achieved or if the startup has been unable to raise follow on capital. The best way for the entrepreneurs to ensure success is by surrounding themselves with a great team and constantly interacting with customers and other market stakeholders to stay updated with the changing market realities and consumer expectations. As investors, we assist our founders by connecting them with the right set of people in the ecosystem and identifying trends that will help the company scale faster.

What’s your advice to entrepreneurs who have a chance to meet investors like you? What are the top 3 questions that you always ask the founders?

Sudhir Sethi: The advice to entrepreneurs is simple – build a strong team and work culture, focus on achieving a product-market fit and constantly engage with customers to get insights. While interacting with founders, I typically try to identify their passion points and motivation behind starting up. I like to get their thoughts on the size of the market they are targeting, their path towards achieving a product-market fit, the scale that they are envisioning for their business and on building a right team that will drive their startup’s growth.

Right after being an investor like in the early days, there must be some tough times in building up the first fund along with building up a second fund or giving back the good returns to those LPs. If there is any similar tough time like this, please tell us more about it and how you (or your team) overcome the difficult times.

Sudhir Sethi: We had raised our first fund with anchor investments of $150Mn from Patrick McGovern led IDG and Bruno Raschle, led Adveq. While we were on the brink of raising our second fund a few years later, IDG as a global conglomerate got dissolved. However, with a strong belief in my team and our investment thesis, we set out to engage with multiple domestic investors and family offices in India. We believed that domestic investors would have a strong conviction in backing Indian entrepreneurs.  Today Chiratae Ventures focusses on backing stellar entrepreneurs who can build India market leaders with the potential to go global.  Today we manage over $ 500 M AUM.

What’s your general thought about the term “Global” and What are the important factors (criteria) for local startups to consider for international expansion?

Sudhir Sethi: The term Global denotes opportunity. We are cognizant of the fact that India and the world is changing rapidly and at scale. We believe that entrepreneurs emerging out of India today have the aspirations and capability of tapping into the large global opportunity and disrupting the global markets. We position our orders to be the catalysts to support this entrepreneurial growth and change.

We have an ample number of examples who exist today within our portfolio, like Healthifyme, CureFit, Lenskart, Uniphore, Unbxd,  Emotix, Cropin PlayShifu, Firstcry, to name a few, that started off with an India-first mindset and then took off on a global platform.  This move is driven through a focus on incorporating key learnings from within the country in terms of product-market fit, envisioning the scale and pace of growth, understanding the strengths and capabilities of the team and spending time in understanding the mindset of the international consumers.

What kind of startup or tech industry will impact the world in the future like 2-3 years locally in your view?

Sudhir Sethi: If we look at India, the rapidly growing digital penetration, 300M new internet users emerging in the last few years, cheapest data prices across the globe and increase in disposable income across income sects, will in the near to mid-term, lead to the emergence of multiple whitespaces which remain untouched by technology today.  As these trends kick-in, we, at Chiratae, are extremely bullish on companies addressing e-commerce for the next 500M internet users, digitizing mobility for the mass market, aggregating whitespaces in traditional fragmented B2B industries and many more evolving trends and technologies.  

What are the one or two things that you would do differently if you could go back to 10 years ago?

Sudhir Sethi: I think I would trace exactly the same path because the journey has been filled with great interactions, experiences, and learnings. Today, we at Chiratae Ventures are proud of our portfolio companies that we have worked with over the years. They have gone on to become disruptive category leaders while some have created categories of their own. They have grown exponentially over the years while adding multiple jobs in the process and creating a meaningful impact on customers across India and abroad. They have also set forth massive examples for other entrepreneurs in the ecosystem to emulate and learn from. This positive impact-driven on the overall ecosystem and society is what drives our team every day.

As you know, our company group name is “beSUCCESS”, what’s your definition of the term “success” as an investor or as an individual human being?

Sudhir Sethi: As an investor, success would entail supporting and being a part of the growth journey of startups which go ahead with disrupting their categories and becoming market leaders. In Venture Capital, success is best measured over the years and not over months or days. It is hence important to stay patient, constantly keep learning and revising our thesis as a team and be committed to identifying and supporting the game changers in the startup ecosystem.

Who are the people who have advised you over the years?

Sudhir Sethi: The advice from our advisors Mr. Ratan Tata, Mr. Kris Gopalakrishnan, Mr. Bruno Raschle and Mr. Manish Choksi has been key to our success.  One thing I would certainly do differently is growing faster.  India presents a stellar opportunity to entrepreneurs and Venturepreneurs like us go grow at an even more rapid pace.

You can follow Sudhir Sethi here.

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