NASDAQ-listed online travel services firm MakeMyTrip (MMT) has recently floated a $15 million (around Rs 90 crore) innovation fund, which will seek to invest in early-stage ventures operating in the travel and tourism space, with a focus on mobile and IP-based startups. The company says that it is an additional prong to its inorganic growth strategy by pursuing M&A opportunities in the travel technology space. The firm will look at early-stage ventures with the fund, and depending on how they evolve it will look to acquire them.
VCCircle spoke with MMT co-founder Rajesh Magow to know more about the fund, its investment philosophy and more. Here are the edited excerpts:
Can you tell us about the new fund? How is it different from a traditional VC fund?
This fund is 10 per cent of our cash in the balance sheet. The plan is to look at potential targets and make early-stage investments in the travel sector, especially in the mobile-based firms. The nature of investment will be minority equity.
If you are looking at our fundraisings in the past, you can see that our main purpose was to expand inorganically and potentially invest in companies in the hotel and holidays space. It is part of our core strategy. Since our IPO, one part of the strategy has been that we will continue and keep looking at potential startups and acquire them. The new fund is an extension of this strategy.
Besides looking at niche areas in the hotel & holidays space, we would now look at very early- stage companies and back them. We may also invest in some IP initiatives and can add value. The plan is just to catch startups very early stage and back them. If they evolve, we will have rights to further invest or acquire.
Will you act as a strategic investor and acquire the companies you invest?
We don't want to overburden our startups at an early stage. We will keep our options open. We will be open to them having other investors on board. If we find a startup interesting, we would like to co-invest in the subsequent stages. We can also give them exit option or acquire them.
Will you also look at concept-stage startups to invest in?
We would look at ideation stage companies as well. However, we will not make angel investment in them since it is a very small ticket size. We will look to back startups in subsequent rounds. We are not a classical VC play either.
How many startups are you looking to back with the fund?
It all depends on what we find relevant. We don't have a target in mind per se. Right now, it is an allocation of $15 million. However, we don't want to cap it in that sense. The advantage for us is that we have not set up a separate entity and we hold the right to increase if required. We believe that $15 million is a good enough corpus for early-stage investment.
What will be the average investment size?
By definition early stage is not going to be a very big ticket size. We are open and we would be flexible in that sense. We don't want to put in very small amount, say Rs 10 lakh or Rs 20 lakh. That's the nature of angel investors.
Are you looking at ventures only from India or will you also back companies from outside the country?
We would be agnostic in that sense. However, we would be more biased towards mobile-enabled ventures. We can look at every part of the world. Largely, India is our key market. So the domestic market will get preference.
Have you identified any potential targets for investments yet? When are you planning to make the first deal?
Indeed, we haven't. Lots of inbound interests keep coming. Right now, it is just a start from our perspective. Now, we will begin our evaluation process.
There is nothing at this point in time.
Are you looking at emulating Info Edge (India) Ltd which has created its own internet properties but has exposure to other verticals as well?
Info Edge is a great inspirational company. However, our strategy is a bit different. Info Edge has gone beyond its verticals and has different businesses. They have invested in restaurant listing (Zomato), online insurance policy space (PolicyBazaar), etc. However, we are not going beyond travel, at least for now. We do believe that there are massive opportunities in the travel space itself.
You are present in multiple countries, including the US and the UAE. Which new markets are you looking to expand to?
We have made our moves already. Our key market beyond India is Southeast Asia and we do have presence there. We also have presence in Amsterdam and the UAE. Right now, we will keep ourselves into these markets.
(Edited by Joby Puthuparampil Johnson)