Does e-commerce investment frenzy look like a land grab or is it fundamentals-driven, VCs debate
In the second episode of DealStreet, a VCCTV show where we go beyond news, our panellists discuss and deliberate on the topic: "India attracts world's best tech investors - what next?"
Our panel comprises Mohan Kumar, Executive Director, Norwest Venture Partners, a global venture capital firm managing about $5 billion; Rehan Yar Khan, a prolific angel investor who has just raised a debut fund of $50 million, Orios Venture Partners; Samir Kumar, managing director at Inventus India Advisors which manages up to $200 million; Klaas Oskam, MD at boutique investment bank Signal Hill Advisors; and Pradeep Tagare, Director of Intel Capital, the corporate venture capital arm of Intel Corp, which has committed more than $300 million across technology investments in the country till now.
Kumar of Norwest Venture Partners believes that the e-commerce story, the GMVs being recorded and the transactions are for real. He says the valuations that look expensive now will look cheap in two-three years, for the category leaders, of course, on the presumption that they execute.
Khan of Orios Venture Partners, who seconds Kumar's views, is quick to add that a lot of high pedigree investors like Softbank & DST are represented by high calibre professionals, and data are available for them to see.
So, when there are such savvy and world's best tech investors investing in India, does it attach some bit of merit to what otherwise looks like a bubble-in-the-making phenomenon?
Kumar of Inventus Capital adds that even if one were for a moment to consider that this supply of unprecedented foreign VC interest were to dry down, there were companies that were built in India before them and will continue to be built post that - perhaps, they won't be $7 billion or $10 billion in valuation but could probably be $0.5 billion-$2 billion. He cites the example of Just Dial, a homegrown consumer internet company which made a successful listing at the Indian bourses.
Oskam of Signal Hill Advisors points out that the e-commerce phenomenon in India is still young.
However, Tagare of Intel Capital brings a contrarian view arguing that what is happening in the Indian internet sector is akin to a land grab being driven by 'momentum investors' who just want to make sure that they are present in these categories and companies before it's too late.
And like most land grabs, it leads to a classic bubble-like situation. He also adds that there are all kinds of investors - family offices, pension funds, hedge funds - who have little clue of what's happening in India and they are just following suit ignoring many glaring risk factors.