Suparna Goswami, Forbes  

Bengaluru, 17 January 2017

The past week saw India’s Flipkart appointing a non-founder CEO who is also part of Tiger Global Management, the online marketplace’s largest investor firm.

A few days later, Snapdeal, another large Indian online marketplace, brought in real estate firm Housing.com’s CEO Jason Kothari as its chief strategy and investment officer. This news comes on the heels of a recent merger between Housing.com and real estate brokerage firm Prop Tiger, which has raised funds from SoftBank – a major investor in Snapdeal.

Are we seeing a pattern of investor overreach into startups in India?

With this latest SoftBank connection, many are starting to lament how young businesses in India are facing excessive interference from venture capitalists. Some experts tracking the ecosystem have written about the number of years left before “impatient investors take control of the startups” – but how well founded are these suspicions? I spoke with a few local venture capitalists for their side of the story, and perhaps unsurprisingly, many were upset with the media for “sensationalizing” a trend that’s not quite the harbinger it appears to be.

Dev Khare from Lightspeed India Partners Advisors, a VC firm, says things shouldn’t be viewed as black and white. “Just because Flipkart announced a professional CEO who happens to have an association with its investor firm Tiger Global Management doesn’t mean [its] founders no longer will have a say in the company,” says Khare.

“In the end it all boils down to making money. If a company isn’t doing well, the equity that VCs and founders jointly hold will have no value. I don’t see this as a battle between VCs and founders,” he says.

For other VCs, it’s all about the individual needs of a company, and labelling the investor’s role as “interference” is the wrong way to approach the issue.

Tarun Davda, managing partner with VC firm Matrix Partners believes that all investors look out for the wellbeing of their investment, no matter how that presents itself.

“We’re helpful when asked for advice but never fool ourselves into believing that we know more about the business than the founders,” says Davda.

He believes there are often cases where founders feel they can better serve their company by bringing on a more experienced CEO, particularly where founders may lack the experience or skills to take a company ahead through all stages of evolution. Davda provides the example of Google, probably the biggest startup success story of our generation, which had to bring in Eric Schmidt as its CEO early in their journey.

Devangshu Dutta, managing partner of venture accelerator PVC Partners, chalks up the media reaction to local culture. Dutta says Indians have a habit of looking down on founders for handing control over to an outsider.

“There is no harm in accepting that sometimes a company needs a new person at the helm to turn around things,” says Dutta. “In India, we tend to take these things as failures; but [they] could be the outcome of well thought out strategic decisions.”

And in reality, for many startups the Flipkart and Snapdeal episodes are a non-issue; founders are aware of their capabilities and strengths, and their limitations.

Ganesh Shankar, founder of FluxGen Technologies, an IoT startup, is fine to pass on the reins of the company to a person who doesn’t alter the company culture too much. “I guess I [would] be glad if I can find a person willing to take on the top leadership role provided he or she has the experience to scale the business,” he says.

Others view it as a matter of practicality, that these seemingly hard decisions are part of the fiduciary responsibility of the VCs towards their LPs.

Pallav Pandey, CEO of startup BroEx, doesn’t believe that VCs interfere in a company’s affairs unless they’re forced to. “Both founders and investors are stakeholders and after having given enough time to founders [to succeed], if it is inevitable that a new CEO needs to be brought in to steer the company forward, then it should be done,” he says.

However, not all agree with this view. One startup founder I spoke with, who asked not to be named because of the potential harm to his business’ relationships, says the reality of a boardroom meeting is darker than what’s usually projected.

“Founders and VCs are fair-weather friends. One can’t expect things to be always amicable. The main flip side of raising huge funds is that somewhere down the line a founder’s opinion gets diluted. That’s a hard reality,” the founder says.  

(Published in Forbes)

Neha Tyagi & Sagar Malviya, The Economic Times 

Mumbai, 3 January 2017

Leading Indian womenswear brands bucked the slowdown trend on the back of mostly younger consumers shifting from tailor-made to ready-to-wear stylish designs at affordable rates and discounts. Makers of ethnic brands in the country — TCNS Clothing (maker of W and Aurelia brands), BIBA, House of Anita Dongre (AND and Global Desi brands), and Ritu Kumar — all posted 14 per cent-64 per cent year-on-year jump in their revenues last fiscal, even as the overall Indian apparel market slipped to single-digit growth at 8 per cent.

Sales of these four companies put together equals that of the apparel sections retail chains Shoppers StopBSE -0.51 % and Lifestyle International that sell around a hundred brands, and are more than Tata’s Westside. In fact, with combined sales of Rs 1,600 crore in the year to March 2016 as per their annual filings, these companies have nearly doubled their business in the past two years.

“Consumers no longer are stuck to the idea of compartmentalising ethnic wear and western wear as strictly as we think it is. There is a growing market for contemporary Indian wear, which cuts across all product segments,” said Anant Daga, CEO at TCNS Clothing.

The maker of W and Aurelia brands, which posted a 65 per cent growth in sales for FY16 at Rs 591 crore, is expecting a threefold jump in revenues in five years.

Experts say there’s good growth opportunity as branded women’s apparel is an extremely under-penetrated category and that is changing gradually.

“The number of women taking up ready to wear earlier was smaller, which is now picking up. Also, younger women are preferring to go out wearing something which addresses both traditional aesthetic and the work environment,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

This growth potential has helped TCNS Clothing, BIBA, House of Anita Dongre and Ritu Kumar — which are nearly two decades old or more — attract private equity investments in the past three years. While Everstone Capital picked a minority stake in Ritu Kumar for Rs 100 crore ($16.6 million), Warburg Pincus and Faering Capital invested about Rs 300 crore to buy a stake in BIBA Apparels. General Atlantic has picked up a significant minority stake in AND Designs for around Rs 150 crore. More recently, US-based private equity firm TA Associates invested about Rs 937 crore in TCNS Clothing.

Experts said companies can now easily support changing trends with investment in product innovation and reach. Indian wear, initially largely restricted to the older age segment, now finds acceptance among younger consumers.

That’s because most companies now sell fusion clothing — a mix of modern and traditional wear — instead of just ethnic, which are reserved for special occasions.

Another growth trigger is growing popularity of online shopping that has helped these brands reach out to customers in smaller cities. Online retailing now accounts for 10-15 per cent of their sales.

While online added to overall sales, companies aren’t necessarily enthused because of discounts. “We have been able to curtail ecommerce growth to a large extent as we believe in selling full price merchandise rather than going into the discount,” said Bijit Nair, president – retail at House of Anita Dongre. “But the new found availability due to geographical presence is helping too,” he said.

Siddharth Bindra, MD at BIBA, said, “We have got bigger stores and more locations. Our product ranges have evolved. We also brought larger heavier collections and collaborations with designers which did very well.” BIBA posted sales growth of 15 per cent at Rs 441crore in FY16.  

(Published in The Economic Times)

Shipra Srivastava, Retailer  
New Delhi, 30 December 2016

The Gurgaon-based  cashback  and  coupon website CashKaro.com  which has raised Rs 25 crore in its Series A funding round from Kalaari Capital in November 2015, and  a very small amount of investment  from Ratan Tata in January this year, is very close to achieve its break-even.  

In an exclusive conversation with indianretailer.com, Rohan Bhargava, Co-founder, Cashkaro.com, said, “We are very close to our break-even. In fact, we should be profitable in next 18 to 20 months.” The raised funds are being utilised to ramp up marketing, technology and expanding the human resource.  Currently, the company has the human resource of 75 people.  As of now, CashKaro  is earning minimum 10% commission of every transaction that happened via Cashkaro collaborated e-retailer.

The company is scouting for suitable investors to support its future campaigns.  “We would be keen for Series B and C funding from the investors who are sufficiently funded to support us in our future campaigns. We are also looking for expansion in to new countries,” informed Bhargava.

Presently, the company is registering ten to twenty thousand transactions per day, and has tied up close to 1200 online retailers including category leaders like Flipkart, Amazon, Yatra, makemytrip, and so on. The company is in talks with many offline retailers to initiate a programme that would offer an add-on value to customer on existing loyalty programme that is run by the retailer.

Speaking on same Bhargava said, “In next two weeks I will be able to give provide more information on same. We are in talks with many offline retailers.  Again, our offerings will be add-on to existing loyalty programme offered by the retailer.  We would be working with retailer on making customer experience seamless. Our motive is, for customers, the speed of getting the cashback should be great. Same time, the entire exercise should fetch value to retailer. On top of that, the specific needs of the retailer should be addressed.” 

The company is also very bullish on tier 2 expansion. Currently, 40 percent of its traffic comes from small towns. The company is also looking to tap unorganized players (in retail segment) from small towns.

No doubt, affiliate marketing sites like CashKaro can help to maintain a diversity of sources for customer traffic in a cost effective way. In fact, in some cases affiliate traffic may be better as affiliate sites usually already provide some context to the product (for instance, product comparison websites or lifestyle blogs), so the traffic is more of qualified leads.

“Currently, with footfalls and spending being affected by a muted consumer sentiment, cashback deals and coupons can help to create not only traffic, but conversions for brands,” shared Devangshu Dutta, Chief Executive, Third Eyesight.

“However, in the longer term, the business environment for affiliate websites is tougher – over time, with fewer online players to send their traffic to, commissions may be squeezed, margins slabs could be changed, and the period for expiry of a referral may be shortened. Therefore, expanding the offline footprint and deeper penetration into the market is vital for the sustained success of an affiliate marketing player,” he summed up. 

(Published in Retailer)

Alnoor Peermohamed, Business Standard

Bengaluru, 28 December 2016

The year 2016 will go down in history as a tumultuous one for India’s new economy companies that utilise the reach of the Internet to do business. The year started off on a low in terms of funding and valuations of start-ups, carrying over a sentiment of excessiveness from the previous six months.

It was a contrarian 12 months, with every expert under the sun saying that the fundamentals of the market — growing Internet penetration, increasing per capita income, a strong economy compared to a weak global market — remained extremely strong, yet companies riding on this wave were being punished.

This neglect from investors finally culminated when Sachin Bansal and Bhavish Aggarwal, two of the biggest poster boys for India’s start-up ecosystem, passed on the blame to foreign competition which came into the country with pockets full of cash. To their dismay, the red carpet treatment for foreign firms isn’t going anywhere, with Chinese big-daddy Alibaba planning to make an entry soon.

“My concern would be that 2017 may be a resurgence of aggressive pricing and discounting. It’s great for advertising and the media, but from the point of view of the sustainability of business, from the point of view of having a healthy consumer business ecosystem, you need a balanced approach,” said Devangshu Dutta, chief executive of Third Eyesight. “Just purely from a capital availability point of view and ability to spend point of view, Flipkart and Snapdeal would be at a bigger disadvantage.”

The year began with Prime Minister Narendra Modi’s big push for Start-up India with announcements of a fund of funds, incubation centres and promoting local start-ups across the country. But as the year came to a close, Modi’s move to scrap large value currency hit start-ups as business slowed across industries.

However, one bright spot was digital payment companies such as Paytm, Freecharge and Mobikwik which benefitted immensely from the move, with their user bases and the number of transactions on their platform going up in instantly.

Growth in digital payments, considered the backbone of e-commerce globally, could turbocharge the rest of India’s Internet ecosystem. Experts have dubbed 2017 the year of FinTech in India, with the government’s digital push helping grow and giving rise to secondary digital finance companies that deal in lending, helping consumers invest in capital markets and those that offer services to small businesses for handling the day-to-day running digitally.

Going into 2017, it is to be seen if the confidence in India’s start-up space returns. While angel investments have remained strong, the transition to Series A and further rounds needs to pick up steam. Consolidation in sectors such as e-retail, grocery delivery and food tech could give investors more confidence to return.

The focus on the scale will continue, however. “VC’s today are looking at how quickly can you add your first customer, your millionth customer and your 200 millionth customer. India is a volume game, if you do not get your 10 million customers in 6 months time they feel you have lost the game,” said K S Viswanathan, vice president, Industry Initiatives, Nasscom. 

(Published in Business Standard)