Insights on the Indian Startup Ecosystem Shared by a Venture Capitalist

Insights on the Indian Startup Ecosystem Shared by a Venture Capitalist
Amit Ratanpal, Founder & MD, BLinC Invest

Mr. Amit Ratanpal is an alumnus of Harvard Business School with over 20 years of experience across private equity, capital markets, asset management, and investment banking with large organizations like Birla Sun Life and ICICI Group. He has also set up various domestic and global funds, through which he invested and managed ~INR 300 Cr with multiple successful exits. Leveraging his experience and strengths, he co-founded BLinC with his partner RK Rangan, to support entrepreneurs and invest in EdTech and FinTech sectors in India.

Here is an excerpt of the interview with Mr. Amit Ratanpal, Founder & MD, BLinC Invest on Indian Startup Ecosystem.

How was the year 2021 for you as an investor/VC?

It was definitely a high-momentum period as private investments touched new peaks and multiple unicorns emerged throughout the year from all sectors. 2021 was a milestone year for BLinC – we had successful exits, launched our INR 100 Cr BLinC Fund II, and also made our first investment from the Fund in an InsurTech company named Vital.

How often do you bet on the entrepreneurs and not on the ideas? And when/if you do that, what quality of the entrepreneur usually makes you do that?

As an investor, I always strive to find the perfect balance between the quality of the promoter and the scalability of the business idea. We at BLinC work very closely with the promoters of our portfolio company, and hence, alignment with the promoters plays a key role in our investment decisions. It is always great to work with experienced and honest entrepreneurs who are good at business execution, organization development, and fundraising.

What is a warning sign for you when investing in a startup?

I prefer investing in startups whose key management team is execution-focused and takes a hands-on approach to the business. Another red flag is when promoters do not have a clear understanding of what problem they are trying to solve for their customers and how significant it is.

What are some common biases you find in the Indian Startup ecosystem?

One of the most common biases in the Indian startup ecosystem is “growth over profitability”. Businesses today adopt a high-burn-high-growth strategy without focusing on profitability. However, high growth does not necessarily lead to profitable unit economics. On the other hand, there is a general bias towards funding entrepreneurs coming from top-tier educational institutions.

What are your views on the SharkTankIndia Episodes until now?

I believe the show will surely motivate all the aspiring entrepreneurs, which will further amplify the existing entrepreneurship wave in the country.

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We are seeing many startups exiting with IPO, what’s your opinion on that? How is it going to change the ecosystem?

Exits, especially through IPOs, are a great sign of success for both entrepreneurs and investors. IPO exits also generate a good amount of liquidity for the investors, who can further invest in other startups in the ecosystem, thereby, improving the liquidity in the market. I believe this phenomenon is only going more prominent over the coming years. On the other hand, the increasing number of IPOs also serves to indicate the maturity of the investors in the market, especially with regards to the acceptance of new-age business models that are yet to turn profitable.

More than 42 unicorns in 2021. What do you think caused this wave? Is the valuation justified according to you?

It is the changing consumer mindset that has enabled these Unicorns to grow. Today’s consumer prefers convenience, is very open to try new products, and is less risk-averse than the consumer of the previous decade. Most of the unicorns have tapped into this changing consumer mindset to identify and solve unique problems for their customers. For example, Licious has completely changed the way consumers order meat. I believe the valuations are steep, and there is a bubble. However, like everything, good businesses always come at a higher price.

How can we support/enable entrepreneurs in tier2 and tier 3 cities?

Entrepreneurs in Tier 2 and Tier 3 cities suffer from lack of access to quality resources. One of the most effective ways to fill this gap is to set up incubation centers in these regions in partnership with colleges, to provide access to top quality mentorship and industry experts.

What do you look forward to as an investor in the year 2022?

Budget 2022 has focused significantly on leveraging technology to penetrate deeper into the Tier-2 and lower cities in India. I expect technology-led businesses to gain significant market traction and attention from the investor community, giving rise to new unicorns in 2022. At BLinC, we are looking forward to deploying our Fund across various whitespaces identified through our internal research.

What are a few sectors you think would be hot in the upcoming year?

Education and Financial Services sectors have been very resilient through the pandemic. Companies in these sectors have a large potential to leverage technology to drive deeper penetration, and I expect these sectors to continue growing at an accelerated rate in the upcoming year.

One learning that you would like to share with founders who are looking to raise funds?

It is all about execution, prioritization, and defining the short-term and the long-term focus. Early-stage startups should have a detailed understanding of their target market, competitive landscape, and the target customers. It is critical to think from the customer’s perspective and solve at least one real pain point of the customers. It is important to consistently prioritize and make efforts to achieve the product development milestones and the targets of the business plan. While pitching to the investors, it is important to give comfort to the investors around your market understanding and your execution capabilities.

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