Sector Agnostic Investing: Key Strategies and Trends for Driving Innovation

✍️ Opinions

Muskaan Kapoor

Aug 31, 2024 — 5 min read

Mudit Kumar, Angel Investor: Sector Agnostic Investing, Key Strategies and Trends

This article has been contributed by Mudit Kumar, Active Angel Investor.

Today’s world that we live in, is rapidly and dynamically evolving. This change is happening so fast that sometimes we don’t even realize this subliminal change is affecting our lives. At the forefront of this change is the dynamic and forward-looking vision of the new-age startup founders, who are driving this change with their innovative vision!

The spirit and passion to drive this innovation to inculcate in our societal and behavioural patterns are what “startup culture” has been defining in the last couple of years!

The underlying phenomenon behind this change is “Innovation” and the same has been spreading across the industry & sectors. Certain sectors that are at the forefront of this transformation, and sectors that have been the growth engines that are driving India’s entrepreneurial culture include FinTech, HealthTech, E-Commerce/Q-Commerce, SpaceTech, AgriTech, SaaS, and EdTech among others. The startups in these sectors have redefined their respective industries and captivated the imaginative spirit of both investors and entrepreneurs alike.

To highlight the way the entire landscape has been shaping up in the last couple of years, startups like “Zomato” have subliminally influenced our behaviour towards the way we eat and consume food. Fintech Startups like “BharatPe”, “PineLabs” and “RazorPay” etc. have influenced the way we do business transactions. “Nykaa” and “Myntra” have changed the way we shop online. And the list is pretty long.

Therefore, for any investor and entrepreneur success lies in finding the answer to this critical question – “How can any sector/industry be enabled or disrupted by the innovative use of technology!”

Key Strategies for Sector-Agnostic Investing

For any sector-agnostic investment, it is imperative to have an in-depth knowledge of these basic strategies:

Ascertaining the Nuances of the Sector

Every sector has its nuances – critical factors that determine outcome and productivity! Understanding the core nature of the sector, and the forward and backward integration mechanisms enables determine what will be more optimal – a product or a solution! Moreover, how the execution needs to be done – whether the execution is towards enabling the sector/industry or disrupting it!

For reference, there is a barrage of wealth-tech startups in the recent past which primarily are banking on the financialization of the Indian economy and the growing affluent class and swelling of HNI/UHNI segments. But the critical aspect for any investor/entrepreneur is how a sustainable and value-driven business solution is being created which not only survives throughout different business cycles but also enables the investor fraternity with better value-added deliverables in a consistent and effective way!

Innovative Use of Technology

At the core of developing any business, lies the innovative use of technology. Today startups are using technologies like Artificial Intelligence (AI), ML, IoT, and blockchain to bring an era of digital disruption by integrating these advanced technologies to enable better decision-making, drive growth, achieve better operational efficiency and elevate customer experiences.

For reference, take a look at how Agri-tech startup “DeHaat” is empowering our farmers through their “DeHaat Farmer App” by using AI-enabled technologies to revolutionize the entire supply chain and production efficiency by providing them 360-degree crop solutions. Niche Generative AI solutions by startups like “Zoho” are revolutionizing the way we communicate (ZohoMail & ZohoChat) and interact.

Future Vision for Defining the Category

Whether an entrepreneur or an early-stage angel investor, both are expected to possess that critical knack of ascertaining – what it takes to define a particular segment! For example, founders of startups like “IdeaForge” and “New Space Research Technology” have defined the entire segment, “Miko” AI Robots can be our Indianized version of Interactive “Alexa”. Deeptech applications in Cybersecurity can be another niche domain to watch out for in time to come.

Furthermore, it's just not about the changing sector-agnostic startup landscape, what is more heartening is the trends that are emerging in the last couple of years.

Emerging Trends Driving Innovation in the Startup Ecosystem

Here are some notable trends that we are witnessing:

Increased Focus on Environment and Sustainability

Startups in Green energy, Deep tech and Clean mobility are at the forefront of this trend. For example, the traditional mobility trend which was earlier defined by “Ola” has scaled up to “Ola Electric” & “BluSmart”! Increased awareness and focus on carbon neutralization has resulted in cleantech startups working on solar, wind and hydrogen solutions to working on niche technologies like biomethanation to solve organic waste management – the list seems to be going on!

Inclusivity & Empowerment Towards “Women Entrepreneurship”

This paradigm shift is evident from the fact that today we have over 8 million Women Entrepreneurs in our startup ecosystem. We have witnessed women entrepreneurs who are the founders of unicorns like Nykaa, Mamaearth, Hosura, GoodGlamm, and Pristyn Care to name a few and this list is growing faster than ever, fostering a more inclusive pursuit towards a diverse ecosystem!

Growing Diverse Base of Investors

We have graduated from those days when the entire dependency used to be on PE/VCs to today where we are witnessing the rapidly growing number of Angel investors to active participation from Corporate Family offices to Industrial houses who are not just supporting financially but also mentoring and hand holding these startups providing necessary business insights also.

This surge in the investor base not only signifies the appetite for investing in these new-age startups but also reflects the deepening faith in the potential of our Indian startups to innovate, create wealth, and create a positive “Impact” on the society at large.

Incubators and Accelerators

One of the most holistic and perhaps groundbreaking trends for fostering and creating a better vibrant, sustainable, inclusive, and healthy breed of startups is the partnerships by academia and corporates in the form of incubators and accelerators programs – who not only provide seed monetary support but also mentor and train them through workshops and expose them through potential partners and investors through their “Demo Day”.

Special mention to esteemed institutions like IITs which are deeply engrossed in creating and nurturing the startup culture among new age of founders by seeding them with innovative thinking. And the result is evident from some of the most successful stories coming out from IIT Madras Incubation Centre (IITMIC) in the form of “AgniKul Cosmos”, “Ather Energy” and “Uniphore” to name a few.

Concluding Remarks

There are opportunities galore in today’s startup landscape, but what is important is to critically analyze the “sustainability” and the critical “impact” that the product/solution will have on the sector/industry and the user base and society at large. Unless the ideation is “Value Accretive” on a consistent basis, the merit will get diluted over time.

Lastly, for any business to create and scale it requires ‘time’ and ‘patience’ with a continued hustle to ‘innovate’ to stay relevant to ever-changing dynamics around. Therefore, whether you are an entrepreneur or an investor – stick to your ‘core’ values and have ‘patience’ to create something bigger and better!