2020 has been an unprecedented year. The COVID-19 pandemic brought the entire world to a standstill and has brought about several changes in the way businesses is conducted, as work from home became the need of the hour. While many businesses struggled with moving online and lost profits as a result, other business adapted to the online model of delivering services with relative ease. Keeping the overarching theme of the pandemic in mind, Srikanth Sundarajan partner at Ventureast recorded a podcast with VCCircle’s Joseph Rai, giving some insight into the performance of Ventureast’s portfolio companies during these perilous times. Ventureast’s current fund called Ventureast Proactive Fund 2.0 is focused on technology and includes companies such as Portea (home healthcare), Orion Edutech () and Kissht (online consumer lending). The key takeaways from this conversation are highlighted below:

·        Overall effects of the pandemic on Ventureast’s portfolio companies

Q: How is Ventureast engaging with its portfolio companies during the pandemic?

A: “One good thing going for us was quite a few of the companies, except the fintech companies, were already digital. This resulted in minimal losses for these companies. Some companies such as ekincare (digital healthcare and wellness assistant) and iNurture (edtech solution provider) have done better in the current situation, given that more people are preferring online avenues for consuming healthcare and education. We have been encouraging our portfolio companies to focus on the digital part of their business by building a strong online presence and increasing revenues from this avenue, and they have yielded good results with respect to this. The sector that got hit harder and will have more difficulty at least in the short run is fintech, with companies like BoonBox which provides tech assisted rural commerce requiring more assistance from our end.”

·        On follow-on investments

Q: Will you be doing follow-on investments in some of the companies that you are worried about?

A: “In all cases we were able to organize some funding by December of last year (2019) because of which all the companies are on a decent platform. We have recently been exploring alternative avenues for providing more financing so that they can survive between 18 months to 2 years. “

Q: What kinds of alternative avenues are being explored?

A: “It could be a combination of venture debt; it could also be a bridge loan from the rest of the investors and we are in good shape on that front. We have three companies who are already doing this and interestingly another three companies are attracting external investments, which is a good sign.”

·        New investments during covid19

Q: Ventureast has been quiet on the investment front this year. Was this a conscious decision to stay away from making investments because of COVID-19 and will see it picking up some pace in the months to come?

A: “If we look at the investible corpus of this fund, it is a little bit below 70 million and we are two thirds of the way done having made 11 investments from this fund already, which is why it probably feels slow. At the most you will see three to four new investments coming up in the next 6 to 12 months.”

Q: What kind of sectors are you looking into for the remaining amount of the funds?  Are there any specific sectors on your mind?

A: “We are very enthusiastic about the Make in India movement, and the fact that the manufacturing and MSME segment will get a lot of attention. So, we want to look at manufacturing 4.0 which is the IoT (Internet of Things) embedded solutions. We are also looking into Agritech because we think it is an untapped market, as well as Healthtech and Edutech both from an AR VR (Augmented Reality and Virtual Reality) standpoint. We think Healthtech has a lot of room for very cool hardware and software solutions in an emerging market like India, especially now that we will be more reliant on indigenous devices which makes it a lot more exciting.”

·        On new products to look forward to

Q: What are some of the new things you see emerging during the pandemic which will be attractive for venture investors other than HealthTech Edutech etc?

A: “The entire world is going to go through a revolution of what can be done without contact because of the pandemic. For example, I think AR,VR, Robotics, IoT’s, sensors, unmanned vehicles, are all very interesting things that are going to impact the way we live and the way we interact with enterprises, be it our banks, insurance companies or how we manage our households, buy groceries etc. There will be many interesting companies emerging which we are interested in looking into. One example from our portfolio is Acko which provides micro insurance which means you get yourself insured for specific perils. For example, when you want to get surgery, they will cover you for it provided everything is in place which is an interesting concept. These are different ways to look at traditional products. Going digital and relying on smart data which is fed into machine learning models to drive decision making is going to be very important. Another big thing is 5G which is around the corner, which means there will be a lot of data flying around which in turn needs infrastructure and security. Technology and its role in everyday life is going to be bigger.”

·        On Valuations

Q: Some venture capitalists I spoke to said valuations are modest, some said valuations are frothy and some said that it depends on the sector. Where do you stand on valuations?

A: “Our approach is slightly different because if you look at the history of Ventureast  and where we all come from, we were all entrepreneurs first which is important to understand. We look at it differently than a pure finance-oriented VC for example. A lot of times valuations become forthy because people run towards something that is hot, like Edutech. Till two years ago there were a few small players, nothing much happening but Bayju’s broke that barrier. Today, everyone is rushing into it so obviously the valuations I would say are frothy because you don’t see the bottom and you don’t know how people are going to invest and exit from it. We are more conservative, if the valuation is way out there, we will not go for it because I don’t think we are going to make any returns especially given that we are not a super-sized fund. We instead look at companies built in a good space with good founders; maybe the velocity is a little slower and it’s not attracting the same kind of hype or trend which some of the bugger guys with deeper pockets can fund. I think after 2015 the market has definitely rationalized and the other trend we see is that if someone has been a success and they have attracted capital, it attracts more capital. But again, that is something where we cannot play because by that time it’s already series D,E,F and the big boys participate. We still like to play early which is series A and series B.”

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