There is a large Internet community that is building on the back of mobile and data consumption. We are focusing on Internet as a theme. Within Internet, there are several opportunities.
He held a private pilot licence till very recently. He is an avid mountaineer who has gone up to the Everest Base camp, but says he hardly gets the time to do any serious climbing now. A civil engineering graduate from IIT-Roorkee, Aakash Goel worked in Infosys for a year before going to 91Ƭ-Calcutta.
After his MBA programme, Goel joined McKinsey serving IT, ITeS and BPO clients in North America and India, before co-founding an e-commerce start-up. Aakash, 33, joined venture capital firm Sequoia and about a year-and-a-half joined Bessemer Venture Partners, a global venture capital firm, where he is Vice-President. In this recent interview in his Bangalore office, Goel talks about Bessemer’s strategy in India. Edited excerpts:
What is Bessemer’s strategy in India? Is it part of an overall fund that you have in the US?
It is a part of the global fund. We are currently investing out of our eighth fund, which is $1.6 billion in size. That is a global fund which is primarily investing in the US, India, Israel and opportunistically in Brazil. We were pretty diverse in terms of our sector approach. We have invested in financial services, healthcare, technology and Internet. We have deployed $350-400 million in India across about 25 companies.
Going forward we are heavily focused on technology as a theme. We are seeking out investments in Internet, mobile and software and we straddle Series A, B, C. Which means we can write cheques from $2 million to upwards of $30 million. Our sweet spot would be $2-20 million.
Where do you see action in the technology space?
We see several industry dynamics at play. There is a large Internet community that is building on the back of mobile and data consumption. We are focusing on Internet as a theme. Within Internet, there are several opportunities. We are going after direct-to-consumer models.
On the mobile side, we are seeing a large ecosystem of apps being developed around gaming and entertainment. We are choosing consumer destinations within entertainment as well. We will look at enablers of the ecosystem like payments, logistics provider and any tech-enabled service to the consumer.
Is there a herd mentality among investors as far as investing in tech-enabled companies is concerned?
I don’t know whether it is herd mentality. Investors do often get influenced by what the other investor may be doing. If you look at the market, there are shifts happening.
Look at China. It has 40-42 per cent Internet penetration. That is almost stagnant. It will grow at a secular kind of pace. In India, we are still at 15-17 per cent Internet penetration.
We are the third largest Internet economy in the world today by users, not by scale of transactions done. We are going to be about 250 million Internet users within a year.
We, as a firm, think we will be 500-600 million Internet users within four years. By 2020, you are staring at 600-650 million Internet users. That will be the second largest, if not the largest Internet community in the world. You are seeing many large business models being created around these.
A large part of this is backed by mobile, data option. If there are tectonic shifts that are happening in the way the consumer behaves in India, which is giving access to tier-2, tier-3 population to goods and services for the first time, a lot of people are chasing that shift.
That is why you are seeing companies like Just Dial, Zomato, Taxi For Sure, getting created out of India. Very young entrepreneurs thinking up interesting ideas.
You pick any vertical, you overlay on top of that some technology and there are these brick and mortar which had a way of reaching out to the consumer, the mobile Internet is just making it simpler, intuitive to interact with that service. Which is what is leading to a lot of opportunity people are going after.
You are right factually that many investors in the venture world are thinking of tech, but I don’t know whether that is herd mentality or driven by the macro trends underneath.
How is the overall investment climate now?
The investment climate was a little bit, towards the end of the year, confused. There was not much action happening.
With GDP growth being where it is, and several projects stuck, people were generally less excited.
I think post-May 16 (Lok Sabha election results), positive sentiment has come back in the public markets, which automatically has a way to flow back to the private markets, even though these two are disconnected. We feel excited.
We see a lot more momentum of deal flow as well within our firm. We are excited about India in the long term.
I think India is a large consuming demography, which will probably evolve differently from China but will definitely create many large companies.