Quality of startup ideas, execution increased significantly in recent yrs

What is the investment philosophy that you follow at SucSEED?

The genesis of the fund was the need to spot, nurture and catalyse the growth of early-stage technology startups. We typically invest in promising pre-revenue startups with interesting use of technology, seeded in research institutions or otherwise, that have their products built. Ours is a long-term engagement model to fund and support them through three stages of capital during their growth – Bucket A (seed capital), Bucket B (growth capital) and Bucket C (pre-series A funding). SucSEED has a unique philosophy of being a meaningful part of the startup journey for a much longer duration than most conventional funds do.

SucSEED has recently closed its maiden Rs 100-crore fund. How many startups is the fund aiming to support, over how many stages and in which sectors?

We recently raised Rs 40 crore, marking the first closure of our maiden Rs 100-crore fund. The fund aims to nurture and promote Indian innovation by supporting early-stage technology-enabled startups in six emerging sectors such as healthtech, edtech, fintech, enterprise SaaS, cyber security and regtech, digital economy and smart living, using emerging deeptech innovations.

The fund has already identified three startups – Stargate (a direct-to-direct cross-border platform for curated lifestyle products), Auris (an AI-powered insights platform that curates insights in real-time to capture, enrich and analyse data) and Freestand (a marketing tech platform that enables FMCG brands to deliver physical product samples to digitally targeted customers) – for investment and has signed term sheets. Further, we have shortlisted three startups in healthtech and regtech space, where the due diligence is still underway. Our goal is to close over 80 investments in 52-odd startups over a three-year deployment period. Many of our investments in the first two years would be in the Bucket A category to provide them opportunity to grow during the fund life with capital allocation for different stages of fund support. We hope to accomplish this as we tap into new potential early-stage ventures.

Is SucSEED looking at floating its second fund? How big would this second fund be and which are the sectors that it would focus on to invest in?

Any successful fund house would have its second and third funds in mind, too, to support various sectors or different investment themes. Having said that, our current focus is to raise, manage, deploy and deliver the objectives of the first fund to utmost satisfactions of our investment partners. Through the first fund, we are adding value to the ecosystem by discovering and supporting deeptech innovations which are supporting the problem statements of masses in the six sectors of our focus.

Our fund operations of discovering 30-odd investments in a year would mean, screening 4,000-odd startups and spotting opportunities through various rounds of conversations with them, which is quite an intense process to manage in itself. We already have around 10 partnerships in place with tech incubators like IIIT Hyderabad CIE, IIT Madras Incubation Cell, IIT Ropar TBIF and many focused accelerators like Pad-up, T-Hub and KSUM, which would drive the bottom-up discovery of such startups in our portfolio. We intend to have more than 50 such partnerships with an aim to get to such startups with strong value proposition into our portfolio and work with them to co-create serious growth and success for the Indian innovation ecosystem. SucSEED's second closing is targeted for March 2021, with a focus on corporate ventures, financial institutions, institutional entities, fund of funds, and family offices to join Indovation for discovery and growth of the early-stage segment.

Currently, which technology trends excite you the most?

It's always exciting when we see technology being used creatively to solve problems. Out-of-the box solutions are even more exciting. The quality of startup ideas and execution has increased significantly in the recent years. The background of the founders and their connect to the problems is much better. Technology is used to resolve / address these problems by design at the base rather than use technology just for tech sake or for using tech for management support only. Lately, there seems to be some very good solutions coming up using various facets of deeptech (AI, machine learning, computer vision, blockchain etc),which needs to be encouraged for building IP-based products and solutions, specifically using sensory inputs like cameras and other devices. Also, layers of intelligence are being used even in conventional enterprise solutions to enable predictive functionality for better user experience. Devices and hardware-centered startups in general also seems to be increasing. The pandemic has also brought in a wave of new technologies to enable contactless solutions.

Despite witnessing record funding year after year, many foreign investors opine that India is still an under-invested market. What is your take on this?

The issue is more of quality than quantity. There are sufficient funds already. The issue is more around discovery of not enough investible startups. Most funds look for startups that have proven their initial premise and have started to become known in their segment. But this typically takes one to three years for a startup to get to this stage. Till then, there is very little structured support available, especially from fund houses. This lack of high-quality support delays the growth of promising startups, many of whom outrun their runway and are forced to shut down. Sometimes, delay in getting institutional fundings at an early stage delays the growth of their deeptech innovation and in the meantime, global proposition grows in a parallel window. Our belief is that more support is needed in earlier stages and that's why our fund starts to support from incubation space and helps them with funds regularly during their growth lifecycle if they are meeting their vision and execution milestones. Startups during the later stages have sufficient fund liquidity available even now and we have seen many startups becoming prominent from that category.

One of the most heartening observations is that the pandemic has neither dampened the spirit of startups nor impacted use-cases by clients/ customers. In fact, if anything, many seem to have marched forward with increased resolve and market has much higher acceptability towards digital / tech solutions. The only thing which was visible during the pandemic was lack of funds being disbursed by large fund houses as they took a cautious approach. However, funding continued at the seed, angel and growth stages. It's known that many startups brought disruptive solutions during the 2008 global crises, which became global ventures and unicorns within 7-10 years horizon. Continuing with the same trend, a lot of good solutions have been conceived during, and due to, this pandemic crises, too. Quality of thinking and execution has surely honed up the founders' ability to march ahead in difficult times. 2021 is looking very promising.