A look back at the investment ecosystem of 2019

This article is from an episode of Matrix Moments by Matrix Partners India, a podcast featuring candid conversations on what it really takes to survive the startup world. This is heavily revised from the original show transcript. For the full interview, go here.

In this episode, I have with me managing directors at Matrix Partners India: Avnish Bajaj, Tarun Davda, and Vikram Vaidyanathan. And I’m Rajinder Balaraman, director of Matrix.

Photo credit: Pixabay

We’re doing a quick look back on 2019 and capturing some of the macro themes from the year. In some ways, it’s been a record year for the Indian VC industry and a very busy one for Matrix.

Rajinder Balaraman (RB): How would you characterize the year for the market?

Vikram Vaidyanathan (VV): It has been a very busy year. We’ve seen diverse founders addressing diverse sectors, which is why it has been super interesting. We’ve also seen the emergence – in our portfolio and across the ecosystem – of companies with revenues of US$50 million to US$100 million.

Finally, I think exits have become more of a choice rather than founders thinking where an exit is coming from. So, they are making trade-offs on whether to sell and when to sell once the company has actually matured and become bigger.

Tarun Davda (TD): We have also witnessed a lot of consumer brands – or digitally native, vertically integrated brands as they’re called. There have been multiple new investments in that sector.

It’s still early days for some of these companies, but as GDP (gross domestic product) spend on these categories goes up, we do believe that there will be real companies that will come of these sectors.

RB: Picking up on the first theme on deal pace, what do you think is the right deal pace for a market like India? And should this change as the market deepens?

VV: Honestly, we don’t define pace; the founders and markets do. So as company creation gets faster, it’s up to us VCs to keep pace with it. If we look at maybe the last three months of the year, company creation hasn’t been as fast. If that continues to slow down, then 2020 might end up being a slow year.

TD: There are opportunities now that, two or three years ago, didn’t seem likely to produce large companies.

Take agritech, for instance. It’s hard to imagine two years ago that a large number of people in the agritech economy would actually be using mobile phones. We are starting to see a lot of that beginning to happen.

Social commerce and WhatsApp penetration among both consumers and businesses has enabled business models which, until now, didn’t seem real or well penetrated enough.