Sanjay Mehta, 100X.VC welcomes the session with Sashi Reddi, SRI Capital. Today’s talk is about the growing importance of SaaS and how it is going to impact business houses. SRI Capital has a portfolio of 40 different entities. Thus Sashi can share his insights and all about his portfolio success and how the Indian start-ups can survive through such crisis times.
Sashi gave his opening remarks by accepting that crisis times like COVID or depression, or even the world war are quite difficult for startups because they barely have funds to manage and such times are the real testing times. But these are the only times when they can stand against big companies and make themselves stand out.
Future of Indian Start-Ups in B2B or B2C Space
Sanjay asked Sashi about the future of Indian startups in B2B or B2C space. To which Sashi replied that there are very few startups in the Indian domain in the field of SaaS. And he highlighted quite some important reasons for the same. He said that at the very first in the time frame of 2-3 years, only 1 startup is seen in this sector which is quite depressing.
Secondly, most of the companies have a mindset of India first rest later. The primary reason for that is India is cheaper in terms of experience and labour. In India, you will get numerous chances of making mistakes and then making amendments. Indian companies, even after having a full-proof mindset of a good SaaS still believe in the concept of a salesperson who will come down to their office to explain things that are not at all required. This has resulted in compromising user service. On the other hand, the price also gets impacted. Indian companies are in the habit of negotiating, and thus the prices are always raised by 60-70% to lessen them in the future negotiation process. This is the major reason why Indian SaaS is unable to flourish in B2B or B2C segments. Major attention should always be given to user experience, and the sales guy can completely be eliminated. Also, there is a need to change the market. The US must come first and India after that.
Sanjay asked the first viewer question to Sashi, which was about the scope of customer analytics SaaS for SMBs. To which Sashi replied positively that yes, there is a very high scope because this is a highly specialised niche and with SaaS, they can pay quite a nominal amount of money and earn specialised service. The field is huge, and customer analytics SaaS can play a major role there.
Sanjay asked Sashi about the major mistake that Indian startups are making and where they are failing in raising funds from deep tech companies. To which Sashi replied that Indian startups are failing quite highly in terms of out of the box thinking. There are extremely few new and fresh ideas. Most of them are the ones which are seen in the US some 2-3 years back and thus out of the box; fresh thinking is highly missing.
Sanjay Asked Sashi how economies play a role in the case of a SaaS business in India and the same in the US. To which Sashi very clearly replied that yes in India the labour is cheap but that sometimes works against Indian people. Companies hire 10 people, whereas only 5 can do the job in a much better way. And thus the cheap most of the time goes against us.
One of the viewers asked Sashi on behalf of Sanjay that whether SRI capital invests in B2C products for the US which are built in India. Sashi clearly said that no principle wise they don’t do that. He further added that for a small fund surviving in the B2C space is not that easy.
Next, they had another question about AI health tech diagnostic solutions that can shift to B2C, which is not their regular norm. Sashi is quite hopeful about this space, and it’s further expansion opportunities in the future. When talking specifically about the US, he said that there are huge challenges in the B2B segment and thus, more and more people are trying towards the B2C segment and gaining success too.
SRI Investment Portfolio
Sanjay asked Sashi about the SRI investment portfolio. And how they choose startups to fund and what kind of startups Sashi likes.
Sashi said that the very first filter that they see while funding is the founder. They firstly check if the founder is the right guy.
Secondly, they also check if the business idea is clear. It should take only 30 seconds to understand the business idea.
Where they stand in the market and how they will achieve the top spot.
Investment of SaaS for Traditional Jewelry Business
Sanjay quickly got a question from another viewer asking are VCs interested in investing in SaaS for traditional Jewelry businesses.
Sashi clearly stated that yes, investment in SaaS could be made for the traditional jewellery business. But this is a complete specific niche, and if there is an opportunity, then, of course, an investment can be made. But the solution might be just specific to the jewellery business and also it should be kept in mind that the field is really small and scattered.
Another viewer asked Sashi that having a single founder is a red flag for investment in SRI capital. Sashi replied positively that having a single founder is a bright green flag. He was a single founder and studies have also shown that having a single founder has always increased chances of success.
Another viewer asked Sashi how do they help their portfolio companies with a longer payment cycle for SaaS companies. To which Sashi said that they generally get quite involved with their portfolio companies and help them in closing payments, revenue cycle, and other important matters.
One of the viewers asked Sashi how do they rate founders who would like to wait for their seed capital rather than committing for their capital. Sashi replied that there might be some people who are unwilling to leave their job for their start-up. Sashi clearly said that the person needs to leave their job and undertake some risk themselves.
Another question asked by the viewer is asking about Sashi’s opinion on VR, AR/V Commerce based tech platforms. Sashi said that this sector has unfortunately not come up. Ad with COVID the scenario is slightly changing. And thus things are hopeful for the future.
One of the viewers asked Sashi what the solution of petrol stations in the form of IoT solutions is. Sashi positively said that things are positive in the future.
When Sanjay asked Sashi about what is the strict no-no which stops funding for SRI capital. Sashi said that earlier they didn’t want to invest in the Indian market, but right now, they are free to invest in both the Indian and US market. But they stay away from investment in B2C, especially in the US market.
Sanjay asked Sashi which area SRI would never like to invest in? Sashi said that earlier they were strictly into no hardware. But now they have supported several such firms, and they are quite positive about interesting hardware startups.
Sanjay asked Sashi an interesting question where he asked about two different situations where he missed funding some start-up which became big names later on. To this, Sashi amusingly replied that Swiggy is one of such startups. And the other is Hi Chemical to which no one has ever heard of, but they are huge.
Sanjay asked Sashi about his inputs on the venture capital funding. Sashi replied that in the pre COVID scenario he felt that B2C startups were valued quite high, whereas B2B startups were raised quite low. But he hopes that the situation will soon change.
Finally, Sashi was asked by Sanjay to bet on three sectors which he feels will be emerging soon in the market. To which Sashi replied that remote economy, AI medicine, and innovative hardware are the three biggest sectors that might see tremendous scope shortly.
Finally, Sanjay thanked Sashi for his time and expertise, and he hoped that things would get better for both B2B and B2C startups in India.
Published on: June 17, 2020