What startup investors want: New ideas, strategies, tech where VCs will invest in 2020

Investors are certain to believe in ‘disruptive’ startups in 2020 but with a pinch of salt after taking a cue from investors like SoftBank who burnt their fingers in disappointing IPO efforts of global tech ventures such as WeWork and Uber. This is the common theme running through investor categories in India as well even as they look for solutions enabled by deep technologies such as artificial intelligence gaining more ground. Some of India’s most active early-stage investors tell Financial Express Online what would keep them excited in 2020 as the Indian startup ecosystem enters into the new decade.

Capital Won’t be Only Moat — 2020 is expected to continue with the momentum in the startup and early-stage ecosystem. “Yes, there will be some shift in the priorities of the ecosystem to reflect the sentiments around the larger macroeconomic factors in India as well as globally but directionally, I am looking upwards and forward,” said Ashish Fafadia, Partner, Blume Ventures. There will also be a focus on exits and positive thrust on greater margins for B2B companies along with building consumer loyalty and unit economics for consumer companies. All in all, 2020 will be a year where capital in the hands of companies won’t be the only moat and that valuations and funding will continue to occur for companies demonstrating strong metrics and meaningful growth, said Fafadia.

The Real Bank Branch — Only bank branch that matters is on my mobile. Neobanking investment has gained momentum in 2019 as the non-banking service providers started to challenge the products and services offered by the traditional banks, according to Sanjay Mehta, Founder and Partner, 100X.VC. “I expect that fintech startups will offer every part of the banking value chain,” he added. Global neo bank market was worth $18.6 billion in 2018 and will accelerate at a CAGR of around 46.5 per cent between 2019 and 2026, generating around $394.6 billion by 2026, as per Zion Market Research.

Cashflow Visibility — Given that the venture market reached peak levels of exuberance, “I feel in 2020 startup investors will take a liking to business models with visible cash flows,” said Utsav Somani, Partner, AngelList India. The investment themes that could stand to benefit from this shift in mindset would be enterprise, SaaS and productivity tools. In 2019, 887 startups had raised $14.5 billion — around 26 per cent jump from 2018, according to Tracxn data.

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AI for Destruction –– The emergence of computer led to the birth of a new industry — cybersecurity. “I see that happening with the proliferation of AI as well. There will be disruption of various industries but followed by offensive AI. I expect an incubation of new sector to safeguard the business from destructive AI,” said Mehta. Detecting impersonation of voice, video or image using AI will an immediate need. According to Accenture, AI has the potential to contribute $957 billion — 15 per cent of India’s current gross value in 2035. Some of the leading AI startups in India include SigTuple, Niramai, Niki.ai, Mfine, Uniphore etc.

Creating ‘Impact’ — Solving real problems for the common man would be the new mainstream as the world of capital witnesses a seismic shift with calls for accountability to equity in Society. “Impact investing would deliver more stories of real change in the year 2020 as we reimagine a new world without hunger, poverty and inequity,” said Vineet Rai, Founder, Aavishkaar Group. Villgro Innovation Foundation — among India’s earliest incubators for startups in social sectors earlier this month partnered with the Council on Energy, Environment and Water to support at least five small enterprises deploying livelihood appliances powered by clean energy.

Talent and Data or Nothing Else — Talent which understood machines, marketing, production are no longer relevant. Past was owning of proprietary data to win, and the future is about data sharing to grow. “I expect that talent, which now understands data, network effect virality, design and relationship will become more critical resources,” said Mehta. Hence startup founders appear to be more resilient as they build on new economy business models that are high on technology fundamentals and excellent management teams understanding the power of software.

Time for EVs and Plant-based Meat — Electric revolution is imminent. Customer anxieties about batteries, range, availability of charging points, cost etc. are set to go away. “I expect that customers are getting more and more educated on building a sustainable future with public policy playing a more significant role in the coming years,” said Mehta. Another new market opportunity is of plant meat in India. JPMorgan Chase estimated the market for plant-based meat could easily top $100 billion in 15 years. “I see a significant market opportunity for plant meat in India as more than 70 per cent of Indians is non-vegetarian,” he said. However, awareness is required among Indian vegetarian population due to low understanding of health benefits and environmental impact of these products.

Source: Financial Express