VC fund General Catalyst looks to boost its India investments

Bengaluru: US-based venture capital fund General Catalyst, which has backed the likes of tech firms like Stripe, Snap and Airbnb, will increase its focus on India with strike more deals across stages as it looks to bolster its presence in one of the biggest emerging markets.

At the vanguard of this drive into India will be former SoftBank investor Deep Nishar, who joined General Catalyst in January, and former Snapdeal and Meta (the erstwhile Facebook) executive Anand Chandrasekaran.

Hemant Taneja, the fund’s managing partner currently on an India visit, said he was excited about the India opportunity and that the fund will make early-stage to late-stage investments from its recent haul of $4.6 billion across three funds.

Hemant Taneja, the fund’s managing partner

Since 2019, General Catalyst has made about a dozen investments in India and is looking to significantly increase its presence here.

“If you think about what technology did in 2010 in the US, I do believe the same is going to happen here in the next decade,” he said.

Nishar, who is also based in the Valley, told ET that General Catalyst has already made seven new investments in India this year and will spend more time on evaluating startups across segments such as consumer, fintech, web3 and crypto, agri-tech and others. It invested $25 million as part of the broader funding round in Farmart.

“The 12 investments happened over a period of roughly three years. Now, we are here this week to reignite our conversation with the ecosystem which includes other investors, startups and our current portfolio firms. We will be a lot more frequent now in terms of engagement,” Nishar said on the firm’s India plans.

The firm may also hire a local team but this year it is likely to be through frequent visits by Nishar, Chandrasekaran and others from the fund. It doesn’t have a country specific capital allocation. “It will be more intentional, going forward. We are not shy about the cheque sizes and are willing to write large cheques,” he added.

Nishar’s comments that General Catalyst is looking at an increased pace of dealmaking in India comes at a time when
startups globally and in India are seeing a correction in valuations and overall funding is expected to slow down owing to multiple global factors. Its top India bets include credit card payments startup Cred, fintech firm Uni, used car marketplace Spinny, among others.

“We are beginning to see more rationalisation in valuation when they (startups) are closer to an IPO. But if a company has two-four years before they can go public, then the prevailing notion still is–and it could change–you have time to catch up and if you are in a large market with a good team, growth will be high and you can grow into the valuation,” said Nishar, explaining the current changes happening across listed startups and privately held startups.

Nishar said he is advising portfolio firms to not tap the market for funding unless they really need it at the moment. “There is no point trying to go public in a market where there is no demand. In terms of what it does to valuation– it’s a question of does the company need the capital? If it does need it, whether it would be a flat round or slightly up round will be decided by the markets. You need one investor to come in and say the price and you decide if it’s right for you,” he said.

A flat or down round is not necessarily a disastrous event for startups, he said, compared with a sharp fall in share prices on bourses. The latter can impact staff morale a lot more, Nishar added.

Talking about the buzzy 10-minute delivery segment, the former Google and LinkedIn executive said, “ Ultimately grocery is a penny profitable business….People don’t make 20% net margins unless you sell everything white label. Like Trader Joe’s in the US, which has an excellent profitability model but there are no other Trader Joe’s…” Nishar sat on the board of Blinkit, formerly Grofers, while he was with SoftBank. There are two variables–basket size and delivery cost. If you look at that model anywhere in the world.. It is not quite worked out yet. If it gets solved (here), it’s great. India will then export a model to the world like Meituan did from China, he added.

Amid a bunch of conversations about corporate governance in India startups, Nishar who has served on many public and private boards, said board member’s job is to trust and verify.

For a founder, in many cases it’s the first time they are seeing what a treasury is, how HR relations works but the investor has hopefully seen many more situations and it is incumbent upon them to guide the founders, he told ET. Good governance is good for everybody, it’s not about being founder friendly or unfriendly, it’s about being stakeholder friendly and stakeholder appropriate. Best founders also want this as it makes them better, Nishar said.