Why India’s unicorns are turning venture capital investors

NEW DELHI : In 2013, Abid Hassan was perhaps a bit ahead of the times. Hassan, a graduate of the Indian Institute of Management (IIM) Ahmedabad, was setting up an options trading company Sensibull. It was another era. Zerodha was a relative newbie in the startup world. And its co-founder Nithin Kamath was a budding entrepreneur who was still learning the ropes. But Kamath’s passion for the stock market as a businessman still stood out.

“Within 10 minutes of our first meeting, Nithin offered to invest in us," recalls the co-founder of Sensibull. But that was not to be. This was the pre-digital, pre-fintech era. Rigid rules imposed by the stock exchanges and the broking world were big bottlenecks for Sensibull. “Soon, we decided to wind up that company," says Hassan.

Cut to 2017. Hassan was happily working with an algo-trading firm. Out of the blue, Kamath reached out asking Hassan if he would like to revive his venture idea. A digital wave was sweeping across the country, particularly in the fintech space. And who would know it better than Zerodha and its founders who’ve been riding the wave? Sensibull’s focus—retail option trading—was a nascent and unexplored area in India with virtually no players. “The capital market ecosystem in India is quite shallow. If you want to grow the ecosystem, we have to help build these niche platforms," says Kamath. Zerodha’s Rainmatter Fintech Technology Fund, which finances and incubates fintech startups, invested in Sensibull. The startup has been busy building a safe, accessible and profitable platform for options trading in India and boasts of over 300,000 unique users. “If Nithin wouldn’t have called that day, there would be no Sensibull. I wouldn’t have been here," says Hassan.

Kamath and Zerodha are part of a growing trend in India’s startup landscape. For a while now, successful Indian entrepreneurs have been investing in startups, but mostly in an individual capacity as an angel investor—tapping into both their financial and entrepreneurial capital. From Infosys co-founder Kris Gopalakrishnan in the 1990s to Sachin Bansal of Flipkart more recently, several entrepreneurs have invested in dozens of startups. Many have in fact set up family offices to invest and bring in some strategic thrust to their angel investing. But increasingly, more and more successful Indian tech startups—many of them unicorns such as Kamath’s Zerodha—are setting up a fund to invest as an organization. There is Flipkart Ventures that crystallizes Flipkart’s decade-long journey as an investor. The $100-million investment arm, set up in 2019, invests in early-stage startups. And then there is Dream Sports, parent of Dream11, which is setting up an investment fund that will finance and scale multiple sports-tech businesses. Earlier this year, Lenskart set up a $20 million Lenskart Vision Fund to invest in startups aligned with its business. Paytm has also set up the One97 Mobility Fund to provide early capital to mobile first businesses. And the list keeps growing. “For the longest time, we have been talking about the need for large companies to work with startups (and support) growth. The trend is now slowly becoming a mainstream activity for most unicorns in India," says Atit Danak, principal and head, Zinnov CoNXT. According to a data analysis by Zinnov, Indian unicorns have invested in 90 plus startups in more than 110 deals over the last decade. 19 of the 50 unicorns in India have made at least one investment in an Indian startup. A majority of the investments have been made by Zerodha, Paytm and Zomato, which account for more than half of all equity investments by active unicorns. Interestingly, despite the pandemic, the investment pace of these unicorns has remained consistent. This year has already seen 14 investments in the first half from the likes of Zerodha. Read More at https://www.livemint.com/companies/start-ups/why-india-s-unicorns-are-donning-the-vc-cap-11628092526905.html