Vertex Ventures: A Catalyst for Growth in India’s Startup Ecosystem
Over the past decade, Vertex Ventures Southeast Asia and India has emerged as a significant player in the Indian startup ecosystem. With a keen eye for opportunity, this Singapore-headquartered early-stage venture capital (VC) firm has been strategically investing in India since its entry in 2013-14. The firm has recognized the potential of the country’s vast working population, favorable government policies, expanding internet penetration, and rising consumer demand.
A Growing Portfolio
Since its inception in India, Vertex Ventures has made approximately 30 startup investments, including notable exits. Among its portfolio are unicorns like FirstCry, Licious, and Xpressbees, which highlight the firm’s ability to identify and nurture high-potential startups. The firm has successfully raised five funds, with its latest, Fund V, attracting an impressive $541 million last year, surpassing its initial target of $450 million. This robust fundraising reflects the growing confidence in the Indian market and Vertex’s commitment to fostering innovation.
A Bullish Outlook
Kanika Mayar, a Partner at Vertex Ventures, expresses a strong bullish sentiment towards India’s startup landscape. “With every successive fund, we are becoming more optimistic about India,” she states. This optimism is rooted in two key factors: the emergence of high-quality founders and the favorable economic indicators that suggest a thriving entrepreneurial environment. Mayar notes that the Indian startup ecosystem has matured significantly, with founders increasingly focused on building sustainable businesses for the long term.
Investment Focus and Strategy
Vertex Ventures has primarily concentrated its investments in four segments: consumer tech, fintech, software-as-a-service (SaaS), and healthtech. However, the firm is now looking to diversify its portfolio further by exploring new segments such as mobility, sustainability, and clean energy. Mayar emphasizes the importance of replicating past successes in these new areas, aiming to increase the number of investments from an average of 3-4 per year to around 5-7 annually. “We aim to keep within a pace of investment which is manageable,” she adds.
The firm’s strategy is informed by shifting trends in various sectors. In consumer tech, for instance, the growing affluence of consumers and their willingness to spend more has led Vertex to invest in brands like Pilgrim, a personal beauty care company. The firm has also made contrarian bets, such as Licious, an online platform for meat and seafood, which faced skepticism at the time of investment. Mayar reflects on this, saying, “When we first invested, a lot of people did not believe that we could build a digital-first meat and seafood company.”
Navigating Exits
While the inflow of VC funding into Indian startups has not yet returned to the peak levels of 2021, it has stabilized. However, concerns about exit strategies—whether through mergers and acquisitions (M&A) or initial public offerings (IPOs)—remain prevalent among investors. Mayar recalls the early days of Vertex in India, where doubts about exit strategies were common. Fortunately, the firm has since achieved successful exits, including from FirstCry and Xpressbees, and has seen several other portfolio companies acquired by major players like Cisco and Amazon.
Vertex Ventures has also demonstrated its ability to navigate the IPO landscape, with one of its portfolio companies, Yatra, successfully listing on Nasdaq last year. “We have learned not only how to invest but also how to exit, which gives us more confidence to be more bullish in India,” Mayar states.
Commitment to Diversity
In a significant move towards promoting diversity, Vertex Ventures has allocated $50 million from its fifth fund specifically to support women-led startups. Mayar emphasizes that while the firm has always prioritized backing women entrepreneurs, this dedicated fund serves as both a formal commitment and a signal of its intent to support high-quality companies led by women founders. Previous investments in women-led startups, such as Karkhana.io and Proactive for Her, underscore this commitment.
The Current Investment Landscape
Despite the cautious atmosphere surrounding startup investments, Mayar believes there is still ample capital available within the ecosystem. However, she notes that the bar for both founders and investors has been raised, leading to more stringent diligence processes. “There are very good founders to meet and back, though the question is when to invest,” she remarks, highlighting the importance of timing in the current market.
A Long-Term Vision
Vertex Ventures maintains a positive outlook on the Indian startup ecosystem, adhering to a philosophy of supporting businesses over an extended period of 8-10 years. The firm’s global perspective aids in guiding startups through their growth journeys. Mayar emphasizes the reciprocal nature of the relationship between startup founders and investors, stating, “Our objective is to be a little ahead of the market.”
Through its strategic investments and commitment to fostering innovation, Vertex Ventures continues to play a pivotal role in shaping the future of India’s vibrant startup landscape.