Q&A: Vertex Ventures' Ben Mathias

Q: What is your impression of India’s VC ecosystem?

A: I think the VC ecosystem in India is exactly where it should be. We’re past the days of the internet bubble, where people were writing very large checks for companies and expecting them to grow at unreasonable rates. Now expectations are more in line with what they should be. People are not overcapitalizing companies and entrepreneurs are not looking for inflated valuations. In addition, the number of sectors has broadened out a lot. Whereas two or three years ago people were only talking about e-commerce and the internet, now it’s gotten a lot wider. We’re seeing a lot of very innovative companies in enterprise software and financial technology as well as in internet-enabling technologies. A lot of deep tech is also coming out of this country.

Q: To what extent are these companies finding global expansion easier?

A: A lot of companies get some early adopters in India that are willing to work with them, and then once they get to the Series A stage they’re able to go out and start globalizing their solution. We’ve been very successful with that model over the last couple of years. [Customer engagement software developer] CloudCherry has built a full-fledged sales office in Salt Lake City, and we are growing the business over there. In the case of [omni-channel retail technology developer] Ace Turtle they’d had a lot of success in India, and we said the problem that they’re solving in India is applicable to most of Asia. So we’re launching them in Singapore and Malaysia.

Q: What value-add does Vertex bring to its portfolio companies?

A: Being a global VC network, we are able to help our companies globalize very quickly. Many Indian companies have used our office in Singapore to launch their Southeast Asia operations. As a global network of funds, we are able to lean on each other for advice and leverage each other’s networks. For example, I am currently looking at a company that has some competitors in Israel. I was able to lean on my Israel partner for his feedback on the sector.

Q: How does the connection with Temasek help in this regard?

A: Being part of the Temasek network helps open a lot of doors. For [industrial internet-of-things company] Flutura, as part of our diligence before the investment we reached out to several Temasek network companies in the industrial space, and we had them meet with Flutura to get their feedback. The feedback was so positive many of them turned into customers for Flutura, and some have turned into revenue-generating relationships already. All of that only came because we’re part of Temasek.

Q: Are large tech companies becoming part of India’s start-up ecosystem?

A: One thing that’s very interesting is the number of large tech companies that are creating incubators in India. They’ve recognized the talent and opportunity here, and I think it’s just a matter of time before they start making acquisitions. Microsoft, for example, has a very active accelerator in India, and we actually sourced a lot of our investments from them. These start-ups were part of the accelerator, and then we invested in their Series A or Series B, but Microsoft continues to help them with go-to-market in India as well as globally. If some of these companies execute as planned, then they could be good M&A targets for Microsoft based on that relationship.

Q: What is the most significant challenge facing entrepreneurs and VCs in India?

A: We focus a lot on getting the right types of talent into our companies. The start-up environment is still new in India compared to other countries, so it does involve people moving from established corporate jobs into start-ups. One of our focuses is helping companies grow their management teams with the right sort of people. Also, if somebody who’s very experienced comes in and reports to a founder who is much younger, sometimes the founder needs help grooming this person. That’s where the VC brings their experience and authority to get these people more acclimated to the start-up world. So if I do see a challenge, it’s that VCs may not be focusing on talent strongly enough. I think that’s going to be the key for a lot of companies.

Q: Is this something that you see often?

A: For some of the companies in India that have not done well, I would ascribe that to a large extent to the inexperience of the management team and the fact that the investors were not hands-on enough. If your founder lacks experience, as an investor it’s your responsibility to coach them and help them through strategic decisions. In many of the unsuccessful startups, had the investors been more hands-on then the outcome could have been different. If you look at Flipkart, the reason it is strong today is that the investors put in a very seasoned person, Kalyan Krishnamurthy, to run the company. Kalyan brought that deep operational and financial rigor to the business, and that’s why they were able to turn things around.

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• Topics
• South Asia
• Early-stage
• Technology
• GPs
• India
• TMT
• Vertex Management (II)