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Dev Raman

Dev Raman, Managing Partner, Lastaki Advisors.

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Where VC’s will Invest in 2018-19 and Why?

In Fintech, businesses will move from one off actions such as making payments to more sustained decision-making systems such as automated savings. Furthermore, businesses that create new and better credit appraisal and underwriting models will pique investor interest.

Venture Capitalists are known to invest in business models that follow industry trends and offer large growth opportunities.

First Wave: The Mainframe Years

If we are to track IT evolution over the years, the first wave was all about business process automation. Large enterprises invested in mainframes and IT infrastructure and software applications were hosted on-premise. Millions were spent to build, support and manage the IT resources and their applications. This was the Mainframe or the ERP era.

Second Wave: Internet and Mobile

The ICT wave or the Internet/Mobile age, with its wide spectrum of personalized computers, laptops and smart devices dramatically transformed people to people communication. The popularity of social networking models like Facebook, WhatsApp, Instagram has led to data mining, enabling businesses to target their customers with absolute specificity. The ecommerce ecosystem has grown to include players such as Flipkart, Practo, MakeMyTrip, LendingKart, and PolicyBazaar allowing clients to discover and compare products and services through aggregation; payment gateways and wallets like Paytm and Citrus has facilitated online payments; whereas providers such as Delhivery and Ekart have delivered ecommerce logistics services.

On the Enterprise side, virtual hosting has become a reality. This marked the advent of SaaS, making technology accessible to small and mid-sized businesses by reducing/replacing infrastructure costs.

Third Wave: ‘SMART’ Living

We are now entering a third wave of IT revolution which will deepen people to machine and machine to machine interactions. We will see a profound proliferation of technology in society, right down to the bottom of the pyramid in India as well as in our daily lives. This revolution will make everything we use ‘smart’, from monitoring how we brush our teeth or cook our food to how we bank or invest our money. This will lead to a remarkable shift in how we use technology to improve our lives. For instance, wearable technology like smart watches that help track vital health parameters may assist in delivering care. AI chatbots will facilitate human interactions with machine, thereby potentially transcending the need for computer literacy.Autonomous vehicles could help reduce accidents and provide ease of access to the physically challenged or the elderly with mobility issues.

Themes that will continue to be on the Investors’ Radar

We believe that the SaaS ride in India has only just begun. It has taken a while for large enterprises to warm up to SaaS as an alternative; however, Enterprise SaaS has now become a reality. We expect sizable investors will continue to hold a keen interest in this space.

B2B ecommerce is more than three times the size of B2C ecommerce in US and China and it should be no different in India. In the last couple of years, several online procurement and B2B ecommerce businesses were established in India and received early stage funding. Walmart and Amazon have committed large amounts to this space which is a testament to its tremendous growth potential and we expect VC funds to follow suit.

In Fintech, businesses will move from one off actions such as making payments to more sustained decision-making systems such as automated savings. Furthermore, businesses that create new and better credit appraisal and underwriting models will pique investor interest.

Health Tech has largely seen investments in the diagnostics ad medicine delivery segments. We expect investor interest to shift focus to businesses that help make and manage lifestyle changes to address root causes of diseases. Advanced diagnostics with the use of non-invasive techniques, date driven intelligence and machine learning technologies will pique investor curiosity.

We will see a technology shift in sectors that haven’t witnessed one for a while such as the Automotive industry and Agriculture. These areas will become mainstream investment themes. The Agri-landscape, in particular, requires an earnest analysis owing to consumer preference for healthy, sustainable and eco-friendly options. This, in turn, will necessitate a greater need for supply chain disruption, new cultivation methodologies and biotech investments.

In the Auto and Manufacturing sectors, the demand for upgrading customer experiences and environmental preservation will generate the much-needed disruption to meet the changing expectations. As commercial deployment of electrical and autonomous vehicles nears reality, an entire ecosystem of businesses will emerge across the value chain, right from manufacturing to financing and resale.

To conclude, businesses that re-envision technology to transform our daily lives, be it as consumers or as an enterprise, will invite investor interest in the coming year.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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