Shanghai-based venture capital firm Fosun RZ Capital entered India in early 2017, and has since backed a handful of technology startups in the country. It has invested in sectors such as media, fintech, travel, and logistics. Its top portfolio companies include logistics company Delhivery, as well as travel booking companies MakeMyTrip and iXigo.
This year, Fosun RZ plans to make around ten investments in India, specifically targeting companies that are solving problems in fintech, mobility, and edtech. Tej Kapoor, co-CEO at Fosun RZ Capital, heads the firm’s India investments. He told KrASIA that, this year, they will invest in companies seeking Series A and B funding.
Kapoor said that the coronavirus has not made an impact on Fosun’s investment plans in India yet, although he is worried about the performance of the firm’s portfolio companies that are still in their growth stage as they navigate the pandemic’s fallout.
The following interview has been edited for brevity and clarity.
KrAsia (Kr): How has coronavirus affected investments, particularly considering the temporary travel ban from India?
Tej Kapoor (TK): We are seeing the initial impact of coronavirus in India. It’s only 31 cases now, but obviously, everybody is under fear, so we and our portfolio companies have taken a lot of protective measures like asking people to work from home, except the warehousing staff [at Delhivery].
In terms of investments, we have not slowed down yet. We are still talking to entrepreneurs and trying to complete deals. We are hoping this will only have a short-term impact on India, and that it doesn’t pick up steam. In China, most of our colleagues are available but working from home. In January, we were helping them with procuring masks from India. So far, we have not received any messages from Fosun that say we need to slow down our investment process. In fact, we just hired one more person in our Bangalore office.
Everybody in the VC community is worried because this is going to have an impact on the companies they have already invested in, as they are the ones who are trying to build the businesses. They are worried that the slowdown will impact their plans. However, people will want to fulfill their estimations for this quarter. Supply chains are also affected as factories in China are running at one-third capacity. It will have an overall impact—not only in India, but across the globe.
Kr: What is your investment strategy in India for 2020?
TK: We are going to continue to focus on the health, wealth, and happiness themes. We will invest in startups working in financial services, logistics, mobility, and consumer e-commerce. We are also open to technology-enabled education startups.
We will keep doing Series B deals, we might also do Series A rounds. We also want to explore other technology verticals. Nothing has changed particularly, and our thesis remains the same—to support good companies. We will hopefully be able to close eight to nine investments this year.
In our view, mobility is going to get big, as we believe it will bring the next million users.
We have already invested in both MakeMyTrip and iXigo. We recently backed another last-mile mobility company, Loca Rides, which provides rides from metros and bus stands to your home or office. In the mobility space, we are looking at inter-city bus services and new companies solving other mobility problems.
The two-wheeler market is much deeper than cars, as it has long been a mode of transportation for masses. The fact that 20 million new bikes were sold last year makes a strong point. I think that it makes more sense to go after that market.
In the fintech sector, we have done three investments as of now. Our first fintech investment was in Kissht, which we did way back in 2017. The recent ones are Dot, which is started by the former PayU team, and a neobank called P10 Bank. We are looking at one or two more investments in the fintech space.
Kr: How are neobanks doing in India? And what is the business model that they are implementing?
TK: Every company is doing something different, but I can talk about P10 Bank, which is creating a bank for millennials. The founders believe millennials have different banking needs. Everyone can provide a bank account, but that’s just the beginning of the answer—not the end of it.
What happens is that the tech side of a neobank enables people to buy coupons, discounted products, and other things like these. That’s a layer that gets built on top of banking. Even the lending products that are offered are created by keeping the needs of young people in mind, rather than a married person or a family. Everything targets the needs of millennials rather than just offering standard banking products.
That’s how P10 is building itself, partnering with other banks, and it is growing quite fast. There is a lot of noise about neobanks, and different companies are building their products by keeping a specific type of client in mind. I have heard of a neobank that is building financial products for small and medium enterprises (SMEs).
We are pretty much a consumption economy, and neobanks are trying to bring on board young people as their customers. People are going to use the products early on and then develop a habit. Once you catch them early, you can migrate them to other use cases, such as credit cards, travel insurance, and other things.
Banks also understand this strategy, and that is why they are helping neobanks to build a layer on top of their system, so they could co-lend and participate in a revenue-share model. Most of the revenue is going to come from lending and selling subscription services to millennials.
Kr: What kind of operational model do you look for in an e-commerce company?
TK: E-commerce in India is very small. The total GMV of Indian e-commerce companies is around USD 50 billion. In China, it’s USD 1.1 trillion. So, the scope [for growth] in India is immense.
E-commerce is largely run by Flipkart and Amazon in India, but their way of doing things is different from what we are looking for. Most of the first-generation e-commerce products were built for search and discovery. On these platforms, you have to search for the product and the buyer must know what they want to buy and which brand. If you want to add the next 300 million clients, this approach won’t work. That’s a very expert kind of online shopping experience.
That’s totally different from somebody putting a bunch of images on your WhatsApp, and then letting you select what you want to buy. For young buyers, we need a model where someone from your social group who knows your choices picks a bunch of things that you might like to buy. We are looking at models like social buying and easier product discovery. This will help bring the next 300 million internet users onto the platform.
