Between 2008 and 2015, a wave of corporate venture capital funds (CVC), both local and international, started investing in Indian startups. It is this period that also marked the rise of the Indian startup ecosystem, with companies like Flipkart, BigBasket, BYJU’S, Firstcry, and Axio (formerly Capital Float) lapping up equity funding on the back of their high-potential business models and product-market fit.
A similar surge was witnessed between 2015 and 2019 when the number of startups launched rose to 2650+ from 1380+ between 2010 and 2014 as per Inc42 data analysis. In 2019, Wipro Consumer Care Ventures, an INR 200 Cr CVC fund associated with IT giant Wipro Consumer Care & Lighting, entered the Indian startup ecosystem.
Armed with an understanding of the ecosystem and the support they could offer to startups, Wipro Consumer Care Ventures began evaluating business models and making investments. The Bengaluru-based CVC fund has largely focussed on areas such as FMCG, digital, B2C ecommerce, female personal hygiene, and personal grooming, among others, in the Indian and Southeast Asian markets.
Over the past four years, the team has made ten investments in India and Southeast Asia, with an average ticket size ranging from $1 Mn to $3 Mn. Some of the most prominent names in the fund’s portfolio include LetsShave.com, The Ayurveda Co., YOU (Youvit), Power Gummies, Soul Flower, MyGlamm (acquired by Good Glam Group), One Life Nutriscience, and Happily Unmarried (Ustraa) among others.
“We initiated the fund with the idea that if we can’t start a startup ourselves, at least let us be a part of it. Let’s invest in them and assist in scaling them to the best of our abilities,” said Sumit Keshan, the managing partner of Wipro Consumer Care Ventures while talking to Inc42 as part of Moneyball Series.
However, according to Keshan, it is inherently challenging for large corporations to fall on the same page as startups. This is because corporations tend to have a different mindset, while startups operate with innovation, simplicity, and agility.
Edited excerpts…
Inc42: In today’s scenario, do you believe CVC funds have lost their first-mover advantage in comparison to VCs when it comes to startup investments?
Sumit Keshan: The way a VC can provide value to a company differs from what a CVC can offer, and vice versa. CVCs bring industry-specific expertise and can focus on building operational competencies. While it’s commonly perceived that CVCs seek strategic funding opportunities, I believe, not all CVCs are equipped to provide such strategic investments. Early stage startups often require extensive mentoring, which CVCs can readily provide.
However, does this diminish investment opportunities? I don’t think so. With the growing number of startups and diverse initiatives, CVCs can undoubtedly find opportunities to add value and potentially outperform VCs.
Accelerated programmes also prove highly beneficial for CVCs to select the right investments. At Wipro Consumer Care Ventures, in addition to financial capital, we bring deep operational knowledge, scalability expertise, and a strong understanding of consumers in the Indian and Southeast Asian markets.
Even today, CVC funds have limited investments in the Indian startup ecosystem. While most look at it from a strategic standpoint with future acquisitions in mind, we approach startup investments more from a financial perspective and function more like a VC.
Inc42: What are some of the key startup evaluation parameters at Wipro Consumer Care Ventures?
Sumit Keshan: When assessing startups, we primarily focus on several key factors. Primarily, we focus on product quality. For consumer products, we conduct lab testing to ensure the product meets meaningful standards.
Secondly, the founders and their skill sets play a pivotal role in our selection process. The expertise of founders and management teams is crucial, especially considering the various challenges that markets go through.
Further, we assess whether the startup has achieved product-market fit and if it aligns with the category size.
Finally, we place significant importance on unit economics. Regardless of the company’s scale, its ability to sustain itself over the long term is imperative for us.
As I often say, we are not building a company for investors; we are building a company for ourselves with a focus on long-term sustainability.
Inc42: What are your thoughts on investing in VC funds?
Sumit Keshan: We are primarily focussed on direct investments, as it allows for a deeper relationship and mutual learning. We find this model to be more valuable. However, we remain open to exploring other investment models, such as more VC-like or indirect investments. Each company has its unique approach, and each CVC has its distinct strategy.
Inc42: What is the intent behind your entry into the D2C space?
Sumit Keshan: The growing interest of larger corporations in the D2C space is intriguing. This sector has gained significant prominence in the past 5-6 years. While our strengths traditionally lie in offline businesses, we were somewhat slow to enter this space. D2C has become crucial for all businesses, and the interest is rising across the board — from larger players to midsized companies. It’s a logical move to be part of this trend, but the key is how effectively we can integrate and succeed.
Inc42: Are you actively hiring young talent to foster innovation, gain a better understanding of newer technologies and offer new services?
Sumit Keshan: Yes. This is an opportunity we cannot afford to miss. Continuous skill development is essential to align with the requirements of different channels. We have dedicated teams focussed on ecommerce, and while we are leaders in certain product categories like smart lighting, there is still a lot of ground to cover in the consumer business segment.
Inc42: While compiling your portfolio, do you consider the possibility of cross-pollination?
Sumit Keshan: Our investments are primarily minority stakes, limiting opportunities for cross-pollination. However, as domain experts, we bring valuable knowledge to the table, which can benefit portfolio companies. We don’t interfere with day-to-day operations, marketing, or the founders’ roles.
Inc42: Your portfolio comprises an interesting mix of startup categories. What is the next segment you are exploring?
Sumit Keshan: We aim to maintain consistent year-over-year growth across segments. Our growth strategy includes organic expansion overseas and within our communities. We have identified food as a significant area for expansion, as the food market size surpasses that of personal care. We have entered this space through the acquisition of two companies in the regional spice category and plan to launch our snack brand soon.
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