Keen to invest more in Indian software, fintech: Insight Partners top brass

Nikhil Sachdev (MD) and Nikki Parker (SVP) travelled to India from the US for face-to-face meetings aimed at building strong ties with Indian startup founders

Since the outbreak of the coronavirus pandemic, a lot of investors have been closing venture capital deals over video conferencing platforms including Zoom. To have face-to-face meetings and build authentic relationships with Indian startup founders, Nikhil Sachdev, managing director at  New York-based venture capital and private equity firm Insight Partners, travelled to India, along with Nikki Parker, SVP, marketing and communications and portfolio experience at the firm. In an interview with Peerzada Abrar, Sachdev and Parker said that after seeing the calibre of Indian entrepreneurs,  Insight Partners, which recently raised $20 billion for its twelfth flagship fund, is eager to invest more in this region, particularly focusing on software and fintech. Edited excerpts:

How was your India trip experience?

Sachdev: It has been a fantastic trip.  I've been helping to spearhead a lot of our investing activity in India. We are focused on software and fintech, which are core focus areas for the firm, globally. We have over 20 portfolio companies (in India) and 16 have been publicly announced. We are really excited about this ecosystem, the kind of quality of founders and ideas and the execution of those ideas. We are eager to invest more in this region, particularly focusing on software and fintech. Within fintech, there's a ton of innovation and a lot of the ‘secular growth’ drivers will be coming from within India. In software, we really view Indian software companies as global firms. We met many founders, who are building innovative category-defining companies. We're a unique partner for them to scale up globally.

Parker: Insight has been around for about 27 years and we invest in scale-ups. Historically we are more (focused) on Series-C and pre-IPO companies. Now we are seeing early-stage companies and were one of the most active Series A investors last year.  The reason for that is that we're seeing early-stage companies becoming scale-ups and getting product-market fit and really focusing on operational excellence much earlier. We are seeing that happening in India. We have an operations team, made up of 130 functional leaders. They are working day in and day out with our portfolio companies and can come in every stage of growth and support them.

What has been the impact of the Covid-19 pandemic on investments and your strategy and what has changed?

Sachdev: I think the pandemic was a horrible human tragedy. For technology and digital disruption, what we saw is that the pandemic was actually a meaningful growth driver for software,  internet and fintech companies, that touched the digital trendline. We were sitting at home more and we consumed entertainment, software, financial services and commerce differently. We accelerated our investment pace through the pandemic, not because of the pandemic but because we as a firm for the last 27 years have seen a trendline of increasing innovation and category creation and really attractive markets in software,  fintech and consumer internet. We did it (investments) in a different way. We had to do it over Zoom. So a lot of our investment activity in India over the last two and a half years has not happened face-to-face as a result of the pandemic. The purpose of this trip is to have face-to-face connectivity and build those authentic relationships.

Uber CEO Dara Khosrowshahi has in a letter to his colleagues said the company is tightening its belt because investors are questioning the firm’s profitability and cash flows. Do you see this as one of the clear signs that the joy ride of some start-ups is under lens globally and in India?

Sachdev: At a macro level, there's definitely been a change. I think we've moved from a risk-on market to a risk-off market, certainly in the public markets. What you have seen is a lot of price movements of high-growth tech companies. Regarding our business, the core is to work with highly talented founders to build category-defining companies. It is pretty unchanged. Our investments are not one-quarter trends. They're 10 year plus trends and that's how we're oriented as a long term investor. I think at the very late stages and in the public markets, there is more scrutiny and maybe appropriately so,  around not just understanding growth, but efficiency as well. But honestly, at Insight, that has always been part of our process. It is not just (about) 'underwriting growth at any cost' but really unpacking the secular growth trend and understanding efficient growth. I can't speak (on behalf) of global investment markets as a whole. But we are seeing a shift in the markets from last year to this year, where there is more risk-off mentality, where (investors) would ask more questions about not just growth, but efficient growth. At this moment, the valuation environment has changed. But I think what's more important and what we're focused on is what's the value opportunity to be created at a 10-year view.

What are the bets that Insight is making in India and globally?

Sachdev: We expect a lot of what we do globally and in India to be centred around software and fintech. We plan to make meaningful investments in India out of our global flagship fund, which we just closed. Insight Partners has raised $20 billion for its twelfth flagship fund. Within fintech in India, we're really excited about some of the consumer-facing applications that are enabling payments and access to credit in a way that's very positive for the consumer. Within the software, we made investments in the application layer, vertical SaaS (software-as-a-service) and data. We are looking to partner with high-quality entrepreneurs. We have a flexible mandate to invest in founders from Series A to all the way through pre-IPO, which is unique.

Parker:  I would put tech at the end of everything like mar-tech, sales-tech, health-tech,  cybersecurity and AI. We are globally looking for those category leaders, particularly around fintech and SaaS (software-as-a-service) solutions in India. What we are seeing particularly on this trip is the sophistication and calibre of entrepreneurs from India. The Indian market alone presents a big opportunity, but we're seeing more businesses and entrepreneurs looking at the global market. I think that this is India's time to move from a startup ecosystem to really scale up-ecosystem