Lightspeed Ventures looks to cash in on cloud-based businesses

Last year, the biggest technology acquisitions worldwide had something in common. 
 

The $4.75 billion acquisition of cloud B2B marketing software company Marketo by multimedia giant Adobe, the $800 million acquisition of cloud-based artificial intelligence (AI) firm Datorama by Salesforce, Siemens’ buyout of cloud-based software Mendix for $730 million, and IBM’s monster-sized buyout of enterprise software firm Red Hat for $34 billion all point to one overriding trend. 

That is, the future of software is in cloud-based solutions that comprise AI and functional specific programmes that allow for collaboration. 

Lightspeed Venture Partners has had measurable success in related technologies. 

Two years ago, AppDynamics, an early investment, was sold to Cisco for around $3.7 billion, while MuleSoft, which Lightspeed sold to Salesforce later, went public with a valuation of around $3 billion at IPO. 

Hemant Mohapatra, Ligh­t­speed’s partner in India, says the strategy behind plays in India, which include Dar­wi­n­B­o­x, OK Credit, Freight Tiger, In­n­­o­vaccer and Yellow Mes­s­e­n­g­e­­r, are based on growing c­­­­­­o­­­m­puter and smart phone usage.  

He says, “As Internet penetration picks up in India, a lot of offline services will have to get digitised across businesses and come online. So, our idea is to invest in the b­est founders in every category of these services by using software as a primary lever for scale.”

Lightspeed doesn’t disclose its investments but officials say that as an early stage fund, it makes seed and series A investments that are in the range of $1-$3 million and $3 million-upwards, respectively. 

As for start-up Yellow Messenger, in which Lightspeed invested around $4 million, the venture allows its businesses to have a two-way conversation. 

It is driven by AI as the primary lever to scale to millions of conversations in seconds which was impossible when humans were involved. 

For decades, enterprises effectively used the telephone to provide customer support, which led to the rise of call centres and the emergence of India as a provider of tech support for corporations here and around the world. 

Then, the mobile phone arrived and it changed further the way business worked with apps and extended communications. 

Of late, the present generation is moving towards cloud connectivity bundled with AI and unlimited collaborations are set to move humans and hardware out of the loop. 

Where the mainstay was once players such as Infosys, and Genpact which delivered services, there’s been a pivot that has shifted to companies such as Inmobi and Zoho which make products.  It then further shifted to fully cloud-native and software as a service (SaaS) on licence fee companies.

According to a report by Mckinsey & Company, cloud computing adoption has been increasing rapidly, with cloud specific spending expected to grow at more than six times the rate of the general IT spend through 2020.

Lightspeed isn’t the only one taking aim at such platforms. Sachin Chhabra, founder of Peel-Works, a B2B commerce cloud-based platform for grocery stores, which he started in 2010, has got around $5 million funding in April from Chiratae Ventures, HDFC Bank, Unilever Ventures and others. 

The company connects 20,000 kiranas or homegrown grocery stores to large FMCG companies and suppliers using a very simple app that can be used easily by even a non-English speaking person. The company derives its revenue through commission on goods sold. This has most recently been pegged around Rs 2,000 crore in gross merchandise value. 

Ramdoss Seetharaman, partner at Mckinsey, says that while large companies would once drive technological changes, now it’s smaller and medium-sized businesses behind the steering wheel of disruption. “Especially in India, where trade is massively fragmented, the driver for customising software for businesses is to increase revenue which is leading to widespread adoption,” Seetharaman says.

“The challenge is that because there is data scarcity in the Indian market, software companies that play in these areas need to be versatile and modular,” Seetharaman adds.