Goafest 2023: 'This is the best time to invest in India'

Day two of Goafest 2023 witnessed Rajan Anandan, managing director, Sequoia Capital & Surge, discuss 'the evolving economy and the future of startups.’ Anandan was in conversation with journalist Anuradha SenGupta.

 

They discussed how the future of startups lies in leveraging emerging technologies to solve complex challenges, create new markets, and drive economic growth.

 

Starting right 

 

Anandan set the tone by highlighting the exponential profitability they will see in the coming years. “I truly believe in the profits these companies will incur in the next six quarters,” he said.

 

Stating that when it comes to this sector one should keep in mind that technology has its cycles of highs and lows, Anandan shared that the sector is beaming with exuberance. 

 

He said, "When you have that much capital come into anything, it doesn't matter if it's real estate, public equities or private equities, you actually do see a level of exuberance. So startups went through that cycle, but then as you would expect, with the global economy, things made up for inflation."

 

The current scenario 

 

Anandan shared that back in 2010, there was less than a billion dollars going into the Indian startups portfolio.

 

However, Anandan stated that the cycle has been corrected.

 

“From our standpoint, this is the best time to invest in India,” he said. 

 

Speaking about what it would take to raise growth capital today, he said, “You have to have very strong unit economics and many businesses will have to be profitable. That's going to take a couple of years.”

 

What works in India 

 

According to Anandan, one has a better chance of succeeding if one is trying to raise less than INR 100 crores. 

 

“If you're trying to raise more than INR 100 crores, that market has slowed down. But otherwise, it is actually very active. The number of companies that come and raise a seed round is actually very healthy,” he shared. 

 

He also believed that all late-stage companies have one priority and that is to get profitable. Anandan added, “If you're not profitable, you're only going to spend on advertising that has a very clear near-term return on investment.” 

 

He added that this was the reason why last year’s IPL saw a large number of startups advertise.

 

Challenges that startups face 

 

There are two instincts for every late-stage company - either they're going to get profitable, or they're going to be out of business.

 

Adding to this, Anandan said, “Basically, if you're not a profitable company, you can't go public. So what we've learned, we’ve seen happen with all those guys.”

 

However, he predicted that most start-ups in India will actually get profitable. He also cited examples of brands like Paytm that have grown immensely profitable in such a short span. 

 

The future 

 

“The big question is, where are the profits?,” Anandan asked before stating that he believed there should be signs of them in the next year and a half.

 

“Give it 12-18 months. We are going to see enormous profits," he said. 

 

Anandan also pointed out that once companies start to reflect in the near term, they’re bound to cut out all expenses that don't lead to very tangible and high return on investment. 

 

Speaking about what he truly believes the future of startups going ahead would be, he stated that the cycles he was earlier referring to will happen for sure. 

 

Since music is the theme of the ongoing Goafest, SenGupta asked Anandan to name a song which he thought rightly described VCs (venture capitals) today. Anandan won applause as he named the song ‘There’s never been a better time.’