Moscow-headquartered venture capital firm RTP Global, which was founded by Russian entrepreneur and investor Leonid Boguslavsky, has raised USD 650 million after exhausting its second global fund of USD 200 million in 34 companies across the US, Europe, India, and Southeast Asia.
The firm will invest USD 650 million in these four geographies, with about one-third of the fund allocated for early-stage to Series B technology companies from India and Southeast Asia.
RTP started developing a portfolio in India in 2011, targeting startups in e-commerce, food delivery, fintech, ed-tech, telemedecine, agritech, and mobile gaming. Then, last year, it made one investment in Vietnam and two in Singapore.
KrASIA got in touch with Galina Chifina, partner and investment advisor at RTP Global, to learn about the firm’s strategy in these two regions.
Chifina, whose plans to relocate to RTP’s new office in Singapore this year have been delayed due to the pandemic, said she will move to the city-state by early 2021.
KrASIA (Kr): Does RTP Global have an investment focus when it comes to startups in India?
Galina Chifina (GC): We are focusing on early-stage startups. We invest in companies that are looking for late-seed, Series A, and early Series B funding. Ideally, we want the companies to have their product out in the market with some customers and active users. Generally, this is the strategy we have deployed, and we would like to stick to this.
Sometimes we are open to exceptions. If we meet an exceptional founder, we would of course be a little flexible and do slightly earlier deals. The earliest seed-stage deal we have done so far was in [credit card payment app] Cred. We committed to invest in Cred even before a team was formed and it was just at the idea stage, because we knew the founder [Kunal Shah, founder of Freecharge, which was sold to Snapdeal].
Kr: What are the sectors that you look at in India?
GC: We go after the sectors in which we have some expertise. We primarily focus on sectors like food and agritech, health tech, fintech, artificial intelligence, and SaaS. We recently started to invest in education technology and the future of work.
Our first investment in education tech was Classplus, which was recently announced. We are bullish on this sector and we hope there will be uptake in this space due to COVID-19.
We think the coronavirus might change the environment significantly. We actually started to look at this sector even before coronavirus started to spread, but now we are just more convinced of the potential in this space.
Kr: How have you seen the Indian ecosystem evolve since you started investing here?
GC: We have been in this market for a while. We started to invest in India in 2011.
I would say it’s super speedy, which makes it very promising and exciting. The cycles in the regions are quite short. In the time frame from 2011 to 2020, we have seen not only second-time but third-time entrepreneurs launch new businesses. Flipkart’s exit was one of the largest in the history of exits—not only in India and Southeast Asia, but also in Europe and the US.
The market has started to yield returns to investors, which has attracted more cash to the region. Founders have matured, there is a lot of thought given to the business models as they are not just built on growth and product features. Founders are now thinking about unit economics and burn rates. It’s amazing how fast this has happened, and we are super bullish on this region. Due to the super-fast growth, Indian companies’ valuations are still much higher than what we have seen in any other market.
Kr: India recently introduced a rule that puts a dampener on Chinese money coming to India. How will that affect the country’s startup ecosystem?
GC: This is something that all of us are currently discussing and wondering if it would affect the liquidity and the next round of funding for companies. Yes, China brings a lot of money, but we believe there will be a resolution for this. We don’t expect any major correction due to that.
Kr: Do you think this would reduce startup valuations since, for some time, Indian founders won’t be able to raise money from Chinese investors?
GC: When a correction for valuations happens, one can attribute the reason to either COVID-19 or regulations passed by India that target China.
The India market was super hot before COVID-19 happened. The last time a market was as hot as India’s was 2012, when there was a wave of e-commerce companies raising money at huge valuations in the US. Then the VCs suddenly realized there was India on the map and that they should invest there. Everyone has been waiting for this correction of high valuations to happen.
Kr: How is your investment strategy different in Southeast Asia compared to India?
GC: We have been in India for a longer time, so our network here is deeper and we understand the market much better. India is just one country with one set of rules—yes, it has varied languages and cuisines, and local differences—but it’s still one country. Southeast Asia is many countries and you have to really adapt to each of them. Specifically, one of the verticals we invest in is fintech, which is regulated differently in each of the Southeast Asian markets.
We are approaching Southeast Asia similarly to how our approach in India was when we just started. We connect with a network of familiar VCs and founders who have launched something in India before and are now moving to Southeast Asia. Sometimes employees of our portfolio companies start their business in Southeast Asia or know founders there. We ask for their help as well. We go through these two channels and basically try to find the most promising companies within this circle.
Kr: How have your portfolio companies in India evolved over the years?
GC: We have made certain rules for India which have helped us. Now we are relaxing them a bit as we feel much comfortable in the country, but a few rules are still there.
Rule number one is we don’t invest in a non-founder-led company. If it’s a hired CEO, or an idea which was originally floated by a VC or by a team that is looking for a hired founder, we wouldn’t get into such deals.
Secondly, we don’t invest alone. We prefer to have a partner on the cap table. We are going to be less rigid on this rule starting this year, but for a long time, this was a rule of thumb—we need someone who we trust to have joined the cap table before us or along with us. We don’t require them to lead the round or be the majority shareholder, but someone we trust should be on the cap table.
The third rule is the founder and the founding team should be motivated enough. If the founder’s share in the business is about 15% when we join in, we would think twice or even more than that before saying yes to the deal. We want to be super aligned with the founder’s long-term vision. Sometimes, when the ownership of the founder is low, it’s very difficult for them to stay motivated for a long time.
Kr: How has COVID-19 affected your deal flow?
GC: It takes more time to get comfortable with the founders. Because nothing tops in-person meetings. The deals we have closed so far—we have closed three deals this year in India—originated before the coronavirus happened. So, we did meet the founders before we made the decisions to invest.
Having said that, we are going to close a fourth deal soon. We are still open-minded and are trying different methods. We are relying on the judgment of partners who we trust to understand the founder. We are trying to adapt, but are eagerly waiting for the situation to get back to normal.