Blume Ventures

Investing in Emerging Markets

India
Blume Ventures
Pre Money Conference,
San Francisco, June 27
Private and Confidential

Blume Ventures

Incredible India !
Why it Matters

Section credits: Citibank (India) Technology Banking

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India Continues to Have a Favourable Macro-Economic Profile

High GDP Growth, With a 1.1 billion & Growing
Population

is Expected to Propel Consumption to New

Heights
1,556

Aggregate Consumption
In US$ bn

Aggregate
Consumption
to Quadruple

Bubble Size Current

Population
Source: The World Factbook and Economist Intelligence Unit.

FDI flows in India continue to remain strong

(US$ bn)

Source: Economist Intelligence Unit.

Note: Figures in US$ bn

Calendar Year
Source: McKinsey Global Institute Consumer Demand

There are Concerns but also Confidence

Currency devaluation
Political uncertainty given general
elections in 2014
Lack of political consensus
Uncertain tax environment
That said, Growth projected to be 5-6%+,
and if the above concerns are alleviated
and a more investor-friendly Govt is in
Power, this could be higher

Attractive Economic & Demographic Trends

Total Population: 6.9 Billion People

2010 World Population

Real GDP per Capita Growth

(mm of People)

(2011 2020 CAGR)

Source: US Census Bureau (2010).

Sources: The Economist Intelligence Unit, CIA Fact Book and Citi Investment Research as of March 2011.

Just this month (June 2013), Fitch upgraded

Indias Rating Outlook to Stable driven by
Government steps to contain the deficit,
stabilize the rupee and other positive reformoriented actions

Attractive Economic & Demographic Trends (Contd)

Projected Shift in Composition of World Economy
2010 / 2030E Global GDP Composition

Projected Evolution of the Global Economy

($ in trillion, purchasing power)(1)
Rank

Country

2010

Rank

Country

2030

US

$14.12

China

$38.49

China

9.98

US

24.62

Japan

4.33

India

23.27

India

3.92

Japan

5.55

Germany

2.91

Brazil

5.28

Russia

2.20

Russia

4.82

Brazil

2.16

Indonesia

4.28

UK

2.16

Germany

4.05

France

2.12

UK

3.67

10

Italy

1.75

10

Mexico

3.20

Sources: The Economist Intelligence Unit, CIA Fact Book and Citi Investment Research as of March 2011.
(1) PPP stands for Purchasing Power Parity, which is a theory of long-term equilibrium exchange rates based on relative price levels of two countries; the purchasing power of different
currencies is equalized for a given basket of goods.

Driven By Rising Middle Class and Domestic Consumption

India is One of the Worlds Youngest Nations

With the Most Diverse Society

Jammu
&
Kashmir

Ao
Assamese
Bengali
Gujarati
Hindi
Kannada
Konkani
Kashmiri
Khasi & Garo
Marathi
Manipuri
Malayalam
Mizo
Nissi/Daffia
Oriya
Punjabi
Tamil
Telegu

Over 300mm People Within

the Target Age Group

A Growing Middle Class

46% middle
class by 2030

<$2,000

$2,000 - $5,000

$15,000-$25,000

>$25,000

$5,000 - $15,000

Sources: Street Research, Mckinsey Estimates and The Economist Intelligence Unit

Haryana
Delhi
Rajasthan

Gujarat

Nepal

Sikkim

Uttar Pradesh
Bihar

(in millions)

Arunachal Pradesh

Bhutah

Assam Nagaland
Meghalaya
Manipur
Bangladesh
Jharkhand
Tripura
Madhya Pradesh
West Bengal
Mizoram
Chhattisgarh

Maharashtra

Orissa

Yanam (Pondicherry)
Andhra Pradesh
Karnataka

Pondicherry
(Puduchcherry)

Karaikal (Pondicherry)
Mahe
(Pondicherry) Tamilnadu
Kerala

. . . With a Rapid Increase in Urbanization

2010A 2030E CAGR: 2.6%

2030E 2050E CAGR: 0.5%

Annual Household Income (USD)

Himachal
Pradesh
Punjab Uttaranchal

Andman & Nicobar Island

India is Among the Most Attractive Internet Markets Globally

Low Internet Penetration Presents Further Upside
Internet Penetration (%), As on December 31, 2011

78%

44%

39%

38%

33%

26%
10%

# of Internet
Users (mm)

US

Russia

Brazil

China

World

Asia

India

245

61

79

513

2,267

1,016

121

Source: Internet World Stats, as of December 2011.

Unique Internet users in India

India: 2nd Largest Wireless Market Globally

(Wireless subscribers as of December 2011, in millions)

Source: Street Research

Source: WCIS and TRAI

Rapidly Growing Smart Phone Penetration

Smart Phone % of all Cell Phones

Active Internet Enabled Smart Phones (1)

Source: TomiAhonen Consulting Analysis December 2011, Citi Investment Research and
Analysis.

Source: KPMG in India Analysis.

3G / 4G Adoption a Key Growth Driver

(2)

Early 3G numbers are encouraging and point to medium-term upside

Analysts project a c.8% 3G penetration by 2015, which we believe is
conservative
(Subscriber base in mm)

Penetration

2%

1%

5%

8%

107

60
26
10
2012E

2013E

2014E

2015E

Source: Analysys Mason, IDC

Notes: (1) Includes Wi-Fi and 3 / 4G enabled smart phones. (2) Includes 3 / 4G enabled smart phones.

Supported by Increasing Smart Phone

Penetration

India The Mobile First Digital Economy will kick in (very) soon

Source: Qualcomm, KPCB Report

Blume Ventures

Early Stage VC in India

Venture 2.0; building ground-up this time

Private and Confidential

Why India early stage?

Blume Ventures

Early stage venture in India can offer higher risk-adjusted returns relative
to other asset classes. Investors can potentially get earlier and multiple
exit options besides IPO or M&A, stakes could potentially be acquired by
VC/PE investors across various financing rounds
Target IRR
returns

> 25%

Venture capital

20-25%

Private equity

18-22%

Public markets
Blume Ventures

14-18%

5-10

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~ 25

> 50

100s

Increasing Competition

Early stage

# of Organized
Funds (India)

Increasing Returns

Asset class

Valuations
are still
attractive,
Investors
collaborate
& cooperate

More
competition,
inflated
valuations,
capital
deployment
pressures

India - Early Stage Funding

Blume Ventures

Many VCs in India have moved upstream, into the realm of Growth VC and PE.
This has created a gap for startups that need critical seed and angel funding

Blumes focus

A majority of VCs have moved

upstream

Pre Series
A

Angel groups
Individual angels
Angel funds
Incubators & Accelerators

Inventus
Accel
Helion
Sequoia Capital
IDG Ventures
Saama (formerly SVB)
Kalaari (formerly IndoUS)
Matrix
Nirvana
Omidyar
Qualcomm

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Nexus
Canaan
NEA
Bessemer
Norwest
SAIF
Lightspeed
Fidelity
Tiger
Vertex
Intel
Cisco

India Shift from 2009 to 2013

Blume Ventures

Pre Series A
Burst of accelerators, seed funds, super
angels (& their quasi-funds)

Almost NO change in the set of Series

A / B / C players

Blume was first of its size in this cycle at

least a dozen more emerged in last 24 months
Reduced attractiveness of the 2006-08
vintage angel groups

Some wind-downs, some rebranding,

some splits amongst larger VCs
Most of them on new funds + limited
exits => large active portfolios

Fragmented angel networks don't work well

as yet (close-knit networks only)
Lack of a network / marketplace of mentors,
advisors, domain experts, service providers
(we may build it like FRC / @500)

IPO market as dormant as ever in

tech, focussed only on exceptionally
large cash-flow or gross rev biz models
Trickle of M&A; we need a flood

Lack of transparency around VC performance

Private and Confidential

Blume Ventures
Smorgasboard of Investment Styles
the pre-2005 "incubator"
models - legacy college
based, govt funded

the we-are-the-domainexperts accelerators like

tandem and angelprime

the 2005+ disruptor

funds such as the entire
audience at pre-money

all models coexisting and

jostling for space - what we
have is a smorgasbord of
styles, lots of noise, everyone
waiting for the music to begin
the let's-copy-the-valley
model (classic $150-250
mill funds, all the usual
suspects)

the 2008+ "new

accelerator" models
(YC / TS clones and bad
ones at that) - more
focussed on demo days
than value
-

the Pre-80s style small

funds, small investments
(not too many deep tech
plays though)
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India the Nuances

Some Localized Startup Ideas
RedBus (Bus Ticketing)

Blume Ventures

Localized problems that

Investors need to be aware of

Tally (Accounting Software on CD)

Large Cash Economy, cards

underpenetrated, payment infra highly
regulated

AppsDaily (offline App Store)

Do-it-for-me > DIY

Gharpay, Delhivery (e-comm Only

Logistics and Payments)

Transport Infrastructure creaking

overburdened as its being built

JustDial (yellow pages on Voice)

Every Citys Tech culture is quite

different

MadRat Games (Indic language, local

character design board games)

Broadband Infra well below optimal

Mobile Service Providers have too
much control over app economy

Every challenge is an opportunity, but nuanced.

Private and Confidential

India some big ideas & themes

Blume Ventures

Mobile First (device and access penetration much higher)

Fix the SMB problems (35-40 million small businesses)
Location tracking and services
Fixing e-commerce backends B2B commerce, payments
Video bigger than text?
Audio / Video Indic languages content bigger than English
Gaming will leapfrog consoles to Mobile and Tablets
Crowdsourcing Surveys, Information, Tasks, Capital
Reimagine traditional plays travel, jobs, housing, dating/marriage
Private and Confidential

Blume Ventures

Blume Ventures
@ the heart and center of the microVC
movement

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Blume a short history

Blume Ventures Fund I is a 2011 vintage $20 mil India-focused seed
stage fund
Helping Indian tech startups seeking a round between $100,000 to
$500,000 in a seed/angel round
Blumes sweet spot is $100-$250K (in rounds that it LEADS; >50% of
round)
And $50-$250K in Syndicates (<35% of round)
We then support our best companies with bridges (mostly convert
notes to next rounds) + pro-rata participation in Series A rounds
with an additional $200-$750K
Stakes post-Series A are 10-15 % (in Leads) and 5-10 % (in
Syndicates), with a few exceptions on either end of the range
Private and Confidential

Blume Performance

Blume Ventures

6 up-rounds (Series A / green shoots Series As) in Blumes portfolio

to date from VCs including Accel, Helion, Kalaari (formerly IndoUS
Ventures), Nirvana Ventures and Jungle Ventures (Singapore)

Another 3 in term sheet stage

..Average multiple achieved @next round = 3x
..2 shutdowns, both cos assets being sold for a small price
Private and Confidential

Blume - Investments & Sectors

Core (75%)
Internet + Mobile
- Infra &
Platforms
HR / Skills /
Employability

Consumer
(other)

Consumer
(e-Com -Goods
+enablers)

Other Niches
(25%)

Ad Tech /
Marketing /
Mkt Research

Internet /
Mobile /
Digital Media

Blume Ventures

Content /
Publishing

Clean /
Green Tech
ITeServices
Life
Sciences

SaaS

Consumer
(e-Com Svcs
+enablers)

Manufacturing /
Robotics
ITeServices
Education

We invest in the change we want to see in India and founders who believe the same
55 Investments (as of Mar 2013, 27 months from launch)
About 40% will grow out into or cater to international markets more B2B, some B2C
100+ founders, 10% Women, 5% Non-Indian citizens
40% Bangalore, 30% Mumbai, 20% Delhi NCR (Rest in Pune, Hyderabad, Chennai)
60+ LPs (all entrepreneurs) invest $20 mill; 1st VC fund w/100% Indian money
4 member Investment Team, 4 member Support team, 3 member platform team
Platforms being built out 1st hacker on payroll

Blume Mantra = Back to basics + best-of-br

Indias need:
to build a classic bottom-up Venture Ecosystem model with best-of-breed
practices adopted from disruptor funds - both from US Innovators and
Other Markets (China / Europe / Israel)

We take inspiration from all the godfathers

- USV / FRC / Felicis / @500 teaching us risk/capital allocn
- First Round teaching us building automation of ecosystems
- Angelist will enable future building of co-investment syndicates
- Innovation Works & Andreesen Horowitz teach us scaling ops
- Learning from Israel on how to Build in India, Ship to the Planet
We will further adapt for India
- Build proprietary angel network for high quality co-investors
- Build proprietary mentor and advisor networks
- Build own M&A platform for systematic exit strategy
Private and Confidential

Blume Ventures

Thank you @500

Youll see a lot more of India and Blume soon

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