3ONE4 CAPITAL: Creating a new value through Innovation

Siddarth Pai & Pranav Pai, Founding PartnersIndia is now host to the third-largest start-up ecosystem on the planet with more than 49,000 start-ups launched in the country from 2008 to 2018. Over $50 billion has entered start-ups between 2014 and 2019 ­ a remarkable acceleration of capital deployment. Venture Capital is one of several vectors that come together to launch new value creation through innovation in any ecosystem. The country presents a large market, a diverse set of problems to solve for, and a deeply specialized and large talent pool to build world class solutions. However, we are still a capital starved nation. Venture Capital, when implemented contextually for India, is a necessary ingredient to build and scale these solutions. We believe a vital role for VCs in any startup ecosystem is the operational expertise they bring to the startups and they will continue to add real value to innovation and new value creation in this ecosystem. Being in India for over two decades now, 3ONE4 CAPITAL can classify the birth of VC to the 2010-2012 period. The early PayTM, Flipkart, Ola, and Byju's funding rounds are milestone markers of VC as we know it in India today. Since 2014, over $50Bn of funding has entered Indian startups. From e-commerce and fintech to logistics and consumer services, these start-ups have already created value of over $130 billion. India is now home to 33 "unicorns" - $1+ billion valued startups ­ that are cumulatively worth more than $73 billion and have raised $24 billion up to now. This trend shows no signs of slowing down: there are 35 `Soonicorns" ­ companies on the path to becoming unicorns by 2020 that have raised $4+ billion already and many more are advancing forward to join the ranks.

The Maturing of VC market

As the startup ecosystem scales and the company see more success, it can also expect more operational expertise to enter the VC domain. As more VCs build an exit track record, they will be more confidence in this sub asset class and capital should be more readily available for Indian VC funds that are raising new funds. This is the mark of a maturing ecosystem ¬ the feedback loops that is created between the operators and the investors. This will be the evolution of the Indian VC ecosystem as well. As we enter the 2020s, 3ONE4 CAPITAL believe there will be more Indian Rupee capital entering VC in India as well. With the SIDBI fund is setting an example of government-led initiative, more Indian PSUs and Corporates will allocate capital to this sub asset class. Corporate VCs and balance-sheet investment strategies will take larger positions and acquire Indian companies ­ Reliance Jio, Times Group, and Tech Mahindra are good examples. Finally, there will be a rise of India-first funds ­ Indian fund managers raising a bulk of their funds with Indian investors to capture the Indian market. Bangalore, Delhi, and Mumbai are already the three most active centers of startup creation and funding, with Bangalore a clear leader. The company should see more distribution in the next set of cities such as Hyderabad, Pune, and Chennai, as well as acceleration in other states as well. India now sees between $11Bn to $14Bn of VC funding entering startups every year. With more Indian Rupee participation, we may expect the annual volumes to hit $15-$18Bn over the next 5-7 years.

Investment Portfolio

3one4 Capital manages $110M across the early stage in India. The firm works in select market categories and in the intersection of adjacencies that are large, growing, and ready for unique products and services. The fund's focus areas include machine-driven actionable intelligence services for the enterprise, enterprise automation, ambient intelligence technologies, consumer products, fintech, media and multi-lingual content generation, and health. 3one4's investments include Licious, Betterplace, Open, DarwinBox, Faircent, Bugworks, YourStoryPocket Aces, and Tracxn. Over the course of working with more than 50 start-ups, one of our most valuable learnings has been the process of building a bridge of trust and confidence with the founding teams.