Kaizen Capital Management: Shaping Human Capital Through Business Investments

Sandeep Aneja, Founder & Managing Partner, Kaizen Capital ManagementStartups often begin with little more than a dream: a concept, an idea, passion and inspiration. While we cannot deny those are the elements that guide the companies through their beginning months of tireless work, it takes much more to grow into a thriving company.

During the early days when product development is still in rudimentary phase, business model is not yet proven, traction is unclear and customer base is modest, startup companies need to find a financial supporter, a knowledge expert and a network connector. Venture capital firms can and should play all these three roles.

Venture capital is a potential funding source. A report by Preqin suggested that in the first seven months of 2019, USD5.1bn has been invested in venture capital space, backing more than 50 startups in India. But the VC ­ entrepreneur relationship does not just stop at purely financial support, it can be a true partnership on all fronts where the founders can capitalize on the VC's industry knowledge, management expertise, and contact base. Surely there are cases where the entrepreneurs can drive the growth of their innovative and creative business ideas on their own but with the VC's support, they can achieve it in a faster, stronger and more efficient way.

The Growth of Indian Venture Capitalist Scenario
Indian startups financing ecosystem is maturing. Venture capitalists are now chasing fewer but more valuable deals in India. After the peak in 2015
where some 855 VC deals were sealed, the number of VC investments has declined to about 500 transactions per year in 2017 and 2018. Despite the decreasing number of deals made, the overall dollar investment volume keeps climbing which is a good sign after the waves of hyper-funding followed by dry spells that forced almost 1,000 startups folded in India before 2016.

The need to identify more valuable deals leads to the second major transition where the VC investors gradually shift their focus from quantity to quality. The venture capital space is becoming more institutionalized with the investors establishing clearer frameworks to get greater clarity in the structure, process and due diligence of investments in startups.

What the Future Holds for VC's?
The future looks bright for venture capitalists. VC shops are still the key vendor who nurtures and supports innovative and creative ideas that can change the world, but the competition will be fiercer. Corporate venture capital firms and successful startup founders are and will be entering the space, leveraging their sector specialty and challenging the generalists who could offer little more than money.

The information technology sector has dominated the venture capital market in India for the past 10 years, reflecting India's strong inclination towards the industry. This trend will continue in the near future with the mature of Fintech and the emerging of Agritech, Edtech, Healthtech, Proptech and other sectors.

Sandeep Aneja Founder & Managing Partner, Kaizen Capital Management
Sandeep founded Kaizen in 2009 as India's first Education focused fund, and has been instrumental in building the firm's knowledge and client networks across the US, Europe and Asia. Prior to Kaizen, his experience in venture capital in Silicon Valley at Outlook Ventures and WingSpring included working with several early stage technology companies from sourcing to exit. He combines this with experience in start-up operations leadership, and management consulting in the US. Sandeep drives overall fund strategy, investor relationships, and works closely with promoters to build a path towards successful growth and value creation. Under his leadership, Kaizen has invested in 15 education companies in Asia of which several are market-leading and impactful companies such as Varthana, Founding Years (Klay Schools), Toppr in India; Yola in Vietnam; and Phinma in the Philippines. He has an MBA from Graduate School of Business at Stanford University.