APAC VC Panel: India Early-Stage Recovery, Emerging Markets Cross-Border Challenges & Deep Tech Boom - E482

· Podcast Episodes English,VC and Angels,Southeast Asia,India

 

“I think there's a lot of headroom, and over the last four or five years, we've seen a bunch of high-quality startups being established. That's one sector that's been picking up. We're also seeing, in a sense, policy driving the setup of startups in various sectors. For example, the semiconductor policy from the government of India has propelled the growth of startups in that space over the past couple of years.” - Ashwin Raguraman, Cofounder & Partner of Bharat Innovation Fund

 

“Investing in growth is becoming more attractive again, and as a couple of speakers already mentioned, this makes it an ideal time for venture investing. Whatever you may think about it, there's a geopolitical bifurcation between Greater China and the West, which we believe creates opportunities for technologies that enable independence on both sides. Lastly, the West is increasingly looking to decouple from Russia, and we've seen innovations that, for example, make fertilizer applications more effective, reducing reliance on countries like Russia for sourcing those ingredients.” - Brent Ogilvie, Managing Director of Pacific Channel Limited

 

“Macro-led, what's interesting and worth addressing is that funding flows are now seeing India as an attractive market, whether out of their own volition or due to the sudden vacuum created by geopolitics and the flight of capital from China, among other reasons. We're seeing increased interest from LPs, FOs, and emerging managers who are looking more closely at India and trying to understand and navigate how to invest. We're hosting many of these meetings as we help people make sense of a country that's moving rapidly on all fronts.”- Nruthya Madappa, Partner at 3one4 Capital

Jeremy Au moderated a panel of venture capitalists to unpack the key trends shaping APAC’s investment landscape. Nruthya Madappa emphasized India's rapid recovery in early-stage VC, driven by second and third-time founders and $600 million deployed across 80+ companies at 3one4 Capital. She outlined how India's growing consumer class now outpaces China’s, creating new market opportunities. Brent Ogilvie highlighted Pacific Channel's 98% IRR over 14 years, investing in health, food, and environmental startups, while spotlighting the growing role of AI in deep tech. Ashwin Raguraman pointed to India’s Semiconductor Policy as a key driver of innovation in deep tech. The panelists also noted macroeconomic shifts, including capital moving from China due to geopolitical tensions, and how India’s Unified Payments Interface (UPI) is transforming fintech. They reflected on the broader shift toward sustainability and economic independence, reshaping how VCs allocate capital across the region.

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(01:44) Leesa Soulodre:

We're actually going to have a panel discussion to really explore what's on the horizon for VC in the region and the factors shaping investment decision. Leading this discussion is Jeremy Au, host of the Brave Southeast Asia Tech podcast. I happen to tune into his podcast on a regular basis at three o'clock in the morning from my time. So it is one that you don't want to miss. Three things you should know about Jeremy, one, he is a Seasoned entrepreneur and VC investor with deep insights into the Southeast Asian tech ecosystem.

Number two, he's built this phenomenal platform through his brave Southeast Asia podcast, where he interviews top leaders in the region, giving you unparalleled access to their experience and insights. And number three, he has a really strong focus on startup growth strategies, helping founders navigate the real complexity of scaling businesses across Southeast Asia.

So Jeremy, I'm going to hand it over to you.

(02:34) Jeremy Au:

Well, I'd love to welcome our three panelists in this group. So good to see all of you here today. So today we'll be talking about the VC trends in the APAC region. So what we'll just do is just go around and have everybody introduce themselves real quick.

I'll introduce myself as he shared. The key thing is I am here in a capacity. I also invest at Orvel as a VC fund across Southeast Asia. I also host the Brave Southeast Asia Tech podcast interviewing founders and VCs with 60, 000 listeners every month at www.bravesea.com. We will have time for questions.

So please put your questions into the chat and we will be able to spotlight some questions that are relevant for that. On that note ,Nruthya, would you like to go ahead and introduce yourself?

(03:16) Nruthya Madappa:

Yeah. Hi. Good afternoon, everyone. I'm dialing in from Singapore today, though. I represent an early stage venture firm, 3one4 Capital, out from Bangalore, India.

Over the last seven years, we've built up into being one of the most leading early stage venture houses in the country, managing over four, four funds with over 600 million in assets deployed across 80 plus active portfolio companies. We invest across sectors where India specialists and over 60 percent of our firm is focused on how we can support our companies after that first check into them, which has been critical in both their success and eventually ours.

So happy to tell you more about that. But thank you for having me here.

(03:57) Brent Oglivie:

Yeah, certainly. Greetings, everyone. So I'm the Cofounder of Pacific Channel. We're a deep tech VC. We invest across Asia Pacific. We're focused on the future of food, health and the environment. We've driven nine exits. We've produced an average IRR of 98 percent of the last 14 years.

So we've had a very good run. And like all of our five partners, I was previously an operator. I've led three successful exits from formation.

(04:25) Ashwin Raguraman:

Hi, good to be here. I'm dialing in from Bangalore in India, and thanks for having me on. So I, I manage an early stage deep tech venture capital fund investing in Indian startups that are addressing global markets.

We manage about a hundred million dollars of capital and typically invest in the pre and series A rounds. We have a portfolio of about 25 companies now. Got checks of a million to 3 million. First check and then follow on in our winners I've been in the Indian Deep Tech VC market since 2010. When I set up my first fund did a fund for full fund cycle, exited the fund back in 2017, and we set up a different GP to set up the next fund, which is called the Product Innovation Fund, where I'm a cofounder.

(05:05) Jeremy Au:

Great. So, you know what, this is a question for everybody. What is something that you're seeing in a VC market today?

(05:11) Nruthya Madappa:

In India, of course, the early stage VC market has all but recovered. We're seeing impressive deal flow with founders who've done this, maybe not even just the second time around, but the third time around across sectors. We're seeing a very high quality in particularly one of the spaces that both Ashwin and I look at, which is deep tech. We're seeing things across synthetic biology. We're seeing industrial automation startups. It's still early in the AI journey, and we're looking forward to seeing a lot more fully baked companies come out of that as the infrastructure towards that continues to improve within the country.

But in India, at least it has been, as most of you must have heard, the public markets are performing well. Most we see, we've had a slew of very high. Calibre, new age technology, IPOs in the past few months with several more to come on the markets are performing really well. All of this has led to really great sentiment across the different stages of investing on across sectors, just broadly for a little bit more macro that's driving some of this euphoria. We've seen and never before sort of seen formalization of savings with Indian retail investors moving away from just gold, fixed deposits as like, their investment instruments and into the equity markets that has led to a really phenomenal, actually, a two X ing of both the equities and mutual funds markets in the past decade alone. This is leading to a very vibrant homegrown equities market, which is obviously extraordinarily important for all of us investors who even invest as early as the early stages within seed and series A. So really great outlook as far as India is concerned, maybe Aswin can add a little bit more from his perspective as well.

(06:55) Ashwin Raguraman:

Yeah. Since you triggered that on my side, let me go next, perhaps which is let me divide my answer into three buckets, perhaps. What's happening on the VC side, the investor side, maybe a little bit on the startup side. And then a broader sort of narrative on the sectors. On the VC side, there's a ton of micro VCs who are getting set up and have been over the last two years, right? There's a massive number of micro VCs, which is taking care of more of the seed stage ecosystem and creating that funnel for a little bit later stage funds, such as ours. And we're seeing a bunch of them getting set up. Some of them are first time fund managers. What we also have let's say fund managers from very large established VC funds were stepping out from their homes after 15 years of investing out of a certain GP setup and creating their own funds. And a bunch of that is happening as well. The third trend quickly on the VC side is you also have very interestingly, some of the large blue blooded funds in India. If you were to think of the Sequoias and the Matrix this is of the world. Who have had a little bit of a dependency on their principles in other parts of the world, like the U. S., are also going independent and then realizing that they have to, and they're getting a life of their own in a sense.

And so that's a bunch of trends on the VC side, which is sort of augmented also by a bunch of family office capital that is coming into India, both into VC funds, as well as into the startup ecosystem direct directly itself. From a startup perspective. I think, I mean, I sort of echo what Nithya said which is, there's just a whole bunch of startups that are getting set up. The rate at which the number of startups getting set up is growing is really at the rate of knots, which means for us, we see sometimes there's a lot more noise to sift through to find signal. And that's something that we are seeing that is happening, but there's obviously, when the base of the funnel is high, you also end up having high quality startups that are emerging. And one of the things driving this, if you ask me honestly, is the top ti out of India that was going into financial services.

And this is engineering talent that is going to areas like financial services and consulting, have decided that the thing to do today is to create startups, right? And so that's the other trend that's emerging. And finally, on the sector part, I mean, we've been investing in AI since about 2017, 2018. And so we have two views on AI which is the gen AI view where there's a buzz today, but we are still waiting to see serious startups. But if I go back to some of the traditionally AI startups and computer vision and so on, I think there's a lot of headroom, but there's also been a bunch of high quality startups that have set up over the last four or five years. And we have been investing quite significantly in that space.

So that's one sector that's picking up. And we are also seeing, in a sense, sometimes policy driving a lot of setting up of startups and sectors. For example, semiconductor policy, which has come out from the government of India has propelled more startups being set up in that space the last couple of years.

(09:45) Brent Oglivie:

I agree with Ashwin, we're seeing increasing quality of startups, especially at the series A stage and at attractive valuation still. And we think that's likely because a lot of the early stage companies that did survive this long downturn have shown their ability to operate efficiently and to hit milestones with limited resources.

So that makes them attractive, of course to us as investors. I think there's increasing focus on startups that actually solve real world needs. And within the startup and partly, for some of them, their focus is on sustainability, financial sustainability, environmental sustainability and companies are doing more with less, which is a great trend.

Our ventures are more aggressive about using grants and other sources of non dilutive funding. And I guess the reality is a number of ventures are just not making it. We've seen a number of alternative protein companies fail in the marketplace. And, I think those that are, can, sometimes too early, you can be too early in as a pioneer, you just end up with arrows in your back, of course. And for us, we're deep tech investors and we've seen a global trend to more investment in deep tech. And I expect consequently less in the digital technologies and I think some of those easy wins or easier wins in digital has probably been realized by now. And then, in our view anyway, there's probably no relocation to AI. This AI first companies, a number of our deep tech companies are enabled somehow by AI. And obviously it's a potent tool to be using. And then lastly, on the VC community happily, especially within Australia, New Zealand and Singapore, we're seeing increasing syndication VCs being prepared and wanting to work together, which is encouraging. for sharing. Yeah.

(11:32) Jeremy Au:

So there we are in terms of seeing what you're using and seeing in your various markets. So what are the macro factors that are impacting this right now?

(11:41) Nruthya Madappa:

I think I touched on this a little bit about formalization and financialization of household savings sort of helping the equity markets. What's also interesting, and this is again, we can only speak to, I can only speak to India because we only invest exclusively within the region. We're also seeing that for the very first time, India has added more consumer class citizens, which is folks who spend over 12 hours a day more than China. So 33 million consumers in India, 31 this year, there's some very foundational shifts happening that's leading to a premiumization of the kinds of products that folks, not just from urban India, but to tier two, tier three and beyond have demand for again, like I said, we're seeing deeper innovation across financial products in India. The person you need to innovate out innovate is actually sort of government enabled large sort of private public NBCI, which run the entire unified payments uh, UPI sort of network in payments. They've got a lending interface up. So it's a whole digital public goods stack that as startups within the financial spaces, you need to be able to not just work very closely with adapt around and also innovate almost against.

So really phenomenal innovation happening at the sort of regulatory regulator led government led or government blessed and also sort of matched with what we're seeing from the private sector as well in software. What's really interesting is that there is increasing global demand for Indian software, not just because of a value argument, which was, I think, the case about a decade ago, but truly because of more impressive products coming out of here across the entire software spectrum. We're seeing something very similar in deep tech for a very long time. Our deep tech companies used to face the question, Oh, why are we not seeing this out of the U. S.? Or why are we not seeing this? seeing this out of China are what you're building truly so foundational? Those questions have become much quieter now. There is belief that the Indian deep tech ecosystem sort of stands on its own. And of course that's on the backs of extraordinarily successful technologies that have scaled very successfully up until now.

So besides just the broader macro, we're also seeing a ground swell of the highest caliber of founders, focusing on like industries that they really know very well and to brand's point, doing a lot more with a lot less and building extremely frugal, but very resilient companies across multiple sectors. So just broadly, it's a really nice marrying of the macros while also having a very ripe population of innovators that are building truly for differentiated markets or a global market from the get go. So as we see, that's very exciting.

Macro led, I think what's interesting and I think we should address here is that funding flows have started seeing India as an interesting market whether. out of sort of their own volition or because of the sudden vacuum created by geopolitics leading to flight of capital out of China and several other reasons. So we're seeing a lot more interest both across LPs, FOs, looking towards India and emerging managers in particular a little bit more closely trying to understand and navigate how to invest in India. We're hosting a lot of those meetings as we have people make sense of a country that's moving very rapidly on all axes. So, that's another really interesting trend that we've seen over the last year.

(15:06) Brent Oglivie:

Yeah, so, fundamentally, we invest into secular market trends. So, the future of food, health and environment, these things are not going away but on the macro front, obviously, as interest rates are starting to fall, investing in growth is becoming more attractive again. So as a couple speakers have already said, that is makes this an ideal time to be investing in venture, in our view. Whatever you might think about it, there's a geopolitical bifurcation greater China and the West, and we think actually that creates opportunities for technologies that help enable independence, actually, on both sides.

And then, I guess the last macro for us is, the West increasingly looking to decouple from Russia. And, we've seen innovation, for example, that makes existing application of fertilizer a lot more effective and therefore, decreases reliance on countries like Russia for sourcing those ingredients.

(16:02) Ashwin Raguraman:

I probably agree with everything that Nruthya said. Again, I mean, with our focus on India. I do believe that there's a convergence of many things that are happening, and one, let me start almost in reverse order, but there's a lot more capital flow into India. At least the serious interest in India, in terms of just the scale of capital that's flowing in from sovereigns and family offices that are sitting outside of the country as well. That is almost complimented by, a lot of capital that is also from Indian family offices that has come to the party more recently.

(16:31) Ashwin Raguraman:

And some of this is also reflective of two things. I mean, of course. Our GDP is growing extremely I mean, comparatively or relatively is growing well. We're in the six and a half to seven and a half percent annual growth in GDP, which is a little bit different from what's happening in many other parts of the world.

But our public markets are also doing extremely well, which is good and bad for us because they're delivering strong returns to investors in that asset class. And then the VC asset class is under stress to those returns simply because we have a higher risk profile. And so it becomes difficult questions with, investors to answer about how we plan to beat public market returns.

But at the same time, public markets have also created a lot of wealth. For family offices in India and therefore they are looking at other asset classes to also diversify into NDPC asset classes, one that they're looking at. I think I spoke about a couple of the other macro trends earlier, which is the talent that is available today.

I think it's clearly startup founders at least successful ones have assumed rockstar status, which is very different from back in 2010 when parents of, let's say, women would be very careful having their daughter marry a startup founder. And today, it's almost rockstar quality that our startup founder enjoys that they're successful or even moderately successful, to be honest. And that's a fundamental shift. I think also, in terms of another fundamental shift, it's just the areas in which startups are beginning to sprout, if I can call it that and a lot of capital is going into back in, let's say early 2000s and even until 2010, there was a lot of capital flowing into the consumer space, right?

And then we had perhaps the advent of marketplaces where a bunch of capital went and we had successful models, sometimes replicas of startups that existed in other parts of the world. And once we had that, it almost led to another phase where we saw a lot of SaaS companies emerge from India go out and address global markets and then some of them even listed on the U. S. public markets, NASDAQ and the such like. What we are seeing early signs off is in the need and desire to differentiate startups that are establishing now are looking at putting together big tech solutions just to compete, to enter customers. And I think there's an emergence of that it's not yet at scale or at the scale that some of the other areas are, but we're clearly seeing that emerging as the next big opportunity. And that's why we are also sort of, kicked to be part of that thought process.

And then finally, I think I touched upon this earlier as well. We are seeing a lot of effort from the government In specific areas, semiconductors being one, sustainability being the second, AI being the third. Biotech being the fourth. And I can name about seven or eight such areas where there are specific missions that have been created to figure out how not just large companies can thrive, but more specifically how startups can get created and thrive. And while some of these are still in execution phase I think, we were at the early stages of some of those platforms being set up and all of them is on the back of something again, that's what you mentioned, which is the whole DPI or the digital public infrastructure that got set up the platform that we have called other on which UPI was built that enabled financial transactions. And you have a bunch of successful companies that have scaled, which have leveraged that. And we see similar platforms coming up in the logistic space, in the healthcare space. And we think there are startups that could leverage these platforms that are being set up by the government and, quasi government sort of entities. And could scale significantly because of these, the scale of the platforms.

(19:59) Jeremy Au:

Thank you so much. Appreciate it. So that pretty much is almost the time. So please type in your questions. And then I'll happy to bring them up in the next five minutes. So please type them into the box.

In the meanwhile I guess one quick question I have here is anything you're excited about, specific company or specific trend brand, you want to go ahead first?

(20:17) Brent Oglivie:

Yeah. So within health we're excited by both neurological treatment and enhancement. And I think that's increasingly emerging, is attractive both in the West and it's now part of China's five year plan as well. So we're just this year appointed a neuroscientist to help us make deals in those areas. And then I think You know, more broadly health is emerging from quite a deep bear market, which again makes it an attractive time to be investing. And then lastly in the environment area, resolving waste is obviously increasingly important both to the variable quality, organic waste and plastic waste. So those are areas that we're excited about.

(20:57) Jeremy Au:

Great. Question for Nruthya, how do you see the landscape expanding?

(21:01) Nruthya Madappa:

We'll see very different types of capital sort of emerge in India. Currently, for instance, I'll just talk about the VC and then, of course, the start up landscape. But on the VC landscape, there still remains sort of a glut of capital on the early stages and pre IPO and very large growth.

There's a very large opportunity in the mid market stages for domestic funds to do a lot more. Then we started seeing a lot of new funds being set up as well, which was typically global capital fed. On the sort of broader startup landscape and technology side we see, just to something that Ashwin mentioned, really fantastic companies emerging in the semiconductor space and the specialty chemical space and synthetic biology, and we've taken bets across all of those in Fund4 and are looking to do a lot more.

(21:46) Jeremy Au:

Another question that people have is, could everybody kind of share which geographies you invest in? So Nruthya, then Brent and Ashwin, could you just share like, which geographies you invest in so that people know? There's another question by Hosea.

(21:58) Nruthya Madappa:

Yeah, I'm India focused, but we have about 20% of our portfolio in US and Singapore companies.

(22:03) Brent Oglivie:

Yeah, so we're New Zealand and Australia focused and we have a portion globally at the moment, Singapore and England.

(22:10) Ashwin Raguraman:

So again, we are India focused, but we have a bunch of companies in the U. S. as well, a smaller set of companies that are U. S. headquartered.

(22:17) Jeremy Au:

Okay. So there's a question for Ashwin. Is it a good idea for a founder to try to do a startup in India instead of targeting the America or outside India?

(22:28) Ashwin Raguraman:

Setup is one part of it. I think where your markets are. So if I understood the question, it's US markets. You set up in India, right?

(22:35) Jeremy Au:

Should an Indian founder target India or America?

(22:39) Ashwin Raguraman:

Yeah, depends on your solution and your product, if you're addressing a consumer, or you have a consumer focused product or solution, I think India is the place to go. If you think about an enterprise solution, which is a lot of what we invest in, I would say that target India first, but very quickly, the volume and velocity markets are still the US as compared to India.

Having said that, Indian enterprises are fantastic in helping you refine your products. And so your target Indian enterprise to start with. It's always great to start in your or to have a good strong domestic market to address your product gets refined. But what we've realized over time is that at least as of now, the US markets provide a different level of volume or scale, as you may call it, and certainly higher velocity than Indian enterprise markets.

But it's very different if you're doing something in the consumer space. And there's certainly a lot more. I mean, there's a lot of scale in the Indian consumer markets and depth as well.

(23:28) Jeremy Au:

All right. Thank you, everybody. Appreciate everybody sharing and we'll share your LinkedIn on everywhere. All right. See you.

(23:33) Leesa Soulodre:

Thank you, Jeremy.