Earlier this year, as the pandemic worsened, Lightspeed India Partners raised its third India-dedicated fund of USD 275 million, with a focus on early- and growth-stage opportunities. The funding comes on the heels of a huge exit the venture capital firm made last year by transferring its stake in Oyo for roughly USD 850 million in a secondary share sale. Now, Lightspeed still owns 4% of the hospitality startup.
While India has been Lightspeed’s major market in Asia, it has made a few investments in Southeast Asia as well. This year, it set up an office in Singapore, with an eye on becoming more involved in the region. Lightspeed India’s partners, Bejul Somaia and Akshay Bhushan, will oversee the firm’s investment opportunities in Southeast Asia.
We spoke with Bhushan about the pandemic and its effects on the startup ecosystems of India and Southeast Asia. Despite the initial dip, Bhushan said, Lightspeed’s pace of deal making has accelerated this year. “We made five to six deals in India and a couple deals in Southeast Asia this year,” he told KrASIA.
The interview has been edited for brevity and clarity.
KrASIA (Kr): How has this year been for Lightspeed in India and Southeast Asia?
Akshay Bhushan (AB): If I rewind to March, it was difficult to see the light at the end of the tunnel. But as we navigated the pandemic, we realized it also came with blessings for the tech sector.
The pandemic changed consumer behavior in terms of digital adoption at scale, which we have never seen before. Whether it be e-commerce or education technology, we are seeing new customers who were reluctant to use technology for these services before. It was a big boost for startups in India and Southeast Asia.
As founders navigated the pandemic, they had to make difficult decisions, and were forced to focus on their core business and strengthen their financial position.
Kr: How has Lightspeed worked with its portfolio companies to deal with this crisis?
AB: We really focused on helping them with resource allocation. We ensured our companies are financed either by us or the right partners.
We worked very closely with founders to show them how to take advantage of digital adoption. Our diverse investments give us the privilege of seeing across different industries.
Kr: How has the pandemic affected startups in India and Southeast Asia?
AB: For many founders, this was their first macroeconomic challenge, where they had to do more with fewer resources. This also impacted how founders think about their businesses.
They have been quick to adapt to deal with how the world is changing. For example, they worked round the clock to ensure a smooth transition to remote work.
Talent is the raw material that drives the success or failure of a startup. Remote work has shown us the best talent doesn’t have to be where your company is based. Companies can hire best talent irrespective of their location.
Kr: How has Lightspeed’s investment thesis evolved in India and Southeast Asia?
AB: The overall thesis hasn’t changed, but the sectors we focus on have definitely been impacted. We are very closely monitoring the shifts in human behavior. For example, we recently invested in Hubilo, which is powering virtual conferences, thus helping businesses that were impacted due to lockdowns. We are trying to back founders that are building products behind such shifts.
Kr: How do your investment strategies differ in India, Southeast Asia, and the US?
AB: The US is a very different market, as it’s a very advanced economy, which also means the user behavior is quite different compared to Asia. The unique thing about India and Southeast Asia is that both are emerging markets and have similar infrastructural bottlenecks.
Whenever there is an infrastructural challenge, there is an opportunity for founders to build large businesses. Broadly, the themes we are interested in India and Southeast Asia are driven by SMEs. In India, we have invested in companies like [B2B trade platform] Udaan and [digital ledger app] OkCredit. In Indonesia, we have backed [wholesale marketplace] Ula, [group-buying network] Chilibeli, and [logistics firm] Shippr. They are all SMB-focused.
Kr: Do you expect more cross-border activity between India and Southeast Asia as things smooth out?
AB: This is one of the reasons we are in Southeast Asia—because a number of our India portfolio companies have expanded to the region. It was the first foreign market for our portfolio companies like Oyo and Yellow Messenger.
One of the reasons to launch in Southeast Asia is geographical proximity, but it also has to do with cultural similarities. There are many members of the Indian diaspora in Southeast Asian countries. It makes it easier for Indian founders to navigate. Even in Southeast Asia’s startups, the first thing we have seen is they plug their talent infrastructure gaps by either importing talent from India or setting up their engineering team in India. That link has only increased over time.
I see India and Southeast Asia not as two separate regions, but as a large market with two billion consumers.
Kr: Short video, edtech, and a few other sectors in which Lightspeed has invested saw huge increases in user demand. Do you expect the uptick to sustain in the coming year as well, when COVID-19 will hopefully have a smaller impact on our lives?
AB: There will be some dips in uptake post-pandemic, but it will not be an overhaul. Some of these trends will continue to persist after we are done with the healthcare crisis. I don’t think remote work is going to go away post-pandemic. We are seeing several leading companies declaring permanent remote work arrangements.
Even for other products and services like online grocery, for example, consumers never had a forced condition that made them try these products. After experiencing the convenience and value that some of these digital services provide, I don’t see why consumer behavior would go back offline.