I just returned from a weeklong trip to India, having spent a few days each in Delhi and Bangalore to meet with local entrepreneurs and investors. Noah Smith recently wrote about why everyone should get excited about India’s prospects. I shared his optimism going into this trip and came back even more bullish about the potential of India’s tech ecosystem. 

I had only a few connections in India before this trip. Version One has made only one investment in the region (Headout, a fast growing marketplace for travel experiences) and I had written a small LP cheque into an emerging fund manager (1947 Rise, run by the awesome Shiva Sangwan). But India is such a welcoming country that it only took a few weeks of preparation to fill a weeklong schedule with meetings – from a dinner arranged by Shiva with approximately 15 founders in Delhi to a talk about crypto at Builders Circle in Bangalore. And I had more than 20 1:1 meetings with founders, angels, emerging fund managers and institutional VC funds.

A few observations from my time in India: 

Geography

India recently surpassed China to become the world’s most populous country. It’s obviously very large, but most start-up activity is concentrated in a few cities: Bangalore (the “Silicon Valley” of India), Delhi (the 33m strong capital of India), Mumbai (the financial capital) and Chennai. Getting around in these cities is generally tough due to the never-ending traffic, so plan accordingly if you decide to visit.

“Reverse brain drain”

“Reverse brain drain” is a real thing in India. Many of the most talented entrepreneurs and engineers left India to study and then work in the US and Canada. But many of them are now coming back to India and building incredible companies thanks to everything they learned while working in North American start-ups. This dynamic is truly accelerating the learning curve in India.  

Two distinct opportunities: “India for India” and “India for the world”

With 1.4 billion people, India itself represents a massive market. And the timing is right for domestic opportunities, as the population is rapidly connecting to the Internet and increasing its purchasing power. E-commerce (DTC and infrastructure), fin tech (lending, payments), healthcare and B2B marketplaces are some of the verticals that have seen tremendous growth. With the right product or service for the Indian market and strong execution, an “India for India” start-up can see incredible growth. 

“India for the world” has traditionally focused on outsourcing and leveraging cost advantages, from customer service to product development. But now, there are more and more examples of India-based companies that are competing on a worldwide basis with best-in-breed products. Freshbooks and Zoho are the best-known examples from past decades, but an increasing number of start-ups are joining that effort (among others, our portfolio company Headout). Enterprise SaaS (today) and climate and crypto (in the future) feel like the three verticals where we might see the biggest worldwide impact from Indian start-ups going forward.

Crypto in India

Speaking of crypto…there is a strong crypto scene in Bangalore that is mostly focused on “Web3 opportunities” (NFT’s, gaming, loyalty/rewards) and crypto infrastructure. Right now, Polygon is the only notable example of a protocol opportunity coming out of India and DeFi seems to be severely limited because of the regulatory environment. But I am hopeful that crypto will see a broader set-up in India over time. There is definitely an enthusiastic community to build on and I met some very smart crypto founders during my trip!

Venture Capital

The VC scene is dominated by US and US-affiliated funds. Sequoia, Accel, Lightspeed, Nexus, Matrix and Elevation came up in conversations all the time. Micro VC’s, dedicated seed funds, domestic funds and a domestic LP ecosystem are all still in the early stages of development.

Biggest surprise

What probably surprised me the most was how digitized some of the infrastructure already is, often driven by government initiatives. One powerful example is UPI which is an instant, real-time payment system that enables inter-bank peer-to-peer and person-to-merchant transactions, open for everyone to build on.

Thank you to everyone that helped make this trip such a memorable one. I am excited for Version One to become more active in India over the next little while and hope to be back in the country soon!