Kanika Mayar On Fintech Revival, Vertical AI Bets And Exits
:format(webp)/f/174198/1950x1100/d474005937/_kanika-vccircle.jpg)
*This article is adapted from *VCCircle
Vertex Ventures Southeast Asia and India is stepping up investments in fintech, consumer brands and artificial intelligence (AI) as it looks to deploy capital at a faster pace across India and Southeast Asia, a top executive told VCCircle.
The venture capital firm has increased its India deployment from around three to four investments a year previously to six to eight deals annually, while deepening its fintech portfolio after a period of slower activity in the sector. The firm is also evaluating fintech infrastructure, vertical AI applications and deep-tech opportunities such as semiconductors, investment partner Kanika Mayar said in an interview.
Vertex Ventures has also seen exits through public listings, secondary sales and strategic acquisitions, with portfolio companies including Kissht, Recko and CloudCherry providing multiple exit routes. The firm expects India's venture ecosystem to deepen further as capital gets recycled from exits and a more experienced pool of founders emerges.
On Fintech Confidence and Regulatory Clarity
What has given you confidence to come back and double down on fintech, especially fintech infrastructure?
We're a lot more confident now. There were a few things where we were waiting for some clarity and also tracking the portfolio to see what's working and what's not working.
The main one is that we are now fairly clear on what are the kind of business models which can work in India. One part of that is consumer preferences, and the other part is, of course, regulation.
There has been a fair amount of regulatory clarity. We are now more confident on the kind of businesses fintechs can undertake, and our portfolio has really come out stronger after regulatory clarity.
We understand the defensibility (right to win) that we need. Apart from just a great consumer product, the kind of infrastructure and data rails that companies need to build is important. Then, being on the right side of regulation, having very strong governance, having very strong KYC.
Across all these factors, there has been some learning from the market and some learning from our portfolio, which we are now incorporating into our investment decisions.
Subsectors: Consumer and Fintech
What are some of the subsectors you are bullish on, particularly within consumer and fintech?
On consumer, one subsector which we're actively continuing to invest in is consumer brands. Our thesis there is that across different lifestyle parameters, the consumer is basically premiumising. They want products which are better for them, either from a health perspective, or from a lifestyle perspective, or from an aesthetic perspective, but still give value for money and offer better value than what an incumbent can give.
For example, in Fund V, we've invested in an electronics company called Nuuk. We've invested in a demi-fine jewellery brand called Palmonas, and we've also invested in a healthy food brand called Anveshan. We've taken bets across different segments of consumption.
We are also very keenly evaluating the quick-commerce space. Of course, we have Zepto and Blinkit, which are now large companies. But we are seeing a lot of verticalised commerce coming up, and essentially the consumer getting used to faster delivery. We're seeing where else faster delivery can play value and how we can participate there.
On fintech, on the consumer side, we think credit on UPI is a huge unlock for the customer, especially for those customers who were earlier difficult to underwrite through the credit metrics. Kiwi is a bet in the space. They've started with the Kiwi cards, which is a Yes Bank card on the Kiwi app.
On the wealth side, we also feel that the market is underpenetrated. There we have an investment in Wint Wealth.
The third is, of course, fintech rails and fintech infrastructure, which we're actively evaluating, both in terms of infrastructure for new products as well as infrastructure for existing banks and large institutions.
Exit Pipeline
How is the exit pipeline looking like from Fund IV or Fund III?
Pretty good. We've had an IPO recently, Kissht, which is a Fund III company for us. Post IPO, the price has done very well, so that's a good one for us.
We have a few more IPOs in the pipeline, and at the same time, we also actively evaluate other avenues for exit, which can be through secondary sale or an M&A.
In the past, we've done pretty well on M&As. We had a company called Recko, which was acquired by Stripe, and then we had a company called CloudCherry, which was acquired by Cisco, and then Gluru by Amazon, and so on.
What we try to do is take a company-level view. Is this company right for an IPO? Because not all companies can IPO. Or is this company more amenable to an M&A? Or if the company is doing well but our investment period is coming to an end, we can also evaluate selling our stake to another incoming financial investor.
AI and Software Themes
What are some of the AI and software themes you are pursuing in India?
We're looking at what can do well from India, given that we still have founders and teams based in India, but the revenue market is the US. We try to see what we can build from India which will do well in the US.
One area which is emerging for us is verticalised plays in AI. We have a few investments where we look at different subsectors where an AI-led solution can actually add value and also give us scale through the scale of the subsector itself.
For example, we have a company called Hakimo, which provides AI software for surveillance for mid to small companies, such as large auto showrooms, shops, schools or hotels.
Then we have a company called Spyne, which essentially has AI software for merchandising for auto dealerships, and is launching other AI products as well. We have Attentive, which has an AI product for the outdoor construction and landscaping space.
These are essentially companies which are catering to specific problem solutions through AI in specific subsegments. That's one core thesis for us.
The other is an AI-led services play, where you have an AI layer providing the software, but on the back end you also have a services layer, which is usually people based in India who are closing the loop.
That's an active area that we are doing due diligence on and trying to see if we can leverage India's existing services capability to provide an AI-plus-services solution for the US.
Deep Tech and Semiconductors
Are you also expanding into deep tech, particularly semiconductors?
Absolutely. We're also evaluating it. In fact, we already have an investment in the semiconductor space. It's a company called BigEndian Semiconductors. They are designing a system-on-chip for surveillance cameras for India.
The way we are looking at this piece is, one, are there enough tailwinds from a market and macro perspective to support the hardware or software development? The difference in deep tech for us compared to the other segments is that most of the companies we look at will be pre-revenue.
There, we focus more on the founder capability. Do they have previous domain expertise? Can they build early partnerships? Do they specifically understand the problem that they're solving for?
If we get clarity on these answers, then it's a sector we're very much open to.
Outlook: India's Startup Ecosystem, 3–5 Years Out
Looking ahead over the next three to five years, what changes do you expect in India's startup ecosystem?
Three to five years is a very long time in VC, so very hard to say. I think the key is that we are seeing the ecosystem deepening and maturing.
VC in India is still a relatively young industry. Unlike the US, which has decades of track record and therefore much more depth of capital, India in the last 24 months is where we've seen the first cycle of exits mature, where India-funded homegrown companies have IPOed and then capital has gone back.
This money will get recycled through new fund investments or new funds or new GPs. I think we'll definitely see deepening of capital.
At the same time, because we've already had the first set of companies scale up, the founder ecosystem is maturing. A lot of founders now have actually worked in these companies before, so they understand how to build for scale. They also understand how to work with investors, what's the right amount of capital to raise and how to put the capital to good use.
We'll also see a much more mature founder ecosystem. Together, if these two things work out, then we'll essentially come out in a much stronger place in the next couple of years.
For the latest news on Vertex Ventures SE Asia and India and our portfolio companies, follow us on Linkedin or subscribe to our monthly newsletter.
