‘We had long summer, let’s plan end of it’

BENGALURU: Deep Nishar, senior managing partner (Americas) at SoftBank Vision Fund, says investment sentiment is turning cautious across the globe. He says investors are advising portfolio companies that they are at the tail end of a very historic bull market and so must be prudent with cash. The IIT-Kharagpur alumnus, who has worked at Google and LinkedIn in senior roles, and sits on the board of online grocer Grofers, told TOI that he’s excited to see a new breed of entrepreneurs in the country who are focusing on the bottom and middle of the pyramid, people for whom value is more important than convenience.Excerpts:
How do you see technology evolutions and their impact on India?
Unlike in previous decades, in this decade there are four or five things that are happening all at once. The compounding effect of this is unfathomable. There’s genomics, IoT, AI/ML, robotics, and quantum computing. The challenge with all massive technology shifts is that it requires government support. The internet was fostered in the US because of the DARPA (Defense Advanced Research Projects Agency) contract. China has learnt from history. They think long term, and over the last decade or so, they have made some of the new technologies — AI, genomics, etc — a core part of their national policy. To foster AI, China has a $100-billion budget.
That is where India has to really think. Maybe it cannot try to be No. 1 in all five. That’s okay. Pick one or two.
Which would you recommend?
The good news for India is that in all five of these areas, some of the top people are Indians. It’s not a gene pool issue, not a capability issue. It’s really a focus issue, ability to give ourselves, our country, the desire to lead.
AI and ML should be a big component of what we do. The government and the private sector should together create the ability to learn and train people in ML and deep learning. Our Digital India movement is to bring old-school manufacturing back into the country. No country looking to progress into the future should be doing that. Most manufacturing jobs are not people oriented, they are robot-oriented. Our software costs are much lower than in the US, so like China did for manufacturing, we should be exploiting this arbitrage cost.
In terms of policies, what would you recommend?
We have these policies like Make in India and Digital India, but they have to be rooted more in the conditions we have here. First and foremost, get the right input, second, root it in reality, third, make it a multi-year thing. These are not things where in every election cycle you have a new policy. We need agencies that will persist. ISRO is a great positive example of that.
Are you seeing some interesting startups in India in these spaces? Would you like to invest in them?
I would absolutely love to invest in India, in this space and other spaces. To be candid, I’m not seeing too many deep-tech companies coming up. But I do see a bunch of interesting areas where this generation of Indian entrepreneurs are tackling. About 10 years ago, it was all about ‘I want to build the next Amazon’, the next X.
Now, I’m seeing entrepreneurs who say they’ll start from the bottom of the pyramid. I may be able to book a movie ticket on BookMyShow. But cab drivers? Can they use Niki.ai, where they speak in Kannada and can ask what movies are playing, as if they are having a conversation. Conversational AI caters to the bottom and the middle of the pyramid.

Then there’s KhataBook, started by Ravish Naresh. I grew up in a trading community in Mumbai and would see everyone with ledgers and notebooks, everything is based on trust, you don’t know how much float you have in the market, people don’t fully understand the interest costs and spreads on that; you have money floating around.
So Ravish said, ‘how do I take this online, but in a way that is not intimidating, doesn’t worry you that it will get into someone’s hand, integrates seamlessly with what I’m used to?’, like Messenger or WhatsApp So, he put a bunch of components together, and all of a sudden it’s taken a big leap because a whole bunch of small, medium entrepreneurs are using it.
Grofers has gone through changes in the past few years. Amazon is doubling down on a hyper-local model. What’s the right model for India?
A facetious answer would be Grofers (smiles). But let me unpack it for you. Grofers has gone through every such model. And they settled on their latest one (with focus on private labels, and no express delivery) after learning a lot of lessons.
Amazon will burn resources for two years learning the same lessons. Because everyone thinks it’s different this time. Amazon may feel they are a global player, they have all this technology, they have machine learning, they have AWS. I’m conjecturing, obviously, I don’t know how they think, but chances are, they think like that. Now, Grofers has a tremendous model. Their customer does not care about things showing up in two hours because their time is not as valuable, but value is more important.
Going forward, in your investments, how important will it be for startups to have a clear path to profitability?
It has nothing to do with SoftBank. It has everything to do with the sustainability of a business. I’ve invested in 14 companies now on behalf of SoftBank, and we’re not the only investors in any of those companies.
At board tables, alongside other investors from some very prominent firms worldwide, all board members right now say the same thing to their companies, which is, we are at the tail end of a very historic bull market, and let’s ensure that we are prudent with our cash, and that we can sustain ourselves as a business. And sustainability is always proportional to the probability of positive cash flows in the future. Some of those cash flows come in when you raise more capital, but the bulk of it must come from operating activities, which means you spending less and making more.
What are you exactly telling your portfolio companies, given there is a sense that ‘winter’ is coming sometime next year?
We have had an inordinately long summer (laughs). So, let’s plan for the end of the summer.
B2B tech companies are trying to serve the US market out of India, what do you make of them?
There’s a wonderful arbitrage that can be hacked. There’s a purchasing power parity gap of at least 20x between the US and India right now. So, if I can sell something for a million dollars in the US that only cost me $100,000 to build here, my gross margins are a lot higher than for someone building it there. So that’s great. Now, the beauty of B2B software is that it’s applicable everywhere in the world, not just limited to India, or to the US.
Would you look at funding them? Do you see promising ones?
Absolutely. There are several that are now starting to come of age. Remember, we are a late-stage fund. We are not going to be investing in something that has $2-10 million in revenue. My rule of thumb for enterprise software companies is $30-50-million-plus annual recurring revenue (ARR).