India can produce the next 'WhatsApp' or 'FB': Lightspeed

Ravi Mhatre, MD & Founder, Lightspeed Venture Partners is very bullish on India that he thinks the nation has the potential of creating a Silicon Valley like landscape although it is still in early stage of innovation cycle.He is confident that India has the ability to produce the next ‘What’s App’ or ‘Facebook’, especially with the government keen to reduce bottlenecks in the start-up ecosystem, says Mhatre.However, in terms of penetration of new technology is concerned, he thinks there has been penetration of only around 5 percent in the market, so there is ample scope for that.Comparing India to other emerging market and other BRIC countries, he likes India better, and prefers investing in the country than in others. According to him India stands out compared to China and Brazil, mainly because it is not so export dependent economy. So, the risk return in terms of valuation and upside potential in India is better compared to China, says Mhatre.He believes, India is maturing as a market and so will attract investments. Also with the Prime Minister Modi’s focus to attract new businesses into India will bring in big capital, he adds. " I think Modi's mindset about being someone who understands that investment capital and new businesses are going to be a source of growth and prosperity for the Indian economy and Indians generally," says Mhatre.Below is the transcript of Ravi Mhatre's interview with Kritika Saxena on CNBC-TV18.Q: In the last ten years things have changed significantly as far as India investment, venture capital investments scenario is concerned. Lightspeed is present in India significantly - you do get a sense about how things are changing on ground. Over the last two years or over the last one-and-a-half year since the new government has come into place, lot of efforts have been put into place the ease of doing business in India. As an investor, do you feel that you are more confident to invest in India than you were about two years ago?A: We definitely are seeing a lot of the indicators in India move up and for us as venture capital investors, a lot of it have to do with just the maturing of the market. I travel to India professionally to set up Lightspeed's office in 2005. So it's been little over ten years and in that time we have seen first generation of entrepreneurs who started companies and been successful and they are now circling back into the ecosystem and so you have more experienced people who understand more about how to build and grow start-ups. You have some very fundamental changes in the last two years around just the consumer technology in India in particular smart phones and high speed data that can be delivered over wireless over the year but you are seeing unprecedented level of internet usage by Indian consumers. We have been believers in the potential for India as a highly educated emerging economy. We been believers for long time that India would emerge along the same way China did and in the last few years we are seeing that start to happen in a much bigger way. So it's quite exciting. Q: Do you believe that India would probably be able to encash upon the opportunities that they would get given that the other emerging markets are so volatile? A: One of the things that distinguish India particularly compared to China but also even Brazil is it is distinctly not an export driven economy. China is an economy that grew on the back of heavy exports to other modernised countries. India, when you look at the growth cycle that is happening, a lot of it is internally driven. Industries are growing to serve the emerging middle class and it\\'s those people in the emerging middle class in India and it\\'s a big number. It\\'s those people now starting to put their consumer dollars back into India native industries and companies. We are conscious of volatility and that does affect all markets globally because it relates to how confident investor capital can be to fund new businesses. On the other hand we think India is likely to do better than the BRIC economies because it is such a strong internal driver of growth that we are seeing fuel a lot of the businesses that we are funding. Q: At this point in time when you look at parking your capital or your investment, would you prefer India to the other emerging geographies? A: I would say right now India is a place where we believe the risk return is better in terms of valuations, in terms of upside potential than the other large market where we have invested international is China. Q: The Prime Minister Modi's pitch is to not only to learn from the start-ups over here but also try to increase investments, sell the India growth story. Do you believe that investing in India is still slightly difficult? The sense I get from Silicon Valley investors that India still has not completely opened up, as a foreign investor it\\'s not very easy to be investing in India. You have to incorporate in Mauritius and not in India. There are many areas over there. Do those concerns stop you when you look at investing in India? A: I would say of course there is friction and in any emerging economy there are different flavours and forms of that friction that exists but the offset to that is that the growth potential is huge and India is a huge country so we are very conscious that nobody can wave hand and make things different overnight. I think Modi's mindset about being someone who understands that investment capital and new businesses are going to be a source of growth and prosperity for the Indian economy and Indians generally. He has a mindset and things that I have heard anecdotally that is just going to push through some of the bureaucracy that has slowed obvious things and help businesses grow, he does seem like he has a mindset to sweep away some of the bureaucratic tendencies to stop progress from happening and he may not be perfect but I do think that people are going to derive confidence from that and when they see that more capital will flow in and just generally the upward cycle will start to spin. Q: Do you believe that India has what it takes. Indian start-ups and entrepreneurs have what it takes to be able to match the kind of innovation that the valley presents? A: I wouldn't try to compare -- there have been lots of countries and lots of places at points in time when people said we are going to create the silicon valley of x; the silicon forest, the silicon desert. I don't think it that way. What I have noticed and I think is terrific in India is particularly over the last three-five years it use to be, when we originally started investing in India, we found a handful. You had to have the willingness to take risk and carve a new path in India if you wanted to do a start-up. It just was not even culturally accepted. The thing is refreshing to see.