The Baltimore- headquartered firm has been active in India since 2012 and has conducted marquee transactions across companies such as Flipkart and South Africa's conglomerate Naspers.
Investment advisory firm Signal Hill is counting on the growing sectors of digital media, software and services in India for its next phase of growth.
The Baltimore- headquartered firm that has been active in India since 2012, has conducted marquee transactions across companies such as Flipkart and South Africa's conglomerate Naspers. It has led deals for private equity and venture capital firms such as Carlyle, Temasek, TA Associates, Sequoia and IDG Ventures.
In an exclusive interaction with Moneycontrol, Klaas Oskam, managing director of Signal Hill argues why it is necessary to have role models in a startup ecosystem and why limited exits in India is not a worrisome trend for VCs, at least for now...Excepts:
Q. How has the startup ecosystem evolved in India in the last one decade?
Klaas Oskam: Clearly it has changed with the massive amount of capital being invested.
From a completely nascent ecosystem 10 years ago to where we are today, there's been a massive pick up.
But it is a continuous journey.
The journey is going to get accelerated when you have more and more role models.
The enterprise tech sector did see a bunch of (role models). I would call it the NRI mafia, where you have got a Satya Nadalla, leading Microsoft, Jyoti Bansal of AppDynamics and Dheeraj Panday of Nutanix, among others.
So you started to see super successful NRI founders in the US.
Apart from capital, they have become big builders of an ecosystem because they have big teams working with them. Those teams will provide the kind of training needed for the next set of startups.
They will see how such great entrepreneurs go about, and find where the gaps are in building scalable large products, brands etc.
In the Indian ecosystem journey, couple of things go hand in hand. There are trained entrepreneurs building great businesses.
The mentoring aspect is great. We have only started to see that in the last five years which really kind of brings a different level of scale.
On the consumer side, ten years ago, no company would have scaled to a billion dollars in revenue. Now there are quite a few of those firms.
What is going to be more interesting is that are we going to see more real disruptive innovations. Not the kind of ...copying models that have worked in the US but creating really "for India" solutions, especially on the consumer side.
In the enterprise side, you need to create global solutions.
Q. But there are barely any exits in India. Isn't that an important aspect as well for investors?
Klaas Oskam: I agree that exits are few, at this point in time.
Many of these companies were started less than five years ago, in some cases, seven or eight years ago and it just takes time. It is natural.
You have started to see that the public IPO in the India market is definitely going to be more of an opportunity.
Q. By when do you estimate Flipkart's IPO to happen?
Klaas Oskam: I would think two to three years.
Q. A couple of expected big mergers in India could not happen in 2017. Can you help us understand what sort of issues, usually rupture these talks?
Klaas Oskam: There are multiple things. As more large companies are created, you have more of a long course M&A ecosystem.
And if you look at China or the US, most of the deal flow is US to US and China to China.
As we get larger in India, the Olas, Flipkarts and the Paytms continue to scale, they will become large acquirers.
The Amazons, the Alibabas and the Tencents of thes world, they all want to have an opportunity in this largest consumer market (India).
They will aggressively be looking at opportunities as well.
Similarly on the enterprise side, especially payments we have seen a lot of cross border action.
Naspers for instance has done an acquisition (of PayU).
Secondly keep in mind, a lot of investors have a 10-12 years of time horizon (for an exit).
So the pressure to start exits is kind of started to just build up only now.
Q. 2017 saw limited funding and a lack of M&As in internet space. What's your expectation from year 2018?
Klaas Oskam: It has been just one failed M&A, that's out there.
There have been tons and tons of smaller M&As that have happened.
In the fintech space there have a been a whole lot of cross border M&A, infact even strategic ones.
In 2016, the largest M&A in travel space occurred - the GoIbibo merger with MakeMyTrip.
So the consolidation is definitely starting to happen as the ecosystem matures and scales.
In 2018, we will see more exists. We will see a pick up on the enterprise side.
On the consumer side most of the dollars would continue to go behind the top three guys -- Flipkart, Paytm and Ola.
You need to be really in a distinct niche... as a consumer company to track funding dollars.
You probably see on the consumer side more omni-channel companies.
Those are the ones that can protect themselves by having a clear distinct brand and a distinct value proposition.
So you will see action there. Then you will see some action in deep tech and will definitely see action on the enterprise firstname.lastname@example.org