Early-stage investing remains energetic with plenty of dry powder for investment: Lightspeed’s Rahul Taneja

Rahul Taneja, Partner at Lightspeed, believes early-stage investing will continue to be active, with plenty of capital available to be deployed. “Founders with deep conviction and those building in large markets will not face any shortage of quality capital,” he asserted.

In 2023, Lightspeed backed one of India's key Generative AI startups—Sarvam AI—which aims to build a ChatGPT-like large language model (LLM) to bring the power of artificial intelligence by leveraging the country's linguistic diversity.

Stepping into 2024, Lightspeed, which has invested nearly $1 billion in artificial intelligence over the last 18-24 months, intends to keep Generative AI squarely in its sights, while continuing to back early-stage startups in emerging categories such as climate, EVs, agri-tech, B2B supply chain and deep tech (such as space, semiconductors), which found favour in 2023 as investors turned away from the internet businesses of the years past.

Since 2000, Lightspeed has invested over $1.8 billion in more than 100 startups in India and Southeast Asia. Unicorns in Lightspeed India's portfolio include Byjus, Udaan, OYO, Sharechat, Darwinbox, Innovaccer, Globalbees, Yubi (CredAvenue), Razorpay, Acko & Zetwerk.

In this exclusive interaction, Rahul Taneja, Partner at Lightspeed talks about investing during a down cycle, the importance of patient capital and reveals sectors of strategic importance for the firm.

Shruti Malhotra, CNBC-TV18: How do you anticipate 2024 unfolding for startups and investors? When do you see clarity emerging, and what notable developments are on the horizon?

Rahul Taneja, Lightspeed: We are patient, long-term investors in the region and strongly believe in the opportunity unfolding in front of us thanks to rapid digitization across the economy. As such, we are very optimistic and believe that 2024 will be a great year for the ecosystem. Early-stage investing continues to be active in India - there is plenty of capital available to be deployed and will continue to come. 2023 was a defining year in terms of a move to sustainable economics and business models. And plenty of founders are succeeding in this environment. So we believe that founders with deep conviction, building in large markets, will not face any shortage of quality capital. We remain confident that 2024 will be a great year for both startups and investors alike - it won’t be without its set of challenges, but we believe the ecosystem is well-geared for it.

Rahul Taneja, Lightspeed

Q: Are any 3-5 startups and sectors catching your attention in 2024? Share your thoughts on emerging trends and potential disruptors.

Rahul Taneja, Lightspeed: We continue to invest in 4 core themes — a) Enterprise SaaS and infrastructure (especially AI-driven), b) Fintech, c) Consumer products & services, and d) Commerce. What we’ve particularly focused on is the now-well-established India to the world movement especially in manufacturing and continue to double down on that. In addition, we are actively investing in emerging themes such as Climate and Mobility.

Q: Are there specific IPOs in 2024 that have captured your interest? What factors make these IPOs stand out for you?

Rahul Taneja, Lightspeed: India has become and remains the global investment destination of choice, with the government ably managing interest rates, inflation and growth together. As profitability improves, the market for companies suited for IPOs is only deepening. We saw this happen in the last 24-36 months with offerings such as Zomato, Mamaearth, Nykaa, Freshworks and others. It’s especially encouraging to see that the domestic investors (both institutional and retail) are embracing these offerings. We believe the companies that will do well in public markets are those who have a definitive view on profitability (or a clear path to it in the near term), predictable growth machinery and a differentiated customer proposition.

Q: What's your perspective on the future of AI? In which directions do you see it expanding? And, in your view, can any business remain unaffected by the impact of AI?

Rahul Taneja, Lightspeed: AI has been clearly an area of significant and strategic importance to the firm. We have been investing in AI for a long time and the last 18 months saw clear inflection. We have globally invested nearly $1 billion in AI in the last 18-24 months.

What we’re seeing is AI reshaping industries and in some cases giving birth of entirely new segments. Every company, in some form, will be an AI company - what this means is most companies are now actively assessing how AI impacts their current workflows, productivity, output and efficiency. This is visible across enterprise, consumer, customer support, software development and finance. In the recent past, we’ve invested across the AI stack starting from foundational models, applications and more with companies such as Sarvam, Portkey, Thena and others.

Rahul Taneja, Lightspeed

Q: Could you share insights into your current fund size and the areas where you are strategically allocating capital?

Rahul Taneja, Lightspeed: We are currently deploying in India & Southeast Asia out of our early stage fund Lightspeed India IV ($500 million) and global growth stage funds Lightspeed Select & Opportunity (~$5 billion). As long-term believers of the potential of the Indian startup ecosystem, we invest across cycles and are patient investors. We believe there are multiple macro themes which are deepening and would continue to invest in them. Top themes today are — a) Cross border/India to the World - predominantly Enterprise SaaS and infrastructure, increasingly Content and Commerce as well; b) Fintech; c) Local consumption - both B2C and B2B, across consumer, commerce; and d) Emerging areas - Climate, Mobility among others.

 

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