How Indian markets value new-age tech companies is no longer a puzzle: RTP Global’s Nishit Garg

Following a year of leaning into efficiency, a third of India’s 102 unicorns have achieved profitability and more are expected to hit the milestone within the next 12 to 18 months as time is ticking with investors demanding IPOs-driven exits. To date, over $80 billion has been invested in the country’s billion-dollar startups.

Nishit Garg, Partner on RTP Global’s Asia investment team, believes IPOs are finally starting to emerge as a repeatable exit avenue for investors and a realistic milestone for founders. “For years, there was a lot of uncertainty around how Indian public markets will value tech startups. Now that puzzle is unfolding…,” he said in an exclusive chat with CNBC-TV18.

NISHIT GARG, RTP Global

RTP Global, which closed its fourth and newest fund in 2023 with a corpus of $1 billion, has earmarked one-third of the proceeds for Indian startups. The venture capital firm’s India portfolio includes Cred, MPL, Snapdeal, Slice, DeHaat, Rebel Foods, Khatabook, Bijak and Classplus among others.

Here’s the edited transcript of the interview.

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?

Nishit Garg: The global business environment has been unstable for the past year and a half, affecting many countries, including India. This instability, particularly in the US public markets, has influenced the flow of capital from investors. However, what sets RTP Global apart is that we do not rely on the usual investor (limited partner) funding structure. Our deployable capital comes from the reinvestment of proceeds from previous investments. For the ecosystem at large, there has been a damp sentiment leading to some capital crunch, which will probably take its own course depending on the global macros. At the same time, sustainable business models and disruptive category-defining ideas, even if they are pre-revenue and innovative tech-powered businesses, will continue to get ecosystem interest. Founders should continue to focus on building businesses efficiently with laser-sharp prioritization and limit distractions.

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

Nishit Garg: At RTP Global, we have tried to be among the first ones to identify and invest in emerging sectors. This approach has been a fundamental pillar of our strategy in India for the last 12-13 years, and we are committed to maintaining this trend. We are very keenly looking at climate tech, EV and AI-based businesses, whether those that are AI enablers or that are building foundational models per se. Of course, innovative ideas in consumer tech, fintech, B2B businesses, and enterprise SaaS continue to be of interest as well.

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

Nishit Garg: The encouraging piece in the Indian tech startup ecosystem is that IPOs are finally starting to emerge as a repeatable exit avenue for investors and a realistic milestone for founders. For years, there was a lot of uncertainty around how Indian public markets will value tech startups. Now that puzzle is unfolding, which gives a lot of directional inputs to founders and private market investors as to what do the public markets value, the multiples and the pitfalls to avoid. Even the global IPOs are re-setting the valuation benchmarks, and all in all, the global & Indian IPOs of last year and probably the coming year will become a reference point for the foreseeable future. Additionally, global IPO trends are reshaping valuation benchmarks, offering a new perspective. The IPOs from last year, both globally and in India, are setting precedence that are likely to influence the market in the foreseeable future.

NISHIT GARG, RTP Global

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?

Nishit Garg: The possibilities that AI offers are, of course, vast. But it is evolving at such a fast pace that startups in this segment will need to learn, adapt and innovate very quickly. Moreover, the type of businesses that will be built in AI in the US versus those in India will probably be different. In the US, there will be a lot more foundational models that will be built. India will probably see a lot more application layers on proprietary datasets using a lot of those foundational models. No business will remain unaffected, AI will elevate the base intelligence level of every sector and businesses that adapt in time will have a much higher chance of success; the ones that don’t will face the risk of becoming irrelevant.

Investment Strategy: The Logic Behind Horizontal Startup Investing

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

Nishit Garg: Our latest fund—RTP IV—totals $1 billion in new capital. We expect to deploy around one-third of the fund in India. We have always focused on backing founders early in their journeys, and we will continue with the same approach and do pre-series, Series A and some seed investments. In terms of sector focus, In India, we have a horizontal approach, exploring everything from e-commerce to EVs, climate tech to B2B and fintech to enterprise SaaS. Our team in India has doubled in size over the past 12 months, and we have just opened a new office in Bengaluru. It just shows our commitment and bullishness for India.

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