The advent of artificial intelligence or AI has drastically changed the way people consume various services globally. Be it e-commerce, banking, or healthcare, this technology has made its presence felt across various markets. That said, the full potential of the internet-of-things (IoT) has not been unlocked yet.
India, a late comer, has also started realising the potential of AI and its applications. In India, the largest and the second fastest-growing market in the globe, AI has bigger roles to play. According to experts, the Indian healthcare and fintech sectors will greatly benefit from AI.
e27 sat with Manish Singhal, Founding Partner at Pi Ventures, a new early-stage fund focusing on AI, Machine Learning (ML) and hardware, to know more about the fund, its investment philosophy, and the future of new-age technologies.
Below are the edited excerpts:
Pi Ventures was launched in January 2016 when India was going through a funding crunch. Was lack of availability of good funding one of the key reasons for you to launch it?
Before answering this question, I will give you the genesis under which we started Pi Ventures.
We started building the fund in January 2016. My background is in tech and angel investment. I have founded a couple of tech startups and co-founded LetsVenture. Last year, I was doing angel investing, and I invested in several companies, including logistics optimisation platform Locus, which leverages AI machine learning.
Then I started thinking about the whole potential of such AI and ML. We started exploring various opportunities in this space and talked to a lot of people including investors. The entire process took about six months before we launched a dedicated fund in AI, ML and internet-of-things (IoT).
The fund was created based on two critical aspects: First, data is all around us. We interact with a lot of data, we squeeze a lot of data, and we consume a lot of data. Products which are able to use AI and ML from data are the one that are going to win the future.
Secondly, the product road maps for these technologies are taken for granted today. For instance, probably 10 years ago we would ask startups whether they had cloud presence. Five years ago, the question was whether companies had mobile presence. Today, or may be a couple of years from now, the question will be about whether businesses are using AI, ML, or data they have.
One critical insight we have got is that AI and ML are critical for businesses to make sense in future. Secondly, as for AI and ML, there is a certain way of making them practical and business-focused.
The third piece is that if you look at the real world, sometimes it is very important to connect the digital and physical world. So, IoT is essential.
Quite a few investors hesitate to invest in hardware because they have no experience building hardware startups, whereas we have created multiple global hardware products, so hardware understanding comes naturally to us. We believe we can do deeper-level engagement with startups in this space.
So, you mean to say the launch of Pi Ventures doesn’t have anything to do with the funding crunch of last year?
You don’t build startups by looking at which direction the wind is blowing. You do it based on your beliefs and the problem you are solving. You never say “Hey, there is an investment crunch so we should not do a fund now,” or “Hey, there is a funding crunch, so we should launch something to help entrepreneurs.”
While your focus areas are AI, ML and IoT, according to your site you have invested in some other different verticals. For instance, e-commerce startup GoCoop …
These are my personal investments. They are not from Pi Ventures. I have actually angel-invested in 13 companies. They were done around two to three years ago.
How many companies have you invested in through Pi Ventures?
We have invested in just one company so far. That is medical-grade wearable startup ten3T. We have committed to two more. As I mentioned earlier, our sole focus is going to be applied AI and ML.
All companies are fascinated about AI these days. In your view, how can this technology change the world?
AI is actually a broad area. Wherever there is data, you can use AI.
I will answer your question from the Indian perspective. AI has a huge potential in the healthcare space. As you know, we are too many people and very few doctors. The doctor-patient ration in India is abysmally low. The ratio is even low in the specialised areas like pathology, ECG or cardiology.
We can improve healthcare by building more intelligent system, so that doctors will be able to remotely monitor patients. It offloads the doctor from meeting patients in person, and thus you can save more people with fewer doctors.
In that regard, we are seeing good work being done in India in the healthcare space. Some companies are using AI, ML, and computer vision already. It makes the diagnostic system much easier and more automated — thus more people get access to healthcare. That is the one big trend that we are seeing.
Second is logistics. Locus is the very good case in point. In India, roads are where a significant chunk of companies’ money is spent. Indian roads are the most inefficient. This leads to huge cost in terms of effort and money.
You must have used Google Maps for navigation, right? It is a tech-driven logistics solution that updates you about the traffic congestion and tells you what to do and what not.
When you apply core logistics into the supply chain, then you are creating an unparalleled efficiency into the whole logistics space.
Third is fintech. You already saw the effects of demonetisation. If you expand the horizons of digitisation, the entire world is moving into mobile. This requires new credit models to be built using ML and assess your creditworthiness in a matter of a few seconds.
In future, if I go to a store and buy something, it can assess my creditworthiness in few seconds and say if I have an option of making down payment, or I get instant approval for EMI. As you know, there is a huge time difference between your request and the approval of that request.
There are couple of more applications of AI. For example, energy and retail. But the first and foremost trend is healthcare.
Are you also looking at robotics as well?
Robotics comes under AI and IoT. That said, we are very business-focused. We are yet to see real-life use cases of robotics. We have yet to find out a robotic company that is very practical to use in business scenarios in a very scalable manner.
You also co-founded LetsVenture. It is now the most popular deal-making platform in India. Why did you quit it? Do you regret quitting?
LetsVenture was a very important part of my journey as an investor as well as an entrepreneur. That exposure was critical for me to relate to entrepreneurs better. Also while building it I thought, maybe, a hands-on fund would also be needed to solve the early-stage funding problem apart from the platform. After LetsVenture we saw an opportunity to build Pi ventures.
There are quite a few VC funds in hardware, AI, etc. Why does India need another fund?
What we believe is that lots of these funds existing in the market were started as seed funds. But now they are more into Series A.
Ours is beyond seed level. I still believe the early-stage ecosystem in India needs hand-on investment. India being a product nation should be recognised and supported early on. So, that has been the key motivation for us. We can really support disruptive products from the beginning. People look at tech as a broad space, but if you look at AI and machine learning as a specialised area, we are probably the only one in India.
Can you share some other details of the fund, like the corpus, ticket size and the number investments to be made?
Pi Ventures is a US$30 million fund. The fundraising is not completed yet.
We can invest anywhere between idea-stage and Series A. Broadly we are early stage. We love to invest in companies which have a product market fit. We can come early and come later.
We invest US$200,000 in the lower end and US$1 million in the upper end. We plan to to invest in 18 to 24 companies from this fund.
Recently, Sachin Bansal of Flipkart and Bhavish Aggarwal of Ola urged the government to frame favourable policies to protect domestic startups from threats from foreign firms. How do you look at these comments?
I have a different view on this. If you look at the world market, India is a vast market in terms of volume. It is the largest after China.
China is a closed economy, and it is very difficult for a foreign company to be successful in China and get foreign investment. Whereas India’s biggest advantage is that it is a democratic setup. It is a level-playing field. I feel India should remain a free market. If it is very protectionist, it will be hard for companies to innovate. Today there is no point saying ‘I am the best in India’. Whatever product you do build, it has be the best and should be on par with other global products. I feel India should keep the market open.
We have come a long way in terms of the startup ecosystem’s growth. But we are still lagging years behind the Silicon Valley and Europe etc. What according to you is holding the growth back?
I will restrict my answer to the product startup ecosystem. Actually, there are many things to be changed. We can be better and faster.
The key problem is that very early-stage companies don’t get support from the market, investors, or talent base. However, it is beginning to change. Freshdesk is one example. This company would not have come a long way if it did not got support early on. I think the ecosystem needs democratisation. That’s why we launched LetsVenture.
Earlier, we used to make only 100 to 150 deals per year, and now it has gone up to 500 to 600.
How do you look at the funding crunch?
I am quite happy that a funding slow-down happened in the last year and half. This is one of the best things to happen. Always remaining in hype is not good. Success doesn’t teach you as much as failure does.
What has happened in this scale is that lot of excess money got wiped out of the system. Lots of fake business model companies which did not have a unit economics but marketshare sort of thesis — they are in trouble. And that has taken out of a lot entrepreneurs who have done startups just for the sake of doing a startup. Therefore the money now remains available for real companies, who have real products and real business models, and those that are solving a real problem.
In reality, there is no dearth of funds in India. There are umpteen angel investors, seed funds, early-stage investors, and growth-stage funds in the country. Many of them have raised lots of money. There was a deployment pressure on all of them from their LPs, and that’s why they invested without doing much due diligence. In essence, they had FOMO — the fear of missing out.
If you talk to any VCs in India, they have enough money to invest in startups, but the question is: Are they finding good enough companies to invest in?
If you keep investing, you have to come out of that cycle we got into — because a lot of early-stage funding have infused money into such companies who had not done any product innovation. Now, with this funding crunch, early-stage funding comes into product innovation and now they can write bigger cheques.