India’s startup market has tremendous potential

India’s startup market is worth betting on, though it’s still “a few years” behind China’s, Facebook co-founder Eduardo Saverin said. 

During a panel discussion at the Forbes Global CEO Conference in Singapore this week, Saverin said his investment company B Capital is deploying “a lot of dollars” into India and is thinking about the long-term success of new companies there. 

“I think India is a huge market with just tremendous potential,” Saverin said, in response to a question on why India’s startup ecosystem has not generated better returns. 

“And I think as the market continues to mature, and as you get into a better macroeconomic environment, it is a market to bet on, combined with Southeast Asia.”

Much of the growth in India will come from enterprise tech companies, Saverin said, adding that B Capital has put money into a electronic health records company and contract management companies. Enterprise tech companies are those that create software that serve businesses.

Underpinning India’s entrepreneurial success is its large population, and the country, along with Southeast Asia, will soon have more people than China, Saverin said. He added that 25 million children are born each year in India.

Gautam Adani, an Indian billionaire and the second-richest person in the world according to Forbes, said in his keynote speech at the same conference that “India is now on the cusp of creating several thousands of entrepreneurs.” 

Adani claimed that of the 760 districts in India, over 670 have at least one registered startup. 

“A smartphone and inexpensive data, mixed with aspirations, make the most potent mix to transform a nation. And the digitally enabled India’s journey is just beginning,” he said.

But Saverin warned that the pace of evolution of India’s startups is behind China’s in areas such as ease of asset exits and the liquidity of the market. 

According to India’s Ministry of Finance report from August, the country’s foreign direct investments in the first quarter of the year still lagged behind China’s. China received more than $100 billion in FDI, while India’s inflows were around $17 billion.

He added that when capital is constrained by a slowing economy, as is the case now, entrepreneurs need to seize the opportunity to “build mission critical products.” The term “mission critical” refers to services and goods that are necessary for the operation of a business.

“And I think environments like this create resilient businesses and it’s actually a time to invest, not to pull back. So entrepreneurs would actually look at this as an opportunity to acquire, to bring in companies while others are looking inward, for them to be aggressive and acquire and consolidate,” Saverin said. 

“And actually, some of the biggest companies out there, I think Microsoft started during a recession.”

Also speaking at the Forbes conference, Venture capital firm GGV Capital’s Jenny Lee, who has backed some of the most well-known companies in China — including Didi Chuxing, XPeng and Kingsoft WPS — said it’s time to look further ahead as the geopolitical contest between the U.S. and China and pandemic-triggered upheaval in global systems put a “huge grind” on public valuation of companies. 

“We’re happy, because I think as a private investor, we’re investing in the next generation of leaders, the next three years, five years, 10 years. And so it’s really back to a more rational market, back to backing true entrepreneurs who want to make a change,” Lee said during the same panel as Saverin.

There are plenty of opportunities in tougher times, Lee said, citing the electric vehicle/autonomous vehicle (EV/AV) and metaverse industries as new areas to invest in.

Saverin, for his part, said “climate tech”  is going to be “huge” and his company will be doubling down on biotech.