Why a VC Might Say Yes or No To Your Enterprise Tech Startup [Interview]

Alok Goyal, Partner at Helion Venture Partners, talks about his reasons for being bullish on enterprise startups coming out of India, why he would invest in them and why he wouldn’t.
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Many entrepreneurs are now starting companies that sell software products to other businesses. A large number of startups that applied for UnPluggd last year were selling to other enterprises. Venture capital firms have also started taking note of the growing number of enterprise startups from India.

Alok Goyal of Helion
Alok Goyal of Helion

Last year, Venture Capital firm Helion hired Alok Goyal, former COO of SAP India to look at such companies and make investments. Goyal has been getting to know new companies and figuring out his moves. He invested in Linguanext in January 2014. Now the firm believes that enterprise technology startups are going to be the next big wave from India.

In this interview, Goyal talks about his reasons for being bullish on enterprise startups coming out of India, why he would invest in them and why he wouldn’t. Edited Excerpts.

What do you focus on at Helion?

I came on board Helion in the beginning of last year. Now I lead enterprise technology investments. Enterprise tech could be hardware, services or software for us. By and large, our interest is more software centric. Anything which is B2B oriented and technology based falls under enterprise for us.

Helion has been investing in enterprise startups. How has it changed now?

In the last couple of years, the partnership really felt that no one really has taken note of enterprise startups out of India, particularly on the product side. Enterprise tech is going to be the next big wave out of India. We want to create a specific focus in this area. What I’ve been doing is meeting a ton of entrepreneurs in the enterprise tech space.

What kind of enterprise companies will you invest in?

Barring exceptions, our investments will be focused on companies which are created in India and sell to the western market. It doesn’t mean that companies aren’t going to sell in India at all. But the primary revenue and scale comes from western markets in enterprise tech.

More specifically..

Application oriented companies, particularly cloud oriented SaaS companies in the App space will be the largest focus. In our traffic, we see that a majority of companies fall into that bucket. There are companies in the infrastructure side, but they are a smaller segment. Even though we have seen successes like Druva (watch video on NextBigWhat.tv), there aren’t many companies in that segment. We see many product companies in application development and deployment value chain.

Why do you think enterprise products from India will be big?

There are a few reasons. Firstly, the Indian domestic market is coming of age. It isn’t a classical early adopter market but we are beginning to see early adopter companies.

Secondly, there is now enough talent with great global perspective. Global product companies which setup bases in India are beginning to create some cutting edge technologies out of these offshore development centers. When people with product management backgrounds at these places move out, they tend to have a very global view. People coming out of successful startups like MakeMyTrip and JustDial are also adding to the pool. Then there are also people moving back to India from the United States.

Now that you are focusing on enterprise, at what pace are you looking at investing?

We never pre-allocate number of deals or capital. If we find 10 great companies to invest in, we will invest in all. If we find none, we will invest in none. Right now in our pipeline, the single largest source of deal-flow is enterprise tech.

On an average how many enterprise companies do you look at?

Collectively between products and services, we see about 100 companies in a quarter. Few of them are in the hardware space too.

How early are you willing to invest in a company?

We are quite flexible but usually come in during Series A rounds. But we are open to investing at a seed stage. One thing about the enterprise space is that exits can happen quicker as well. Larger companies looking to fill in white spaces for them could acquire companies very early. So the acquisitions are more from a technology perspective. So we can afford to get into companies early.

Whats the most common reason you say No to an enterprise tech startup that interests you?

For product companies, one red flag for us is lack of focus. Products have a gestation period. People who think that they will develop 10 products simultaneously aren’t very focused.

Secondly, companies that don’t have a global view or scalability from a team perspective might be difficult for us to invest in.

For enterprise products, even the Indian companies benchmark you globally against the likes of Oracle and SAP. So you have to think global by definition. Those who compare themselves against the other Indian companies don’t seem to have product management or marketing skills that are up to global benchmarks.

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