We are seeing an increase in localised business models: SAIF Partners

SAIF Partners, early backer of companies like Paytm and MakeMyTrip, has raised its third India-focused fund of $350 million, taking its total assets under management to $1billion. ET was the first to report that SAIF Partners was raising the fund in May this year. The new fund will look to focus on sectors such as healthcare, education, enterprise Saas and consumer brands, which it had so far not looked at closely. In an interview to ET, managing directors Alok Goel, Mukul Arora and Deepak Gaur said the firm is also seeing an increasing deal flow of localised business models, rather than just copycat ideas. Excerpts:

ET: Why do you think $350 million is the right size? You could have raised a larger fund as well?
Deepak: It is a conscious choice to cap it at $350 million. It allows us the flexibility to do very early stage deals and also larger cheques.

ET: Will you have a different strategy for the fund?
Deepak: The fund will have the same strategy. We will continue to do seed, series-A, growth stage and public-listed.Public (listed) will be around 20% of the fund. It is flexible. In our last fund, we were not very active in series-B, in terms of cheque sizes above $15 million. We are hopeful in this fund we will do much more. We will also become more active in the newer sectors where we have not been very active, such as enterprise, SaaS, education, healthcare and consumer brands.

ET: Are you looking at more localised ideas?
Alok: Earlier, in consumer internet, there were X of Y models, where there was empty space and it was more about grabbing that land. Now we are looking at newer opportunities which are not being done somewhere else. However, the pace will be slower in terms of number of companies.

Deepak: The X of Y plays have dramatically reduced. It takes a while before founders turn inwards and say which India-specific problems they want to solve, so the quantity of such companies is not very high. But the proportion in the overall deal flow is higher. People are finding that it is not easy to copy and that capital is also not easily available. We are seeing good signs not only in consumer internet but also in the B2B side. Rivigo is India-specific. However,w e don't see 50 such companies every month. While we used to see only about 2-5% of such companies in a year, it has now come to 20%. One-fourth of our deals are very India-specific.

ET: How hard is it to evaluate these deals?
Deepak: Over the last three years, we have been telling our LPs that this is the thing we want to back. It is at some level, a little bit easier. A founder pitching India-specific idea has done a lot of groundwork and research to understand the problem, versus us having to come with the hypothesis of similar models in China or US. The quality of discussion is significantly better. Given that most of our team has been here, it is definitely better.

Mukul: Even if we look at X of Y models, our approach is to figure out how deep is the pain point, how big is the opportunity and strong the team is.Given that we are a very India-focused fund, we behave like an entrepreneurial organisation. We can convince everyone about such opportunities. In global ICs, it can become a challenge.