Bengaluru: Early-stage investors are increasingly inclined to make substantial and audacious investments in the realms of quick commerce and consumer-oriented artificial intelligence (AI) tools within India. This trend highlights the burgeoning optimism surrounding the growth potential in these sectors, as articulated by a prominent executive from venture capital firm RTP Global.
With larger financial commitments and elevated stakes, these investors are plunging in at the nascent stages—boldly placing their bets, observing discreetly, and patiently awaiting the outcome of their ventures, shared Nishit Garg, partner at RTP Global’s Asia operations, in a recent interview with Mint.
“Quick commerce and AI represent the sectors currently generating significant buzz in India. These markets are witnessing more substantial funding rounds and ticket sizes, along with heightened valuations,” Garg elaborated.
RTP Global has embarked on a series of investments in quick commerce and AI in recent months. In July, they spearheaded a $3 million seed round for Trupeer AI, a software platform facilitating the creation of studio-quality tutorials and guides for enterprises.
This initiative followed a substantial $9.6 million investment in Kluisz.ai, a private cloud infrastructure startup, marking the largest seed funding round within the AI domain for the year.
Garg further indicated that RTP Global is also poised to pursue larger follow-on investments in these sectors throughout the year.
In the quick commerce sphere, RTP made an investment in FirstClub—a curated grocery delivery startup established by former Cleartrip CEO Ayyappan R—in August of the previous year. This was complemented by their investment in Outzidr, a fast-fashion enterprise seeking to enhance its rapid delivery capabilities imminently.
Early-stage investors are increasingly recognizing that Indian companies have transformed into a hotspot for lucrative deals, thus presenting appealing exit opportunities. “Investors are beginning to secure larger ownership stakes in these enticing opportunities. Many are revising their portfolio strategies to allocate more capital per investment,” Garg noted.
Remarkably, early-stage investments in India have gained momentum despite an overall decline in funding, which fell by over 20% year-on-year in 2024. This downturn resulted from apprehensions stemming from global economic challenges, coupled with market saturation, escalating customer acquisition costs, and ambiguous unit economics.
Nevertheless, early-stage investments saw a 25% increase to $355 million in 2024 relative to the previous year, driven by optimism surrounding direct-to-consumer brands. Seed stage funding also ascended by 18%, reaching $141 million during the year, according to estimates from market intelligence firm Tracxn.
Risky but Rewarding
According to Garg, despite the high probability of failure among startups in the AI sector, investors are undeterred. “I believe that most funds today comprehend the grim reality that the failure rate in AI will significantly exceed that of other sectors. However, the ease of launching a company creates intense competition,” he remarked.
“One must be prepared to accept that perhaps only one out of every ten companies will endure. In contrast, other sectors might see three or four succeed,” Garg explained.
They are banking on the notion that the few companies that manage to prevail will yield returns substantial enough to offset the losses incurred along the way.
“The mortality rate may be elevated, yet the rewards render the risk worthwhile. Those that survive will more than compensate for the failures,” he observed.
Within the high-stakes arena of quick commerce, early-stage investors are increasingly adopting a perspective that parallels the capital-intensive nature of traditional e-commerce. Establishing a successful quick commerce enterprise necessitates considerable funding, repeated capital infusions, and a cap table populated with affluent global investors.
Given this trajectory, early investors are strategically opting for larger ownership stakes at the outset, fully cognizant of the dilution they are likely to encounter throughout the company’s evolution.
“When entering early, it is crucial to secure higher ownership, as dilution will happen multiple times over the course of the company’s lifecycle,” he stated.
Source link: Livemint.com.
