Keen to invest in Indian firms with global ambitions: Florian Reichert of Picus Capital

The German early-stage technology investment firm sees significant potential in the country despite the risk of late effects of the pandemic

By Rajiv Singh Forbes India Staff

Published: May 12, 2021 02:17:45 PM IST

Updated: May 12, 2021 02:23:13 PM IST

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Florian Reichert, partner and managing director of Picus Capital

Covid-19 had an accelerating effect on the adoption of technology solutions across sectors, reckons Florian Reichert. “This is the case, especially for markets such as India, which are still catching up in terms of digitisation in areas like payments or ecommerce,” underlines the partner and managing director of Picus Capital, a German early-stage technology investment firm. The Rocket Internet co-founder Alexander Samwer-led firm, which has backed a bunch of startups in India such as MoneyOnClick, Basic Home Loan, Lido Learning and Meddo Health, is bullish on the Indian market. While the risk of an economic downturn remains and other late effects of the pandemic are still to be seen, Reichert lets on, one can say that the technology sector, in fact, profited from the pandemic, obviously under circumstances nobody had wished for. “We see significant potential in the Indian market despite the risk of late effects of the pandemic,” he says in an exclusive interview. Excerpts:

Over the last few years, India has seen the blossoming of early-stage VC funds. How is Picus different from the others?

We see ourselves as an entrepreneurial sparring partner that brings more than just capital to the table. We take a very holistic approach and support our portfolio companies with much more than just capital. It is our philosophy to act more like an entrepreneurial sparring partner than a financial investor by actively supporting different dimensions like key strategic decisions (for example, go-to-market or customer acquisition strategy), recruiting of key employees, structuring of fundraising processes and more. For us, this support starts before a potential financing round. We start working together with founders when they are forming and validating their idea, thinking about first customers or product development.

Primarily, we partner with exceptional founders who share our ambition of building category-leading businesses over the next five to ten or more years, who challenge the status quo and shape our tomorrow. We thereby focus on technology ventures targeting massive industries like real estate, finance, human resources, mobility, health and ecommerce. Further, we have a sustainability mindset and focus on investments that fundamentally make a positive contribution to our society.

Do you reckon having a global presence and experience helps in terms of mentoring startups?

We have a presence in all major ecosystems and can hence leverage a global network when working with our portfolio companies. Our team is closely aligned across all geographies which allows us to spot and track global trends as well as learnings, and share these insights with the founders in our portfolio.

In India, we have invested in MoneyOnClick, Basic Home Loan, Lido Learning and Meddo Health, and in Southeast Asia, we have backed Aspire, Cove Living, Crea, Multiplier Technologies, and Easyship. These are the markets we are particularly bullish about as we see interesting founding teams and market dynamics around digital adoption and growth.

There is a scramble among Indian startups to get listed… is IPO an endgame?

Many investors see an IPO as the pinnacle and hence often as an exit event. Given our long-term philosophy, an IPO is mostly only an intermediate step in the journey of building category-leading businesses for us. We do believe that a listing on public markets can be beneficial for many startups, given that public markets value certain business models more favourably than private markets and provide access to larger capital pools on the equity and debt side.

What are your focus segments in India?

In general, we focus on the same industries in India as we do globally. We focus on technology ventures in the following sectors: Real estate, finance and insurance, human resources, renewable energy, ecommerce and health. In emerging markets like India, we see a lot of potential in ventures tackling infrastructure gaps like our portfolio companies Meddo Health, which is building a clinic network in order to improve the quality of care. Another example is MoneyOnClick, which provides the broader Indian population outside of Tier I cities with access to fair financial products.

Generally, we are looking to invest in category leaders. This can be at a global, regional or local scale, and depends on the business model. Therefore, we are definitely interested in investing in Indian companies with global ambitions. Especially when it comes to B2B software solutions, India has shown great success at a global scale.

Our ticket size usually ranges between $250,000 and $750,000. We follow a long-term strategy in which follow-on investments play an important role. These follow-on tickets can go up to a couple of million dollars. In total, we plan to invest $300 million over the next few years of which around 25 percent will be allocated to Asia.

How is the Indian startup ecosystem different from other global markets?

There are several characteristics that make the Indian market interesting for us. First, the large amount of micro and tech entrepreneurs in the country shows that the Indian population has an impressive entrepreneurial drive.

Second, we see strong entrepreneurial talent that gathered relevant experience by studying at top local and international universities, and by working at the first wave of technology companies (Flipkart, for example) or other successful companies in and outside of India.

Third, India will develop into one of the three largest economies globally. Fourth, we still see gaps in the infrastructure of massive industries. This gives entrepreneurship promising opportunities and white spaces, while in more mature markets like Europe, new ventures can often only achieve marginal improvements compared to the status quo. Finally, India shows a strong adoption of digital solutions which is also supported by the government in industries like the payments sector.

Due to the emerging nature of the economy, the monetisation potential for certain models such as SME or enterprise software is limited to some extent. Hence, it can be less attractive compared to markets like Europe. However, on the flip side, this causes Indian software companies to quickly focus on international markets like the US, which yielded successful businesses in the past.