When Vishal Gupta started out at Bessemer Venture Partners, in India, venture capital in the country was more “private-equity style," he recalls. That was 2006, when he was one of three people kicking off the VC firm’s India operations out of two connected rooms in Mumbai’s Trident hotel, helped by a formidable secretary, he recalls.
In fact, Bessemer’s investment in Motilal Oswal Financial Services (MOFS) that year, for example, alongside a US-based firm called New Vernon, was described in the top Indian business dailies as a private equity deal. The well-documented news shows Bessemer picked up 2.6 percent in the capital-markets brokerage at Rs208 a share, privately valuing MOFS at Rs1,250 crore.
A year later, MOFS went public at Rs825 a share, closing at Rs977.45 on listing day, bringing a handsome return to Bessemer, which exited partially and then fully by 2010.
Today, Gupta and his colleagues continue to back companies bringing innovation to the Indian market. But the approach of the early years–backing more mature, and non-tech, companies such as Shriram EPC, Orient Green Power or Sarovar Hotels & Resorts–have given way to true blue early-stage startup investments in tech-led businesses, with Bessemer often going in early and sticking with the founders for several years.
Perfios Software Solutions, for example, is widely seen today as a promising fintech innovator. Bessemer, the startup’s first institutional investor, led its $6.2 million Series-A investment in March 2017, according to data from Tracxn, a private markets intelligence provider. Privately last valued at $2.6 billion after a March 2024 funding round, Perfios is expected to seek a public listing soon in India.
Gupta had started looking at tech-led startups from around 2011, and by 2013, he moved the firm’s India base to Bengaluru. Some early tech-led bets Bessemer made include Anunta, Indian Energy Exchange, Snapdeal, Remedinet, Taxiforsure, and Matrimony.com, StartupCentral noted in a report in 2014.
Bessemer also backed other tech-led consumer businesses in India spanning both early and growth stages, including LivSpace (2014, series A), BigBasket (2015, series C), Urban Company (2015, series B), PharmEasy (2015, series A) and Swiggy (2016, series D). More than 80 percent of Bessemer’s investments in India over the last five years have been in early-stage companies, the firm said in a March 12 press release announcing its second dedicated India fund, a $350 million corpus.
The partners at Bessemer invest in companies based on what they call roadmaps, in which they lay out their arguments and expectations that a certain sector will see big changes or shifts, or certain type of companies will do exceptionally well in the years ahead.
“We look for discontinuities in the ecosystem," Gupta says. “Changing of revenue pools, shifting of profit pools, regulatory changes may be driving something, new platforms emerging and new consumer behaviour changing."
The idea is to ferret out these discontinuities and try to go deeper and see what the future might look like over the next 10-15 years in an ecosystem. The investment plan is to be a bit ahead of the curve. For example, Bessemer developed a consumer internet roadmap around 2011, and its investments in Livspace, Bigbasket, Urban Company, PharmEasy, and Swiggy–using its global funds–can be attributed to that roadmap.
With the latest India fund, Bessemer will focus on early-stage investments in areas including AI-enabled services and software-as-a-service (SaaS), fintech, digital health, direct-to-consumer brands, and cybersecurity, the firm said in the press release.
These remain consistent with most of the focus areas the firm outlined in November 2021, with its first dedicated India fund, which was $220 million. The mandate for the second fund reflects how the Indian market has evolved.
“There are not many large categories left if you think about them from a scale perspective," Gupta says. For example, dominant players have already emerged and are entrenched in certain broad categories such as horizontal ecommerce (meaning covering a very wide variety of products.) But the market is ready for the next phase of innovation in multiple sectors.
Beyond fintech, where Gupta is expecting the next big phase of growth in India, “I would say, two roadmaps that we probably are most excited about today, one is around direct-to-consumer, and second, cybersecurity," he says. The reason for the first is that in ecommerce, “the next wave that we see now is the changing of consumer behaviour to direct-to-consumer brands."
Bessemer is betting that the Gen-Z consumer–born with a smartphone in hand with some of the world’s cheapest data rates–definitely doesn’t want to buy her parents’ brands. While the Indian customer remains value conscious, it is a far more affluent India than 10-20 years ago, and access to consumption and spending is easier, Gupta points out.
“We continue to be very keen on the fintech ecosystem in India because we think that will continue to be very large," Gupta says. And by fintech, he means software mostly, including software for banks, insurance companies, asset management companies, brokerages and so on.
Consider India’s unified payments interface (UPI) for example, which people often see as a simple peer-to-peer transaction. However, before the transaction goes through, the data needs to bounce off some multiple nodes (from the sender’s bank via the UPI system to the receiver’s bank), Gupta points out.
“If there’s a failure at any one node, how’re you going to observe that … or how will you prevent AI from spoofing your KYC," and so on – there is a multitude of such layers and areas in which modern software is the need of the hour.
With their legacy software, today’s large banks and financial institutions in India have many siloes, he says. A simple example, a credit card IT system may not be talking to the banking system with respect to the same customer of the same bank. “Where’s the interoperability between all these different ecosystems?"
Similarly, “I"m very excited about the health insurance ecosystem in India and where it is going. It"s a secular multi-decade build, if you think about it," he says. As India goes from a $10-12 billion-in-premium health insurance market today to $50 billion or more, how does one underwrite a given individual.
Or how does an insurer pre-empt a likely problem a customer might face on the basis of longitudinal data (meaning data collected on the same subject over a period of time).
Whether it is fraud prevention or protecting customers or settling claims, obtaining this ‘one customer’ view can be a game changer for financial companies. Software entrepreneurs who can build solutions for such requirements will end up establishing large businesses, Gupta points out.
India’s venture capital (VC) landscape demonstrated resilience and recovery in 2024, with funding rebounding to $13.7 billion — 1.4x the 2023 levels, Bain and Company said in its India Venture Capital Report 2025 on March 10. Strong domestic fundamentals, progressive regulatory reforms, and rising public market activity strengthened India’s position as Asia-Pacific’s second-largest VC destination, according to the report.
A rise in deal volumes (880 deals in 2023 versus 1,270 in 2024, a 45 percent increase) led this growth in deal activity. Small and medium-ticket deals (less than $50 million in value), which made up around 95 percent of the deals, increased by about 1.4x while large deals (more than $50 million in value) nearly doubled, returning to pre-pandemic levels.
Tech-first sectors (consumer tech, software and SaaS, and fintech) remained dominant, capturing more than 60% of the total funding. Consumer tech became the largest sector, with funding rising 2.3x to $5.4 billion. Exit activity remained steady in 2024, edging up to $6.8 billion.
“The Indian startup base has tripled since 2021, and tech continues to be a dominant theme in India," Aditya Shukla, a partner with the consultancy, in Mumbai, tells Forbes India in an interview. “What has changed is that you are seeing a lot more innovation in consumer tech, software and SaaS, which will remain a core part of VC growth equity investments in India," Shukla says, who is a member of Bain’s private equity and technology practice.
He agrees that new, niche opportunities are on the rise in e-commerce and that quick commerce is expanding the market in its own right. With software and SaaS, factors such as improved utility of the solutions coming out now, increasing levels of embedded AI and the maturity of the ecosystem with respect to ‘go-to-market’ in the US are all some structural, fundamental tailwinds, he says.
The first set of software companies that have achieved scale, Zoho and Freshworks – but also tech-led giants such as Flipkart – has spawned a large number of entrepreneurs. Access to mentorship, networks, playbooks and money has all matured and this is creating a virtuous cycle, he says.
With respect to founders’ mindset today, there is a clear shift towards balancing growth with a path to profitability. And there’s a very visible incentive for this, he says. The mega deals in 2024 are evidence that VCs clearly prefer companies that have focused on both top line growth and bottom line improvements.
“It’s a welcome shift," he says.
Another noteworthy trend is that more Indian startups than ever, are now coming from outside Bengaluru, Delhi-NCR or Mumbai, he says. Hyderabad is on the rise as a strong startup hub and smaller centres such as Jaipur are also emerging. Today close to one in four new startups, the “VC-friendly" ones, are coming from outside the three biggest centres, Shukla says.
First Published: Apr 14, 2025, 12:25
Subscribe Now