Covid has not changed the fundamentals of investment: MD, Picus Capital

Picus Capital, a privately financed venture capital company headquartered in Munich with offices in New York, Berlin, London and Beijing, has been a prolific investor in Indian startups. Picus predominantly invests in pre-seed, seed and Series A rounds and focuses on technology companies in the real estate, finance and insurance, HR, renewable energy, mobility, e-commerce and healthcare sectors. In India, it has invested in startups such as Moneyonclick, Basic Home Loan, Meddo Health, Lido Learning and Simplicontract. Florian Reichert, Partner & MD at Picus Capital talks to TOI about the company’s strategy in India. Excerpts:

What are Picus Capital’s specific topics of interest when investing in India?

Our investment topics for India are pretty much the same, in line with our global scale theme and ambitions. The focus is on software technology firms emerging in sectors such as Real Estate, Finance & Insurance, Human Resources, Renewable Energy, Mobility, E-Commerce and Health.
When it comes to India, we are also closely looking at investing in companies that address specific infrastructure gaps in the market. For example, companies that ensure access to financial services, like our two portfolio comapnies in India, called MoneyOnClick and BASIC Home Loan. Both the companies cater to people who don’t have access to a full suite of financial services, particularly credit but also other banking products like cards or investing.
They are essentially trying to reach them digitally, hence have a much leaner cost structure and can serve the customers in India in tier 2, 3, and 4 cities.
Another investment of ours, which is bridging the infrastructure gap is a company called Meddo health. Meddo health is building an OPD Clinic network, enabling higher quality healthcare service for the customers. They are transforming physical clinics into digital healthcare centres, enabling doctors to interact with patients digitally and offer outpatient care insurance on top of it. Besides that, many opportunities are riding in the B2B software system space, where we see many teams in India building products for the global markets by leveraging the technology, expertise, knowledge and the talent the country offers.

What kind of a lock-in period Picus Capital looks at while investing in companies?

We have a different approach than a typical venture capital investor. We are a privately financed investor, which means we do not have fund structures in place. Because of the same, we have a very long-term oriented investment horizon, which is 10+ years. We ultimately want to invest in category leaders who will have a positive impact on how we live, how we work today and are challenging the status quo.
We believe that changing the status quo in a market often can’t be done in five or six years, which is why we think with a 10 + years horizon. For example, for us even an IPO is not an exit event, it is actually another step in our journey of building a category defining business. So, therefore, in that sense, we are probably different from a typical VC investor.

A couple of news reports mentioned that you have a budget of around 25% for the Asia market, out of your total global spends earmarked for the next 12 months. What are your specific budgets for India?

We don’t have any fixed percentages in mind for India, as such. That’s a budgeted amount for Asia (including India), but we as a company don’t believe in hard allocations. It’s all about the right opportunities coming our way. If there are founders/ventures that we believe can disrupt the future of the sectors in which they operate, we would invest more than 25% in Asia or in India, to say.

How different are the start-up objectives in India from the rest of the world, where Picus Capital has made investments?

If you compare India with more developed markets like the US, the companies here address more fundamental gaps/white spaces (for instance, companies like Meddo in Healthcare or MoneyonClick in finance) In more developed markets, the innovation is often happening on a more incremental level given a more advanced status quo they are addressing. For example, companies are building a better software solution than an outdated one in thevs.digitising and entire space from scratch. However, the potential in these incremental improvements is very significant given that the addressable market is often larger.

Do you believe that pandemic accelerated the acceptance and growth of e-commerce/ online business in India? Do you think the COVID-induced trends are here to stay, or is it just a blip on the RADAR?

Yes, the pandemic had an accelerating effect on the acceptance and growth of e-commerce / online businesses in India. While the adoption has been increasing continuously due to the pandemic, a few years probably have been skipped. There might be a setback post the pandemic, but I am quite sure that it will level out above the pre-pandemic levels. It is interesting to observe India specific e-commerce business models, such as Meesho, which focuses more on the social commerce tribe, providing local market flavor to the consumer with a strong level of trust coming from the community level leaders showcasing and transacting on the platform.

Do you believe Indian start-ups addressing fundamental gaps is more promising compared to what is happening in the developed market?

Not really! There is a very different kind of innovation you can do in India compared to the developed markets like the US. From an investor perspective, the opportunities in the US or other developed markets are equally interesting to the opportunities in India.
I would say that you find a lot more white spaces in India, and less penetrated markets here. There is more fundamental innovation that can be done, the positive impact you can generate on society or the environment is therefore also often higher.

There is a method of investment for VC Companies. Do you think COVID has changed the lens through which the investors have started looking at start-ups?

I don’t think COVID has changed the fundamentals for investment. A strong leadership team, large market, financials, and many other factors, which every investor considers, still remain the basis for a start-up investment. However, market trends have of course changed which make a lot of investment opportunities like for example in digital healthcare or digital education more interesting compared to pre-COVID times.

Which are some of the next companies that you are going to invest in India?

As mentioned before we are very interested in companies that are working on bridging the infrastructure gaps in the Indian market – in that context we are closing another investment in the FinTech space. We also very recently invested in a company called Simplicontract which is building a B2B software solution in contract lifecycle management for international markets.