AI valuations in India remain much more reasonable than US – Business News

RTP Global, the early backer of startups such as Practo and Snapdeal, has evolved into a significant early-stage investor over the last decade. With a third of its $1-billion global fund earmarked for the market, the firm is now writing larger cheques and backing startups from seed to Series A. RTP’s Asia partner Nishit Garg, tells Ayanti Bera about the firm’s investment strategy, views on AI valuations, and how the funding landscape has reshaped early-stage bets. Excerpts:

Q. How much of your fund is allocated to India, and what sectors do you invest in?

We’re currently deploying a billion-dollar global fund, announced in 2023, with first cheques going out in early 2024. About one-third of the capital is marked for India, which means we will write 25 to 30 cheques over a 3–3.5 year period, with 7–8 cheques per year. Sector-wise, we are very agnostic. We mostly enter at seed or Series A, sometimes early B. Typical cheque sizes are $1–10 million, with one or two follow-on rounds.

Q. It’s been observed that Series B and C funding has slowed.

Yes, even though this slowdown has persisted for about three years, there is now a pickup in Series B rounds. Two of our companies (Wiom and Stable Money) just closed their Series Bs. But there’s still a vacuum for big $200–500 million rounds as large funds such as SoftBank and Tiger Global are less aggressive. Private equity firms have come in, but they demand hard business metrics which takes time for startups to achieve.

Q. How has this funding slowdown changed your early-stage strategy?

Every fund is a bit more cautious now. When investing, we look at whether the company will have a sustainable business model. If follow-on funding is delayed, the startup must be able to survive by cutting costs as needed and last for a year if required. We ensure that by Series B our companies don’t face existential crises and have manageable burn rates. Exceptions are there in hype sectors such as quick commerce and AI, where high burn continues due to ample capital chasing them.

Q. What is your view on current AI sector valuations?

Valuations in India remain more reasonable, but in the US, it is “crazy”. Seed deals are happening at $50–60 million valuations, Series A at $150–200 million, without much progress in the real business. Some Indian AI founders with US backgrounds expect similar multiples, but they know Indian investors aren’t willing to pay as much. Globally, about 50% of our new deals are in AI. In India, it is 25–30%, while in the US, it’s as high as 80%.

Q. Which sectors beyond AI are currently interesting to you?

Consumer tech is a very strong and ongoing play. There’s been some compression in B2B commerce, which I think is not particularly a venture scale business and suits private equity investors better. Fintech, for us, is about distribution and tech layers, not direct banking. Wealth management, too, is a promising sub-sector. But in fintech, regulatory risk is always lurking, especially when stances change after businesses have been built, which creates uncertainty. You must operate strictly “by the book”. Grey areas aren’t viable anymore.

Q. What’s the state of exits in India?

Improving significantly. Secondary sales and IPOs are increasingly the main exit routes but M&A remain opportunistic or distress-driven, not as predictable as in the US. Most large M&As have been by consumer companies, not tech giants, though examples like Myntra-Flipkart or Freecharge-Snapdeal exist. But we’re patient as investors. Since we are a single LP (limited partner) fund, our capital can be patient, with the flexibility to hold investments for longer.