Themes and Thoughts emerging from FastForward 2022

As we wrapped the third edition of our flagship seed investment program Fast Forward back in March, we've spent the time since past ruminating over the quality of applications and the process we ran. As it happens with a fast-paced yet personalized program such as ours, we tend to get consumed by the frenzy. So this is us purposefully taking a step back and double-clicking on things we came across, things we liked, what applying founders thought of the program and things that we believe are indicative of emerging trends and inflexion points.?

Over the last month, we saw a record 1,500+ applications with by far the best pool of early-stage startups we’ve seen over our three years of running Fast Forward. The opportunity to evaluate this many early-stage startups in such a short space of time gives us some insight into how founders are thinking about the future. While we were instantly overwhelmed by the amount of interest, we also noticed several themes and trends that we were keen to dig deeper into.

We are truly seed and support companies with their first institutional cheque

• 44% of applicants had fewer than 5 employees at the time of application.?
• A whopping 72% had received either no prior funding at all or just capital support from friends and family.?
• 35% of applicants had been newly incorporated in the past year, up from just 18% in FastForward 2021?
• 50% were revenue-earning v/s 44% last year - another indication of how companies are thinking about building startups these days

Sector Insights that help us see what the future looks like

• FinTech - the most heavily funded sector of 2021 - saw the least participation at just 7% of applicants.
• Web3 is well and truly here, with startups across sectors looking to integrate blockchain-based offerings into their platforms.?

Other themes needed some digging and thought to uncover - several interesting trends emerged across B2B-tech, consumer, and health that we’re extremely excited about!

Connecting India to the world (B2B + SaaS)

We saw a number of companies looking to solve massive B2B pain points in India as well as globally. One of the most eye-catching themes that emerged this season was the sheer volume and quality of cross-border platforms. Total exports from India totalled $292bn and imports into India totalled $394bn in FY21. 10 months into FY22 (as of Jan-22), exports totalled $340bn and imports $494bn, already up YoY by 16.4% and 25.4%, respectively. Global cross-border commerce is fast emerging as the next big growth opportunity for the Indian e-commerce industry. As per Forrester Research, cross-border commerce is expected to grow at a CAGR of 17.3% in 2022. During Fast Forward 3.0, we saw a wide range of cross-border solutions, with some of the most prominent business models being:?

• SaaS platforms which digitize the export/import supply chain
• B2B cross-border marketplaces
• Cross-border payments and compliance platforms that enable easier FDI investment into India and international banking

Some key factors driving the trend in e-commerce include consumer preferences for the most relevant product globally, as well as the ability of sellers to manage fulfilment with last-mile delivery players and complete transactions via integrated logistics and payments platforms.?

We also saw a number of platforms looking to digitize the agricultural ecosystem in India. Platforms connecting farmers to wholesalers and retailers, offering input procurement solutions, and knowledge networks for farmers. However, while the market is sufficiently deep for a number of established players, we are unconvinced on competitive moats and business model differentiators.?

Companies looking to further connect the rest of the ecosystem with knowledge-sharing platforms and helplines also face steep competition from the same players that are looking to widen their portfolio of offerings beyond just supply chain and market linkage solutions. In addition to that, generating traction with a digital-first platform from a non-tech savvy demographic such as farmers will require immense creativity and precision on the distribution front.?

Within SaaS platforms, with 70+ applications, we witnessed a large number of companies building Enterprise Solutions for Global Customers. The majority of these businesses (at over 80%) had a B2B GTM with subscription-based revenue models. We also saw a number of SME-focused SaaS solutions, which was the second most popular sub-sector within Global SaaS. In our view, there is currently limited evidence of the pay-ability of Indian SMEs for product-led software, however, in global markets (especially in the US) these smaller businesses seem more inclined towards early adoption. Existing investments in the space such as Atlan, Global SaaS and India-to-the-World Software is certainly an area we’re extremely excited about here at WaterBridge.

Indian e-commerce approaching an inflexion point

Consumer tech was the hottest sector in Fast Forward 2022 with 22% of applications. Within this, we saw a wide range of different tech platforms across e-commerce, social media, networking, gaming and several web3 companies offering AR/VR experiences, NFT marketplaces and more.

However, by far our biggest takeaway from the consumer tech companies we saw was driven by the huge number of verticalized marketplaces and influencer-led e-commerce platforms. Although most companies approached the problem statement in their unique way across verticals, they were all solving for one overarching pain point - e-commerce in its current form is inefficient, consolidated and discount-led, as a result of which consumers have limited options (that they’re aware of) and often settle for underwhelming products offered on leading e-commerce platforms.

At WaterBridge, we recognized this as the next big problem area in e-commerce, which led us to our recent investment in Downtown Club via Fast Forward. Downtown is looking to solve this through a platform to facilitate the discovery of D2C brands. The discovery-led Downtown App enables users to browse new brands and products every day through a personalized virtual shopping experience.

Potential saturation in FinTech?

Fintech, which led the way in private equity funding received in 2021, seems to have matured as a sector.?

• Payments apps have hit saturation following Paytm’s IPO and Bill Desk’s bumper buy-out?
• New age lending like BNPLs and challenger banks have raised significant funding over the last year, perhaps shrinking the white spaces available in the market for new incumbents

A lot of this is driven by the well-developed infrastructure under India’s banking stack, which prompted fewer entrepreneurs to venture out in this space this year.

Emerging themes across health and wellness

In health-tech, we were elated to see the passion for entrepreneurship amongst one of the most respected and trusted groups of professionals - Doctors. More than 40 doctors and PhDs applied for Fast Forward 3.0. This trend is indicative of the growing interest in tech-enabled solutions from traditional healthcare practitioners.

Mental Health has been on a steady upward trajectory in terms of both awareness and marketability as a sector since the Covid-19 outbreak in 2020. Kudos to the 50+ founders who applied to Fast Forward 3.0 that are building solutions in this space and solving for significant disease burdens globally and in India. We saw Indian founders breaking through in global markets with early traction and retention. We at WaterBridge Ventures remain keen to take a bet in this space and are paying extra attention to how Indian startups are looking to break out in developed markets in the west.

Players solving for the broken healthcare infrastructure of India: We saw a large influx of applications around founders trying to solve big problems embedded in the Indian health infrastructure.

Most of the opportunities were home care oriented and full-stack integrated healthcare solutions, which were very operationally intensive. However, we remain bullish on the health-tech sector, which currently accounts for less than 2% of the US$130-150bn healthcare market in India. The industry faces >65% out of pocket expenditure, low insurance penetration at 27% and an under-developed policy stack with PMJAY and the National Digital Health Mission. We’re actively on the lookout for tech-led businesses that are looking to digitize the Indian healthcare infrastructure.

Edtech

As a whole, Edtech was far less prominent in this edition of Fast Forward as compared to earlier iterations. However, there was one key theme that caught our attention. As opposed to the flurry of K-12 live-learning and extra-curricular platforms we saw in the past, this year adult upskilling and continued learning platforms were undoubtedly the flavour of the season. The 2021 World Economic Forum report estimates that substantial investments in upskilling can cause the Indian economy to realise potential gains of up to INR 570bn in the next decade. As per the 'Upskilling Outlook in India 2022' report by edtech company Great Learning, a record high intent towards upskilling is being seen in 2022 with the emergence of newer domains like web 3.0, metaverse, NFTs etc. 79% of people still plan to upskill in 2022.

Driven by monetization challenges in the K-12 segment, founders are also increasingly targeting groups that have greater pay-ability, and offering courses with measurable ROI in the form of job placements and career progression. However, the space remains extremely crowded and intensely competitive, often even overlapping with recruitment-tech platforms. Given that players such as UpGrad, Simplilearn and Udemy are already established with significant scale, a breakout player in this space would need some highly differentiated product magic and high network effects.

Conclusion

Overall, looking back at the largest and most successful edition of Fast Forward yet, we couldn’t be more excited about what’s to come for the Indian startup ecosystem. We’ve already noticed a shift in founder demographics, including more diverse geographies and company stages - Delhi-NCR leading the way in 2022! Looking at the top of the funnel, women founders remain in the minority. This is something we’re actively looking to change by doing the only thing that’s in our control - providing opportunity - 100% of women-led founding teams get to a pitch call with our Investment Team - Pitch to Us here!

As we continue speaking to founders and digging deeper into various sectors over the following months, we’re far more informed about and cognizant of what to look out for through our learnings from Fast Forward 2022.?We hope to announce our new investments soon! If you are curious about the Founders we have backed thus far in FastForward - listen to our podcast series That One Idea on Spotify!

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