Unicorn India Ventures eyes 150 crore investment in Kerala

“We are looking to invest 100 to 150 crore rupees in Kerala's tech sector over the next couple of years.” When Anil Joshi, Managing Partner of Unicorn India Ventures, says this, it goes against the familiar warnings that arise whenever the words ‘Kerala’ and ‘investment’ are mentioned in the same breath.

In a place where even local people are sceptical of putting money into businesses, Joshi has bravely entered that space. The Maharashtra-born and bred investor has invested crores of rupees in Kerala startups over the last eight years and has reaped rich dividends from it.

“Unicorn India made seven investments from our first fund that was floated in 2016. When we invested, the possibility of failure was 50 percent. However, we exited all. So if I take investments in Kerala as a standalone, my failure rate is zero,” says Joshi.

Unicorn India’s initial investments in Kerala appreciated a jaw-dropping 650 percent. “In seven years, Unicorn managed to return twice the initial investment to the investors,” Joshi told TikTalk Newsletter during the recently held Huddle Global. 

His only disappointment in Kerala so far has been the lack of interest shown by local investors who have not taken an interest in this new asset class.

Though his role as an investor in Kerala started only in 2016, Joshi had been in contact with the technology sector in Kerala a decade before that.

Prior to his Unicorn India days, Joshi was associated with Bombay Angels, a leading angel investing group in India. In 2006, the Kerala government had invited him to provide inputs on how to develop a startup ecosystem here.

Over the next few years, these interactions with officials of Kerala Startup Village (the precursor of Kerala Startup Mission) grew, and he delivered multiple lectures in Trivandrum and Cochin.

“I provided several suggestions, and the government took them seriously. I was of the view that there should be steps to identify startups with good potential and provide mentoring to them. All these suggestions were taken on board by the government. That gave me confidence in the ecosystem developing here.”

The groundwork done by Kerala government paved the way for some positive outcomes, but major investors continued to stay away. In 2013-14, Kerala Startup Mission sought his views again to overcome this.

Joshi says he observed that the government was spending crores every year as grants to encourage startups and suggested that, apart from such incentives, Kerala should invest in funds willing to back startups here.

By 2014, Joshi had parted ways with Mumbai Angels and began working towards the creation of a new venture capital fund. When Unicorn India floated its first fund of 100 crore rupees in 2015, the Kerala government invested 15 crores in it.

However, his early forays into the startup scene here had some hiccups. Unicorn’s first investment was in a renewable energy company that didn’t do too well. Then came his investment in a little-known startup called Genrobotics, which was struggling to raise funds from local investors.

“A startup with the idea of developing robots for cleaning drainage manholes wasn’t very attractive to investors at that time. Moreover, their main clients were going to be government agencies, making it a less appealing proposition. However, I still decided to visit them,” Joshi recalls.

“When I went to see them, they were operating from a small room where barely six people could sit. There was a hardboard and plywood model of a robot hanging from the wall and a water tank on the other side. None of this would impress an investor. But as the cofounders explained the concept and idea, I felt their knowledge, passion, and commitment coming through.”

“I felt the least I could do was to write a cheque just to encourage them. I asked how much they needed to make a workable prototype of the crude model they had, and they said 20 to 30 lakh rupees. So, I invested that amount without hesitation.”

The rest is history, as Trivandrum-based Genrobotics went on to become a poster boy of the Kerala startup scene, with renowned investors like Anand Mahindra and Vembu Sreedhar also backing them. In 2016 alone, Unicorn invested 70 lakhs in Genrobotics, which has now grown into a multi-crore business with clients across India and abroad.

Another early investment Joshi made was in Open Financial, which went on to become the first Kerala startup to reach unicorn status. Unicorn India exited from that, but 40 percent of its total investments in the country still are in Kerala.

“Unfortunately, there are not many Keralites investing in our fund, except for a few close friends,” he says ruefully. “I don't know why people are not looking at this opportunity.”

“High net worth individuals should allocate 5 to 10 percent of their portfolio to these types of investments, as the return on investment is very high. The startup ecosystem in Kerala has evolved, and people are investing in them and making money.”

“This is a message I would like to give to investors from Kerala: Do not shy away from supporting your own. They are doing well.”

But he agrees this change will come only gradually. “The venture capital industry is very young in India, unlike the USA. During my Mumbai Angel days, the total number of angel investors in India was just around 25. Now, it is more than 25,000.”

“But startup investments will continue to increase in the coming years. This is an asset class that never existed before. People still invest in gold and land because they are tangible, and in fixed deposits because it is a kind of secured investment. Startups are a high-risk area, but with the potential of high returns.”

He also offers some advice to those planning to enter the funding scene. Many Kerala startup founders lack exposure and are unsure about how to build larger ventures or see the bigger picture. This makes it difficult for angel investors and venture capitalists to negotiate and close deals. “So, be prepared to spend time educating these young innovators. Then, it will yield good results,” says Joshi.

He notes that there are many successful tech entrepreneurs in Kerala now and predicts that, five years down the line, these individuals will become active investors focused on startups here. 

After initial investments, Unicorn India continued to strengthen their tie-ups in Kerala when they launched their second fund of 300 crore rupees while adding a few more firms to their portfolios. 

The VC, which launched a 1,000-crore fund in September, is planning for more investments in the state. “In the coming two to three years, we will be investing 100 to 150 crore rupees here,” says Joshi. 

He mentions that Kerala is much ahead when it comes to encouraging startups, and some other governments are now following the state’s example. 

In Karnataka, startups emerged without the government’s involvement due to a history of influential industries. In Kerala, it is happening just because of the government’s intervention. Without that, it wouldn’t have happened, says Joshi.

“Kerala needs to continue doing this and should not squeeze that budget.”

So what about this image of Kerala as a place hostile to investors and its history of labour problems?

“Those are relevant for yesterday’s companies when labour exploitation existed. Today’s companies are knowledge-driven and not labour-intensive,” he points out.

To elaborate on this changing scenario, Joshi mentions that when Unicorn India invested in Genrobotics, it was a six-member startup, with four co-founders. Now, it has expanded its staff to around 250 employees, but 102 of them are engaged in research and development.

This is the new Kerala that is emerging. 

“I am optimistic; I have invested in Kerala, and I am making money,” says Joshi.

Trivandrum may get aerospace industrial park

At the risk of sounding like a broken record, we again want to talk about the untapped talent pool of space experts in Trivandrum. The government says it is fast-tracking the establishment of K-Space, which replaced the aborted Space Park project. This is while states like Tamil Nadu and Telangana are going ahead at warp speed to establish space tech hubs. While the official project drags on, the Chamber of Aerospace Industries (CAI) in the capital is looking to establish a private industrial park in the city.

The chamber president, Pius Varughese, tells TikTalk Newsletter that they are in the process of identifying suitable land to establish such a facility and pave the way for a cluster of aerospace industries to create an ecosystem needed for the sector. He says Trivandrum already hosts more than 50 companies that have been serving the premier space research organisations, and the city can easily become a space tech hub if the potential is utilised properly. Hopefully, the chamber will have some good news to announce soon. Watch this space.

Electrifying news from Idukki startup

Kerala’s startup sector is renowned for its SaaS providers. However, away from the tech hotspots of city-based technology parks, a startup has achieved a notable feat by establishing a 4MW hydroelectric dam at the cost of 30 crore rupees in Idukki, reports Open Digest. Founded by seven friends who studied together at Angamly FISAT Engineering College, Mukkudam Electro Energy successfully completed the project in October 2023, and the power generated from the dam is now integrated into the KSEB power grid. Rakesh Roy, one of the co-founders, tells TikTalk Newsletter that 70 percent of their project funding was through loans from central agencies, and the rest through bootstrapping. Given that startup funds in Kerala predominantly cater to software firms, this comes as no surprise.

Adobe move shows India’s AI potential

Tech giant Adobe marked a major move into the regenerative AI domain with the acquisition of Bengaluru-based Rephrase.ai, a cutting-edge video creation platform. While the financial details of the deal remain undisclosed, a Techstory report suggests that “the acquisition will likely result in a complete cash exit for Rephrase.ai’s investors”. It seems some investors are in for a windfall. Established in 2019 by Ashray Malhotra, Nisheeth Lahoti, and Shivam Mangla, Rephrase.ai had previously secured backing worth 13.9 million US dollars. Some experts predict that Adobe’s move may prompt other tech giants to closely explore the regenerative AI sector in India.

Sam Altman and a new star

He was out and then back in before we could even say Sam. The saga of Sam Altman and OpenAI will continue to hog the headlines, though what started it all remains hazy. But what intrigued us is the Reuters report that said some employees had written to the OpenAI board warning about their Q-star model. Apparently, it had acquired the ability to crack math problems, though at a school kid level. What sets this apart is that unlike regenerating words and pictures, math problems have definitive answers. If true, this might signify that the OpenAI model is edging closer to mimicking the workings of the human brain. Perhaps it’s a good time to revisit Stanley Kubrick’s 2001: A Space Odyssey