Behind the Exit: IndiaMART

An Interview with Quona partner Ganesh Rengaswamy

In 2016, Quona partner Ganesh Rengaswamy led the Series B investment into a company called IndiaMART. At the time, IndiaMART had been quietly building for 15 years. In the 3+ years since Quona’s initial investment, IndiaMART’s user base grew to over 100 million registered businesses. And in mid-2019, IndiaMART went public, in a massively anticipated and oversubscribed IPO.

What follows is a discussion with Rengaswamy about what the IPO and Quona’s subsequent exit means for SME digitisation and commerce in India, why it’s so exciting for the industry, and what we think is next.

How did you discover IndiaMART in the first place?

IndiaMART is one of the longest-standing B2B commerce platforms in India. They pivoted to their newer business model in 2008–2009, and I had been following them since then. It was a long wait before we got the opportunity to invest in them since the company only raised two institutional funding rounds (we co-led the Series B in 2016) before it went public! This is unheard of amongst digital commerce companies in India, which have taken very large amounts of capital in their attempt to create value.

Was it a risk to invest in a company that was growing, but that didn’t necessarily fit with the typical venture model — it wasn’t a newer company, it was established and known — how did you pitch it to your partners as something worth doing?

IndiaMART was an interesting addition to the Quona portfolio for a couple of reasons.

First, though the company had been around for a while and was the dominant player in B2B commerce, their financial services and broader SME digitisation/SaaS services strategies were still in their infancy. We believed Quona could add significant value on that front, and that our involvement was likely to lead to more value for the ecosystem and within the company.

Second, being the largest SME commerce platform in the country, the opportunity to make an impact for these SMEs at scale through the inclusion of value-added services was appealing to the Quona team.

What did you see in IndiaMART’s management team that made them a good bet?

B2B and SME services is a tough space and the mortality rate of startups in this space is high. IndiaMART’s founders were tenacious, persistent, disciplined, and refused to give up. This is what made them outlive all other players in the space over two decades. Additionally, we saw that they had the hunger to make an impact and take the company public even after all those years of building the company.

What happened with IndiaMART between Quona’s initial investment and the public offering? What supercharged their growth? How did the climate change for what they were building?

The proliferation of smartphones and the democratisation of the internet (with very affordable plans from Reliance Jio) were turning points in IndiaMART’s scale-up journey. This led to strong growth in SME buyers, sellers, transaction activity, exploration of payment and escrow services, SME digitisation services and more.

What did you learn from this specific investment? From the IndiaMART management team?

We have learned so much! I would highlight a few key areas that have helped us become more reflective:

  • Understanding differences in SMEs across Tier 1,2,3 cities/towns in India
  • Understanding and appreciating the complexity of challenges companies face in B2B commerce
  • Gaining greater insight into credible commerce monetisation models
  • Seeing firsthand that delivering superior customer experience beats everything
  • Understanding how employee centricity can turbo-charge a business
  • Preparation for an IPO; and how to handle going public and what happens next

Was there anything that surprised you about IndiaMART?

Most companies say they care about their employees. But IndiaMART takes it to another level. They stick by employees in thick and thin — I know several employees who would vouch for the company’s support in difficult times, even in their personal lives. The camaraderie and loyalty that IndiaMART has built amongst its employees is remarkable, and that commitment to their people shows — there are many employees with long-term careers at IndiaMART. It’s a great culture, and one that people are reluctant to leave for other roles!

What kinds of things are you most enthusiastic about investing in now that Quona is out of IndiaMART? What do you think is the next more promising area for investing in India, given COVID and other global and market factors?

The things that I’m excited about now are in a few key areas: Open banking models, insurtech, agritech/financial services, digitisation of SME services and supply chain efficiencies.



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Quona Capital

Quona Capital

Quona Capital is a venture firm specializing in financial technology for inclusion in emerging markets. Learn more at quona.com.