Gaurav Singh, founding partner, JPIN VCATS
The volume of goods moving from the U.K. mainland to the European Union fell by 68 percent in January when compared with the same month in 2020, according to a letter sent by the Road Hauliers Association to Government Minister, Michael Gove.
The leaked letter suggests that Britain’s economy could be in for a bumpy ride over the next few months as businesses grapple with new regulations.
That’s the short-term picture. In the longer term, the dip in exports is unlikely to be quite so dramatic but the expectation that trade volumes will be, at least, a little lower, simply because of the friction caused by new layers of bureaucracy and the associated added costs. If that’s the case, SMEs – who are arguably less well equipped to deal with a welter of extra form filling – are likely to the hardest hit. Government advice is that they look for new customers beyond the European Single Market.
One of the biggest of the just-slightly-beyond-the-horizon markets is India. As things stand, trade between the two nations is worth about £23 billion, a figure dwarfed by the value of U.K./EU commerce but significant nonetheless.
So significant, in fact, that Britain’s International Trade Secretary, Liz Truss last week concluded a five-day mission to India with the announcement of a number of investment deals and a pledge to work towards a deeper trading relationship. A trade deal may or may not happen but what is certain is that the UK is keen to position itself as both an investment destination and a supplier of tech and science solutions and services.
And what we may also see is more investment by Indian VCs and family offices in Britain’s startup sector.
Now, the UK is no stranger to cash flowing from India, much of it emanating from major corporations. For instance, among the investments flagged by Liz Trust, conglomerate Tata pledged to create 1,500 consultancy jobs in Britain while biotech company Wockhardt announced the expansion of its plant in Wrexham, Wales. But is there an appetite for backing early stages businesses?
Nayan Gala, founding partner, JPIN VCATS
Gaurav Singh and Nayan Gala think there is. They are founding partners of JPIN VCATS, an investment and consultancy firm with offices across India and Asia, and the U.K. With extensive experience of investing in and growing companies in Asia, JPIN is now on the hunt for British startups.
However, Singh says that until recently that appetite has been tempered by the fact that investing in startup companies from another geographical region is not necessarily straightforward. “We see investors from India struggling to navigate the U.K.,” he says. “And UK investors find India a challenge.”
Drawing on experience of working in both markets, JPIN is hoping to act as a bridge connecting investors and startup opportunities in both directions.
So what does an Indian investment company offer to British startups? Well, aside from money, there is access to India’s markets.
“In the past, people tended to see India in terms of supply chains and a low-cost workforce,” he says. “That is changing. India has a growing middle class and there is a lot of capital in the system. There is also a one billion population and 627 million internet users. It’s a massive market to capture.
Equally important, despite growing prosperity and the enormous wealth generated by its major corporations, India is still in some regards an emerging market with a corresponding potential for growth. Gala cites the finance sector as a case in point. “There is still a big section of the population that is unbanked,” he says – pointing to opportunities for fintech businesses.
A case in point, is CreditEnable, a U.K.-headquartered startup offering a platform that provides banks with a means to assess the risks associated with SME borrowers, thus simplifying the process of getting a business loan. JPIN lead a recent £2 million raises with a £700,000 investment. CreditEnable is already active in India.
“There massive opportunities in challenger banking, healthtech, insurtech, and payments,” says Singh.
Part of JPIN’s pitch to British businesses is that it can help them establish themselves and expand not right across the Indian Subcontinent and Asia more generally. And not just in the obvious places. “Many of the opportunities are in tier 2 rather than tier 1 cities,” says Gala.
There is potentially a problem in that British companies are not necessarily focused on India or Asia as a whole. “They want to grow in their own market or go to the U.S.,” Gala acknowledges. So in that regard, JPIN has something of a selling job to do. Thus, the company is building relationships with startups, entrepreneurs, and VCs in Britain. “We regularly attend pitch days,” says Singh.
There is a bigger picture. India is – according to a 2020 report from the Trade Department – the second-highest source (after the U.S) of Foreign Direct Investment into Britain. In terms of VC and private equity investment, a report published by Bain in the same year found that there was around $7bn in “dry powder” capital available to Indian VCs. Some may look abroad for opportunities. Then there are angels and family offices. Meanwhile, investment from the Asia region into the UK has grown rapidly, with most of the activity focused on late-stage mega-rounds. According to a report by London & Partners, 39% of funding for deals worth over $250 million came from Asian VCs.
It’s early days for JPIN in terms of investing in UK startups, but the company seeks to be a leading player in terms of channeling funds from Indian investors.