Data-led investing strategy: Arjun Sethi of Tribe Capital

Valley firm chalks out data-led investing strategy as pandemic forces SMBs to adopt technology and move online.

Silicon Valley-based Tribe Capital made its first India investment in logistics aggregator Shiprocket earlier this year. Its founding partners Arjun Sethi, Jonathan Hsu and Ted Maidenberg will look at India as a key market outside of the US.

In an interview with ET’s Samidha Sharma, Sethi discussed Tribe’s data-led investing strategy, the digitisation of small businesses, and how it may get tougher for foreign technology companies to do business outside of their countries. Edited excerpts:

You invested in Shiprocket recently. What was the big theme behind doing the deal and how does this tie up with the India opportunity you are betting on?
We have been watching the progress in ecommerce and logistics across several countries, and when we met Shiprocket, we were blown away by the execution that they had exhibited up to that point. They showed a combination of scrappy product development with a nuanced vision of how the market was unfolding and how their

logistics offering would provide a strong wedge into the market.

At Tribe, we focus on deeply understanding product-market fit through the Magic 8-ball – an analytical framework we’ve been developing for many years. The Magic 8-ball for Shiprocket was very strong, and when coupled with a stellar team and a market in which we had high conviction, we were very excited to do the deal.

A big trend in India is the evolving small business segment, which is mostly offline, how do you see it growing, especially in light of Covid-19?
Prior to Covid-19, ecommerce in India was growing at 13% annually, with penetration growing from 40% to 60% over the next five years. This is a massive tailwind that forms a key input to why we were looking at this space in India in the first place. Covid-19 has only accelerated this trend as we’ve seen globally that ecommerce is a much safer way to conduct many aspects of commerce in a pandemic world. The big implication here for SMBs is that they may have been adopting technology at some particular rate before the pandemic, the new world forces them to move online and adopt technology at a rate that will exceed the historical rate.

You primarily invest in the US– where does India stack up and what’s its significance in terms of allocation from the fund?
While Tribe Capital invests globally, India is a place that we continue to watch closely. We have made significant investments in India for many years, both at Tribe and before that, and intend to continue doing so.

How does this impact smaller venture-backed startups– the ones you will pick?
For smaller companies, it’s likely a good thing. This is a large inflow of capital and some fraction of it will likely find its way through to early-stage Indian tech companies, either in the form of investment or in the form of B2B revenue. It appears that this capital inflow is happening in addition to continued direct engagement between the large tech firms and the Indian ecosystem. So I’m optimistic that it will have a positive impact.

How would it pose a challenge to US tech firms?
American tech firms are already dominant in the US and much of the world. Impediments to that growth are not great. There are certainly positive side effects, such as making it harder for startups to achieve any global footprint, thus further locking in large company positions, or perhaps it will be easier for American tech firms to do business in India with less China involvement.

That said, the Indian position towards Chinese tech companies may eventually have some parallel on the American side. American firms can try to mitigate through partnership, but at the end of the day, the more that the government and the people want to curtail access to their market in any form, it’s going to make it tougher for foreign companies to do business.

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