As a part of our #Outlook14 series, we asked Venture Capital firms, Angel Investment Firms and Accelerators – Nexus Venture Partners, Jungle Ventures, KAE Capital, Helion Venture Partners, LightSpeed Venture Partners, Indian Angel Network, Mumbai Angels, Info Edge, One97 and Times Internet about their focus areas for 2014, and the challenges that the digital ecosystem needs to address.

MediaNama: What were the top developments in the digital (Internet/Mobile) industry in 2013

Suvir Sujan, Nexus Venture Partners:

– Indian Ecommerce has seen meaningful scale for the first time in 2013

Amit Anand, Jungle Ventures:

– Growth in smartphones is fast reaching escape velocity. Pervasiveness of smartphones with internet connections will create a digital ecosystem in India with different dynamics from what we are used to today.
– Exits @ RedBus, Viki, travelmob are early signs of a rapidly maturing and robust startup ecosystem across Asia.

Navin Honagudi/Sasha Mirchandani, KAE Capital:

– Platform / aggregation plays – Organizing the fragmented
– Move of ecommerce companies towards marketplace
– SMEs migrating to cloud support / infrastructure

Rahul Chowdhri, Helion Venture Partners:

– Mobile has now become ubiquitous across consumer and enterprise companies.
– Many ecommerce companies have realised that inventory lead models are more capex heavy and require specialised skill sets. Hence several of them have either pivoted towards a marketplace model or more JIT inventory management.
– Several e-commerce companies have started focussing on growing the business keeping unit level profitability in mind.

Dev Khare, LightSpeed Venture Partners:

– Android going from 15M data-active (wifi or 2g or 3g) on Jan 1’13 to 55-60M on Dec 31’13

Padmaja Ruparel, Indian Angel Network:

– High internet adoption rate and increasing adoption of mobile has given a boost to the number of start-ups as well as the consumer adoption rate.

Mumbai Angels

– Digital space has seen lot of development especially after development of smart phone and tablet, these developments have opened up lot of opportunities across spectrum like consumption of content, payments, commerce etc.

Hitesh Oberoi, Info-Edge

– Mobile first ventures given the huge growth in smartphone penetration

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Emergence of serious mobile traffic – Android first, but Windows Phone making a move for real consumption. iPhones are losing share in India for us.

Vijay Shekhar Sharma, One97 Mobility Fund

– Vodafone making telco charging with >60% revenue share available to every app developer.
– Google making exclusive charging using Google Wallet.

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MediaNama: Which are the sectors that you intend to focus on, in 2014? Why?

Rahul Chowdhri, Helion Venture Partners:

– We continue to focus on backing high quality entrepreneurs who are using technology as an important part of their business model, as the core offering (e.g. SaaS company) or as an enabler (e.g. ecommerce company).

Suvir Sujan, Nexus Venture Partners:

– Enterprise Software. IT Departments in enterprises worldwide are going through a rethink on how to increase productivity.

Amit Anand, Jungle Ventures:

– Digital retail, marketplaces, digital media and marketing & analytics

Navin Honagudi/Sasha Mirchandani, KAE Capital:

– Enterprise software
– Mobile data analytics
– SaaS models for SMEs
– Cloud computing

Dev Khare, LightSpeed Venture Partners:

– Mobile (global-focused)
– SaaS (global-focused)
– Education
– Healthcare IT
– Online transactions (ecommerce, travel, payments etc.)

Padmaja Ruparel, Indian Angel Network:

– Ventures in healthcare / medical devices, education, semiconductor, online and mobile plays, food, hospitality, cleanergy, etc. would all be focus sectors. ‘IAN Impact’ will remain an investment focus as well.

Mumbai Angels

– IT, Telecom, Cloud, Big data, Health care, Education

Hitesh Oberoi, Info-Edge

– We don’t really focus on sectors as such. When we invest we go by the idea and the quality of the team

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Anything with serious mobile consumption, but particularly we will focus on sports and on travel, amongst a few others.

Vijay Shekhar Sharma, One97 Mobility Fund

– Mobile Commerce and Mobile Payments

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MediaNama: What are some of the broad trends that you expect to see in the digital industry in 2014?

Rahul Chowdhri, Helion Venture Partners:

– Companies coming out with mobile first kind of offering.
– Scaling of SaaS companies from India.

Suvir Sujan, Nexus Venture Partners:

– Mobile advertising will begin to see scale in 2014

Amit Anand, Jungle Ventures:

– Digital retail: Tablet, Smartphone and Cloud revolutions combined together will bring the power of enterprise grade solutions to millions of SMB retailers across the world to improve customer experience, influence customer shopping patterns and their purchasing power.
– Marketplaces: Aggregating demand or supply or both sides across different industries and segments in Asia will continue to remain a great way to create value. Point in case: Justdial.
– Marketing & Analytics:  Due to increasing demand from advertisers for more performance related marketing and demand from millions of first time advertisers, mostly SMB that would try digital and mobile advertising for the first time.
– Digital Media: Advent of smartphones and 3G,4G will drive a lot of media consumption on the go thus creating demand for new kinds of content whether apps or games.

Navin Honagudi, KAE Capital:

– Growth in mobile content consumption and transactions to increase significantly.
– Marketing messaging to be more real time.
– Fitness data on mobile + wearable devices to grow.

Dev Khare, LightSpeed Venture Partners:

– Android going to 100M+ data-active devices

Padmaja Ruparel, Indian Angel Network:

– Propositions to help / grow e-commerce online digital and mobile ventures, leveraging the internet to reach rural markets & communities is what we may expect to see in the new year.

Mumbai Angels

– Expect increase in data consumption.
– Also with 4G round the corner digital space will see lot of changes and would be positive for India.

Hitesh Oberoi, Info-Edge

– More funding, more startups, more brand building, more action from big foreign players, possibly some  ipos / large acquistions, more design and product focus.

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Web will become a minority of total traffic
– Goal will be for services that users pay for to get some traction
– Well designed services will take share from existing, poorly designed services

Vijay Shekhar Sharma, One97 Mobility Fund

– Expect ton of experimentation on mobile by established internet companies.

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MediaNama: What are the key trends you see in Venture Capital in the coming year?

Rahul Chowdhri, Helion Venture Partners:

– More exits for venture backed companies
– More enterprise/ SaaS / mobility companies getting funded

Suvir Sujan, Nexus Venture Partners:

– Exits are finally happening.

Amit Anand, Jungle Ventures:

– Money will always chase the best businesses and the best business will need a lot of money to remain best in class.
– Internet and democratization of information will make the job of the venture people better and harder at the same time.

Navin Honagudi/Sasha Mirchandani, KAE Capital:

– Healthy investments to continue in the seed / Series A funding.
– Small ticket size MnA’s / early exits to happen.
– Strong focus back on enterprise plays.

Dev Khare, LightSpeed Venture Partners:

– Don’t expect much change in the set of firms operating in India
– More of a turn toward global-focused deals

Padmaja Ruparel, Indian Angel Network:

– Angel investing promises to grow and the new year should see many new investors come in.
– This is very encouraging as this will inspire and enable many more ‘job seekers’ to become “job creators”.
– Angels look to invest in companies across sectors and we should see investors look to invest beyond 1st and 2nd tier cities and enable ventures to quickly create a nationwide footprint.

Mumbai Angels

– In time to come we will see many more angel groups forming up. The trend has already started with formation of Calcutta and Bangalore Angels last year and Gujarat Angels in process to start. The trend seems positive and good for start-ups

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Still see a lot of risk aversion here, away from businesses without proven revenue models. Don’t see this changing anytime soon.

Vijay Shekhar Sharma, One97 Mobility Fund

– Many angel and early stage fund will become the risk takers and traditional VC’s (Series A) will happen to the filtered out companies of these.
– Accelerators also will create similar large funnel of very early stage companies.

– A new company will be made by having one feature different than other and that will create challenge in picking investment worthy winners from the pack.

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MediaNama: What do you expect will fizzle out in 2014. Which are the sectors you’re going to avoid, and why?

Rahul Chowdhri, Helion Venture Partners:

– Early stage investment in high execution intensity, lower margin and geographic spread kind of businesses
– Also, most of these business require high scale-up and hence may take longer to achieve if one invests too early.

Navin Honagudi/Sasha Mirchandani, KAE Capital:

– Ecommerce: Too much money chasing the larger players.
– B2B Education: There are many players selling to schools / publishers which makes it a very competitive market in addition to the -long sales cycle.
– Crowded domestic plays: Taxi companies, restaurant booking companies etc.

Padmaja Ruparel, Indian Angel Network:

– Vanilla, broad focused e-commerce sectors & headcount based services businesses will find it difficult to raise funding.
– But even more importantly, ventures will find it difficult if next round funding or exits for angels are bleak.

Mumbai Angels

– As stated earlier, India is developing country and have lot of demand and supply gaps on even basic needs, hence it is difficult to figure out what will fizzle out in 2014 and which sectors can be avoided.

Hitesh Oberoi, Info-Edge

– Some e-commerce ventures
– We will continue to avoid capital intensive sectors not for any other reasons but because we have limited capital.

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Anything that worked in 2013 will work in 2014… only question is how fast will it grow. The macro trends are still very positive.

Vijay Shekhar Sharma, One97 Mobility Fund

– Don’t know if “Mobile Social” is fizzed out yet or not.
– We will avoid every business model based on monetising indian user based, using adverting.

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MediaNama: What are some of the challenges in the digital space that would need to be addressed in 2014?

Rahul Chowdhri, Helion Venture Partners:

– Digital buying population number need to grow from current 10-15M to 40-50M.
– Ability of enterprise companies to sell globally is yet to be proven
– Monetization ability of consumer mobile app companies

Suvir Sujan, Nexus Venture Partners:

– The mindset of Indian advertisers are slow to change. A lot more ad spends needs to move digital

Amit Anand, Jungle Ventures:

– Internet infrastructure remains the biggest challenge in india.

Navin Honagudi, KAE Capital:

– Easier / reliable payment infrastructure on mobile to drive m-commerce
– Strong data gathering ecosystem to help predictive analytics and improve RoI
– Strong Technology / UX talent to build great consumer products

Dev Khare, LightSpeed Venture Partners:

– Digital payments (on web & mobile) perhaps through carrier billing integration

Padmaja Ruparel, Indian Angel Network:

– Section 56 (2) (vii)(b) of the Income tax act is one of the ecosystem challenges. Ventures in digital space capital efficient, high growth businesses are largely non collateral based businesses and for them to debt funding is not an option. Hence, for these ventures raising investments from Angels who are patient investors is the only option for these high growth companies.

Mumbai Angels

– The life of each innovation would be short hence could be big challenge for developers to monetize it.

Hitesh Oberoi, Info-Edge

– Regulatory issues around FDI in ecommerce and then ofcourse the usual ones –  broadband penetration, payments etc.

Satyan Gajwani, CEO, Times Internet (Tlabs)

– Payments and connectivity.
– Still waiting for telcos to make an open, easily scalable payments service, and waiting for sustainably consistent connectivity.

Vijay Shekhar Sharma, One97 Mobility Fund

– Smartphone penetration, mobile broadband and mobile payments are foundations of digital ecosystem. Everything that comes in way has to be addressed well.
– Government should look at mobile money/payments and allow lot more to happen than current restriction.

Note: Answers have been edited for for brevity