Why Ratan Tata backs e-commerce startups

Tata Sons' chairman emeritus Ratan Tata has a penchant for e-commerce startups despite the 'pricey' valuations attached to several such ventures. In fact, seven out of his 27 investee companies are e-commerce firms, data from VCCedge shows.

"By and large I have been backing businesses in the e-commerce space, because they enable goods and services to reach people who could never have been catered to before in this manner. They never got a chance previously to order what they wanted, have it delivered to their doorstep, pay when they receive it, and return it if not acceptable," Tata said in an interview to Tata Review, the Tata Group's internal magazine.

"This sort of reach has never been there in the brick-and-mortar world," the 78-year-old added.

Top angel investor

Tata, who was one of India's most active angel investors last year, started 2016 with five new startup deals. Of this, three were e-commerce investments. He put money in specialty tea e-tailer Teabox.com, baby products e-commerce site FirstCry.com and online pet shop DogSpot.in.

"We have a consumer population of 300 million that may go up to 600 million in the years ahead. There are tremendous opportunities in reaching this population and the task is being undertaken by passionate young people. They need backing," Tata said.

Tata's most profitable bet would probably be online marketplace Snapdeal, which caught his attention back in 2014. Snapdeal CEO Kunal Bahl believes Tata's investment in Snapdeal worked as a good luck charm for his company. In August 2015, Snapdeal raised $500 million (Rs 3,250 crore) in fresh funding led by Taiwanese iPhone contract manufacturer Foxconn, Chinese e-commerce giant Alibaba and existing Japanese investor SoftBank.

Tata's bullishness on specialty e-commerce comes at a time when several angel investors are going slow in this space. Seed investor Sanjay Mehta, who has backed about 40 tech startups, recently told Techcircle.in that he will not put money in e-commerce platforms.

Tata too is selective in his approach.

"Some of the valuations are pricey. I support those who are really making a difference," he explained.

Value system

While Tata invests in only those ideas that excite him, he also needs to get a good impression of the team backing the venture, he had said at a fireside chat recently.

An entrepreneur's value system and his long-term commitment to the startup idea are among the key factors that influence Tata's decision to invest in a new-age venture.

Tata is building a portfolio of new-age businesses across sectors ranging from consumer internet – particularly e-commerce – to social impact, e-health, home services, animal care and clean-tech sectors.