Propelled By Growth: Leo Capital Founder And Managing Partner Rajul Garg Leo Capital has a unique focus- it aims to help companies access affordable and specialized talent in India, and also to enter the US market.

"We feel the Middle East has the potential to grow and export great businesses to the rest of the world, and that is why we decided to spend more time on the ground," says Rajul Garg, founder and Managing Partner of Leo Capital, an India-born global early-stage software-as-a-service-focused venture capital fund from that has just opened its offices in Dubai, UAE. "Both the UAE and Saudi Arabia have come a very long way in the last couple of years, leapfrogging the startup ecosystem that was largely driven by governmental support towards the venture capital industry," he adds. "You can be proud of this improvement."

While Garg is currently a part of the investment arena, he also has an enviable entrepreneurial background- he was, after all, behind successful startup endeavors like Pine Labs, an India-born merchant commerce omni-channel platform with a valuation of over US$5 billion, GlobalLogic, a US-based digital engineering services company that got acquired by Japanese Hitachi group for $9.6 billion, and Sunstone Eduversity, an India-based edtech company offering industry-ready higher education programs. Having been such a well-accomplished entrepreneur, Garg now has a trained eye for promising startups, and that is why his angel investments include Meesho, a Bangalore-headquartered online shopping platform that recently secured a $275 million funding round, Reify Health, a Boston-based clinical trial tech company whose current valuation stands at about to $4.8 billion, and 1mg, a Gurugram-based online pharmacy whose majority stake of 55% was recently acquired by Tata Digital, a subsidiary of the Indian business conglomerate, Tata Group.

Today, India is among the top five startup ecosystems globally, and Garg is easily one of the people who have not only witnessed its growth, but also contributed to it over the years. "India is large, but unique in many ways, and it has two larger sub-markets in the startup world," Garg notes. "The first is the domestic market, driven by digitization of core sectors, such as finance, commerce, logistics, education, insurance, healthcare, and so on. These markets tend to be extremely voluminous but have low order values. For example, Zomato, India's largest food delivery company, has an order value of $3, but serves tens of millions of customers. The ability to serve a very large audience at low order values defines the Indian consumer startup ecosystem. The regulatory framework in India is also protective towards customers compared to other markets, and startups have to cater to that." The second sub-market for startups in India, Garg continues, is software because the country houses the second largest software engineering workforce in the world. "All the global majors, like Microsoft, Google, Adobe, or IBM, have hundreds of thousands of engineers employed in India," he says. "Hence, India has plentiful availability of highly skilled engineers- who are doing cutting edge startups in software, artificial intelligence (AI), blockchain, etc. This is also very unique to the Indian market."

It is thus armed with this knowledge (and experience) that Garg launched Leo Capital in 2018 as an early-stage and technology-centric venture capital fund that "looks to invest in large spaces where technology creates leverage." "I spent the first 18 years of my professional experience as an entrepreneur, and I started investing my own capital in 2012, so I gained experience with investing too," Garg recalls. "When I was investing, I saw that there was a lack of operator seed funds in India. Most fund managers had not built businesses in India. I saw well-funded entrepreneurs come to me for advice while building business. I saw this as a gap. In addition, I had been witnessing the macro growth, and I was benefiting as an individual investor. To be able to contribute a little more meaningfully to the ecosystem, I decided to start Leo Capital."

Leo Capital has a unique focus- it aims to help companies access affordable and specialized talent in India, and also to enter the US market. This two-fold approach reflects the experience that Garg and his fellow fund partners have had in building global businesses. "India has a unique talent structure, because, on one hand, we have 1.5 million fresh engineering graduates coming out of college every year, providing a high volume at a low cost ($4,000/year)," he explains. "On the other hand, the very skilled engineers have salaries at par with their global peers. So, it's a wide range. Companies that want to leverage the cost and availability of talent in India need to structure their talent right, and provide the right management support. It's not easy to get this right without experience, and we help in this." And when it comes to entering the US market, Garg has captured the lessons learned by a few Indian businesses that have done already it successfully. "Companies like two Chennai-born startups, software company Zoho and cloud-based software-as-a-service Freshworks, as well as several others, have successfully employed a combination of inside sales teams, digital sales teams and content marketing to penetrate global markets at a fraction of the traditional cost," Garg notes. "These learnings can be transformational to startups, and we are helping institutionalize them and pass them on to startups."

The Leo Capital team in Dubai. Source: Leo Capital

So, in what sectors and technologies should startups operate in order to attract the attention of Leo Capital? "As an entrepreneur, if you are not building an AI company today, one has to really question why," Garg replies. "The technology disruption cycles have continued to accelerate. We have a whole new paradigm in technology in terms of AI available to us at this point. This is resulting in the beginning of a major overhaul of technology stacks for the foreseeable future. We are just at the tip of the iceberg in AI evolution today. Sectorally, we are seeing opportunities to start with in financial services, healthcare, and legal, in terms of disruption, but we expect this to be much wider over the next few years." Now, some of these companies could well be in the UAE and the wider Middle East- and that explains Garg's decision to keep an eye on this part of the world too.

"There are several strengths that we have witnessed in the UAE that are slowly turning it into a startup hub, such as the ease of doing business and the regulatory framework," he says. "The UAE has become a crypto and Web3 hub globally. We are seeing more international highly qualified talent moving into the region, and settling in the UAE. And the position of the UAE, as a hub between Asia, Europe, and Africa, making it a destination of choice with access to several markets and regions within hours of reach, is attractive when expanding your business." That said, Garg notes that since the UAE is a relatively small and fragmented market, entrepreneurs here should aim to build global businesses from day one. To achieve this, he considers understanding the market and the potential a business can achieve a key task for any entrepreneur. "Not just locally in the MENA region, but also globally," he adds. "As venture investors, we invest in businesses that have the ability to scale and become sizable businesses. A deep understanding of the market is the best way to build credibility."

He follows up with his advice for founders by highlighting the importance of having a growth mindset. "Given the nature of venture capital, an entrepreneur needs to keep an eye on both near-term growth and longer-term growth," he says. "This leads to decisions around product expansion, geographical expansion, and so on. This is extremely critical from a larger business building perspective." Lastly, he notes that any entrepreneurial advice he shares would be incomplete without stressing on the importance of resilience. "Building a business is hard," he concludes. "It requires dogged persistence over a long period of time to find the right product-market fit, and later on, to benefit from compounding."

Related: Batting It Out Of The Park: Zomato Founder And CEO Deepinder Goyal