Bertelsmann Next, the mid-market and acquisition investment vehicle of Germany-based media, services and education conglomerate Bertelsmann announced its entry into India with the acquisition of logistics marketplace Let’s Transport.
“In the US and Europe, where the startup ecosystem is mature, founders prefer to work with conglomerates, where they get substantial benefits. That maturity has now come to India,” Pankaj Makkar, managing director of Bertelsmann India Investments (BII) told Mint. Makkar will be leading Bertelsmann Next India (BNI).
The Bertelsmann Next platform typically invests in companies across the mobile technology, HR tech and pharma tech. With BNI, the conglomerate will be more focused on mid-market opportunities, however, the thesis in the country would be different from its investments in Europe and the US.
The corporate investment vehicle’s entry into India comes at a time where more and more investors are pouring money into mid-market companies. These investments, which have largely been sector agnostic are primarily being led by these companies’ earning potential, strong revenues, increasing market share and potential to disrupt the larger players in the market.
“Think of us as quasi-strategic, quasi-financial investors,” said Makkar. “Anything 100% financial comes from our venture capital units, while strategics come from a different business arm. Whatever is in the middle, comes out of Bertelsmann Next.”
Through the BNI platform, Bertelsmann tends to think more long-term with a sole focus on acquisition. While it might pick up a minority stake earlier on, the eventual long-term goal is to hold a majority stake. Even so, its minority stake tends to be significant, not lower than 20%.
In India, the investment platform is focusing on first consolidating the logistics sector, through its acquisition of an 80% stake in Let’s Transport, making the latter the first portfolio company of BNI. Bertelsmann cleaned up the captable, providing an exit to several investors including Alteria Capital, Stride Ventures, and Rebright Partners, among others.
Over the next 18-24 months, BNI will consolidate its investment in Let’s Transport through a host of acquisitions. The platform typically makes between one and three acquisitions on an anchor investment before moving on to create another large business in another sector.
The conglomerate seeks companies that either sectoral leaders or are on their way there. “We’re typically looking for companies that have already crossed two thresholds, product-market fit and go-to-market strategy,” said Makkar. “Any sector we invest in should have the ability to generate a billion dollars in revenue over 7 to 10 years.”
Between Bertelsmann’s corporate venture capital investments and the Next platform, the conglomerate has invested a total of €2.1 billion since 2006. The conglomerate currently has more than 320 active investments.
The venture capital arm in India, BII, has invested in several companies across services, education, logistics and even healthcare. Some of its investments include unicorns Eruditus and Shiprocket, alongside other companies like health tech firm Inito, meat delivery company Licious, furniture marketplace Pepperfry and deeptech chemical manufacturer Scimplify.
Makkar said investments made through BII would remain separate, for the most part, and that they are unlikely to be transferred to the BNI portfolio.
“If there’s a synergy between the startup and what we’re trying to do, then yes. But, it’s not going to be a natural path,” said Makkar. “It will be the exception to the rule, like Let’s Transport.”
The acquired entity will be rebranded as Let’s Transport Group. According to the startup’s founder Pushkar Singh, the company is currently doing $100-150 million in sales, growing at around 15% annually.
The focus for the current year is a new vertical, a partial loading business that allows companies with shipment sizes of up to 250 kg to access India’s rural heartland with faster turnaround times.
“We’re also building ecosystem services for the trucker network. This will allow them access to insurance, fuel cards, and tools at more competitive rates,” said Singh. They’re also opening their trucking network to small and medium businesses, giving them access to a logistics ecosystem previously only used by large companies. “This is how you typically bring down logistics costs in India,” he said.
