In this episode Patric and Shub chat completely unprepared about:
Why are surety bonds insurtech's a thing for construction in APAC
What is the cross-border manufacturing space and what makes it such a great fit for construction
What is happening in recapitalization of startups, and what do the nerds think of pay-to-play among investors
Why founders might want to fact-check a lot of random claims (solo) VC's make on social media
Unlocking India's Infrastructure Boom
Surety bonds are an emerging opportunity in India, with the potential to unlock infrastructure development by reducing capital constraints for contractors. The concept of surety bonds is still very new in India, having been legalized in 2022, compared to being signed into US law in 1935. In mature markets like the US, surety bonds are the default for construction projects, providing a "guarantee from the contractor while freeing up their working capital." India's nascent surety bonds industry means no party can yet confidently underwrite the products at scale, creating a window where all players are still determining effective risk management. Startups have an opening to become the first to seriously offer statistics-based underwriting of surety bonds in India's $1+ trillion infrastructure roadmap, according to Shubhankar.
Reshaping Global Supply Chains
Cross-border manufacturing and supply chain decoupling are creating a "perfect storm" of opportunity for tech-enabled platforms matching suppliers and buyers globally, said Patric. Geopolitics and macroeconomics are aligning to disrupt manufacturing supply chains and enable a "rewrite of cross-border commerce." Western brands sourcing building materials from offshore now face supply chain rigidity, whereas new entrants promise flexibility in matching suppliers, costs, lead times and routes. Incumbents built for margin and stability, not volatility, whereas platforms manage complexity in fluid supplier discovery and logistics. Rather than disintermediate distribution, supply chain platforms now threaten manufacturer strongholds in places like Europe and North America. The timing is opportune for startups still able to find white space in cross-border niches, before dominant players crystallize.
AI Funding Frenzy
Generative AI startups received $14 billion in VC funding in 2023 till end of June, possibly kickstarting a new decade of venture funding like vertical SaaS did in 2014, according to Patric. These $14 billion were invested across just 140 generative AI startups, versus 2014 when vertical SaaS startups got $15 billion across 2,000 companies. This explosion follows nearly a decade of steady $1-2 billion annual funding to AI startups. The new venture cycle may have already begun while the prior one sees downward corrections, implying more funding volatility before stabilization. With prototypical rounds above $100 million, most generative AI startups will lack defensibility when the "hype cycle inevitably wanes."
Recapping Struggling Startup
Many overvalued 2021 startups are facing recapitalization and "pay-to-play" dilemmas as runway depletes and down rounds loom, said Patric. Exuberance in 2021, especially for consumer tech, led to disconnects between valuations and fundamentals that are now 10-100X apart. As these companies face recapitalization, existing investors must decide whether to double down or get washed out in "pay-to-play" rounds. Lead investors may find themselves explaining and defending untenable valuations from the past amidst current economic reality. Rather than a buying opportunity, recaps with reasonable dilution versus bankruptcy and restarting likely represent the "least bad option" for struggling startups, according to Shubhankar.
Digitalizing Construction Workflows
Construction tech opportunities exist in digitalizing workflows like contracts, invoices and materials procurement with AI and big data analytics, said Shubhankar. Construction projects involve thousands of contracts, invoices and other documents, demanding software tools to manage this paperwork throughout sourcing, vendor selection and approvals. Other solutions are emerging to match suppliers and transactions using AI-enabled platforms rather than slow analog processes. While construction has lagged in technology adoption, today's solutions focus on unique complexities like subcontractor relationships versus horizontal SaaS. Startups that smoothly "digitize construction workflows" will unlock efficiency and cost gains through automation.
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Keywords: surety bonds, infrastructure development, construction projects, working capital, underwriting, risk management, India, cross-border manufacturing, supply chains, building materials, logistics, distribution, startups, AI, venture capital, funding, startups, venture cycles, valuations, recapitalization, down rounds, workflows, automation, documents