Indian Internet Startup opportunity overestimated! — Few more years pls
Mr. Mahesh Murthy poses this question— Has The Opportunity For Indian Internet Startups Been Terribly Wrongly Estimated? Mahesh estimates that the overall potential opportunity (in terms of market cap) could be in the range of 300B USD in few years out of which around 200B USD will accrue to non-Indian firms. That leaves about 100 B USD for local startups but still a significant number. Imagine 100 (or 70 attributing 30 B to top 10) unicorns in India in few years or if unicorn is not in fashion any more 200 half-unicorns or 400 quarter unicorns. Those are significant numbers by any standard considering that we have only 8 unicorns now. Tremendous opportunity to be pursued by investors as well as entrepreneurs even with these numbers.
Mahesh’s conservative estimate is about 50B-100B USD and his VC friend’s estimate is 300–450 B USD for local startups!! VC partners like entrepreneurs have to be confident of their market and need to present a rosy picture to their investment houses.(albeit they would not like to see similar kind of rosy business plans).
Once you start doing some math on these numbers things start falling apart. Let us take a look at conservative estimate 50B-100 B USD in few years.
Point 1: 50B-100B USD is a wide range!
If we take 50B and attribute 30B to top 10, we are now talking of 10 more unicorns with the rest of 10B distributed amongst 20–30 companies.
If we take 100B and attribute 30–40B to top 10, we are talking 40 more unicorns with the rest of 10–20B distributed amongst 40–60 companies.
In scenario 1 we get 1x more unicorns and in scenario 2 we get 4x more unicorns.
Point 2: Few years by IST (Indian Stretchable Time) could mean anything!
If we take both the points into consideration at the same time, the numbers may mean something or nothing!
Let’s do some math based on the numbers in MIDDLING FIGURES article:
5% of the Indian citizens are classified as above middle class. i.e about 60 million. (Please ignore 360 million internet connections for now). 60 million people earning 15$/day means a disposable income of 5475 …rounded to 5500 USD/year. And if consumer is willing to allocate 550 USD/year(10% of income…5% consumer pays for convenience/productivity enabled by technology,5% seller pays for consumer acquisition), the total revenue opportunity is 60*550= 33B USD aka 330B market valuation. So these numbers are close to what Mahesh says or his VC friend says.
But the numbers presented above are like our bureaucratic estimates just that there is no audit here!!And anyone like me (or an undergrad student) can come up with numbers like this. These types of estimates lack rigor and a reality check. Entrepreneurs and Investors are supposed to tread upon uncertainties!
In few years though everything will be good,market will grow and there is an opportunity to be harnessed!!! All it needs is passion and patience. Kudos to Flipkart’s Bansals, Snapdeal’s Bahl, Ola’s Aggarwal and Paytm’s Vijay, for displaying passion and patience and they should be thankful to their passionate and patient investors! Once you start becoming dispassionate or impatient, the result will be Housing.com :). Just few more years , everything should be alright!
So what does it really mean? There is always an opportunity for doing business! Old businesses fall apart, new businesses come in. There is always a business opportunity to open another Tech Restaurant in the upcoming Tech suburb. Customer service and execution are the key. The more money we could funnel into the system, the better it is.
And to the point can we build global companies like ‘Skype’ from India, given our track record of progress in the IT Product sector and investment eco-system, surely we can do in few years.