Can the Real Startup Heroes, Please Stand Up?
If you are in India and even remotely interested in current affairs, you have already listened to or heard about PM Modi’s speech yesterday. If you haven’t, don’t worry, it will make its way to you via your facebook or twitter feed in the next 24 hours.
Never before in my life time have I seen such enthusiasm and support for innovation and entrepreneurship in any country that I have lived in. And I’ve lived in a few. There is a burgeoning amount of entrepreneurial activity in cities like Tel Aviv, Berlin, SF, NYC and London, but what is happening in India currently is unprecedented. And unmatched to an extent.
A billion people, and a million problems, is how the PM summed it up.
Firms like Facebook, Google, Uber and other tech giants are scrambling over each other in trying to figure out how to profit from and gain an advantage in this ocean of opportunity.
The entrepreneurs who have already succeeded in building substantial companies are being perched on pedestals and spoken of as demi-gods. In fact, never before in India’s economic history has ‘entrepreneurship’ taken up more space in a newspaper than cricket or bollywood. The cynic in me concurs, given Team India’s shambolic performances in Australia, but Kohli and Sharma have a right to be unhappy when their monumental batting efforts command only a tiny article on the inside back page.
I can only speak for Bangalore, as I am a resident, but I know at least 10 start-ups run by foreign nationals who have moved to India with the specific intent of building their companies here. That says a lot about the attractiveness of the Indian ecosystem to entrepreneurs from all over the world. After all, entrepreneurs need easy access to funds, talent and of course customers. At this point in time, India has all three in plenty. Not to mention that it still is much cheaper to live in, compared to the other big startup hubs in the world. And the language of choice for business is English, making it easy for anyone who knows the language to do business here.
While this isn’t the right forum to debate the changes brought in by the PM last night, it certainly gives a lot of young people the assurance that there is solid support for them. And India is fundamentally a very young nation. More than 50 per cent of the population is below the age of 25.
But there is a growing sense that all of the hype surrounding startups here is taking the story to unmanageable proportions. And rightly so. Almost $18B (yes, that is a B) has been invested in Indian companies in the last 5 years. This means that there is a lot of money which needs a good enough return to encourage investors to stay. The pressure is on the big boys (Flipkart, Snapdeal, Ola etc) to deliver, and we’re all hoping that there are a few BIG exits in the next 3 to 5 years. That will drive the momentum even further, giving hope to a lot more entrepreneurs to build companies of value. And as a friend of mine quips, it will also result in millionaire employees who can finally buy up all the vacant real estate lying around ;)
But until that happens, we need to be mindful of the tendency of financial history to repeat itself. Booms and busts are a given in every economic cycle. The credit crunch threw up some ghastly scenarios for the financial system, and there already appears to be a resurgence of debt fuelled consumption in many economies. The dot com era saw a wave of crazy valuations, and even crazier deals. Who is to say the same won’t happen here?
Chamath Palihapitiya, no stranger to the startup scene, posted recently on Quora:
“ There are a handful of startups in India that will not only determine the liquidity path for the rest of India but many companies in the US as well. At the top of that list is Flipkart. If they can’t get profitable and IPO, it will be an unmitigated disaster for any unicorn who isn’t already profitable or almost there. The reason is that they are the current posterboys for -ve gross margin expansion at all costs; funded by rational, institutional investors while competing with a company (Amazon) who views winning in India as an existential risk. So Bezos will keep spending billions and somehow, Flipkart will have to do the same but not from an unlimited balance sheet, but from rational investors who ultimately have to answer to their LPs. If flipkart doesn’t win (and winning may be 1x capital), the implications to the rest of the market are very bad.”
Oftentimes you have heard the saying ‘India succeeds not because of its government, but despite its government’. The government is now very much on our side, so let’s see what happens!
______________
If you enjoyed reading this post, I’d be really grateful if you hit that green heart button below! Thanks!
