Imitation Nation —Trying to make sense of India’s start up ecosystem
The start-up ecosystem in India is giving rise to some amazing situations which most people (i.e. outsiders like me) find very difficult to grasp.
I for one find it incredibly infuriating to simply sit on the sidelines and watch mundane, easy-to-replicate FOMO induced ideas get funded.
And get funded HOW?!!
Bazillions of dollars being thrown at 22 year old kids who have never, ever before needed to steward anything more than a little bit of cash to buy cheap beer for a house party.
Let me give you an example. There is a company in India, innocuously named Housing, which thinks it is ‘solving’ the real estate ‘problem’ in India. They got given a wad of cash (approximately $140 million across 4 funding rounds in 2 years) thrown at them by the savviest investors around (Helion, Softbank and Qualcomm), and they spent a huge chunk of it on marketing. Some estimates vary between $20m and $30m over six months. WTF?!!
Which CMO can justify spending that much money, that quickly? If you were selling a product or service, a reasonable case can be made for such a strategy. But in this case, for a website which is basically an information portal, how on Earth are you going to recoup an ROI on that? Which arse wipe of an investor agreed to that?
HOUSING was an EPIC marketing campaign. In practically every Tier 1 and Tier 2 city in the country. OK, I’ll admit, some of the female models were damn cute, but the marketing spiel thrown at Indians by the real estate companies can only be described as downright fraudulent and misleading.
Buy, buy, buy. At prices never seen before. No down payment. 0% financing. Once in a life-time opportunity. Live the dream. Buy 1 flat, get a plot of land free.
Driving into the city from Bangalore airport, you feel like you are at a drive-thru real estate exhibition. MASSIVE hoardings line both sides of the highway and try to stuff your brain with messages about home ownership being the end all and be all of life.
I’ve even seen advertisements for schemes where you pay a certain amount NOW and they guarantee to return twice your money in 3 years. With an asset! Talk about undying trust in the future!
3 bedroom villas in some godforsaken part of Bangalore being sold for the equivalent of a million dollars. Who prices this shit?
I have spent a significant amount of my adult life studying finance, and while I am by no means an expert, I can tell you this:
THERE ARE NO GUARANTEES WHEN IT COMES TO INVESTMENTS. THE ONLY GUARANTEE IS THAT YOU WILL PAY A LOT OF TAX WHEN YOU MAKE MONEY. IF YOU MAKE MONEY
Whoa, I’ve gone so far off the intended topic. Already!
But I do get puzzled by the following line of thought, which seems to prevail in the minds of many start-up founders:
The aim is to acquire USERS, whether they contribute to revenues or not is irrelevant in the short (and long?!) run. Let’s leave that to the fool who acquires us 3 years down the road
Related to above, build to become an acquisition target. Who’s trying to build a business here? That’s so old school!
Getting the funding round is the only meaningful target. Just get that big Series A. Building a sustainable business? Screw that, that’ll take care of itself
Employees are a flexible resource. A tap which can be turned on and off at the founder’s (investor’s?) will.
Quantity trumps quality. Always. It doesn’t matter if the platform is not stable enough or the network not strong enough to support 100 cities. GO out and get 100 cities.
Unit economics is a fancy phrase investors throw about to put you off guard. Even if the cost of acquiring a customer far exceeds the value to be derived from that customer, just get that freaking customer!
Every second person you meet at a party in Bangalore is a co-founder. There is much to be said about the entrepreneurial energy in the system, but I also sense a big dose of pure, unadulterated hype.
These are some of the ideas people are working on.
“I am building the uber for {INSERT ANY F*CKING INDUSTRY HERE}”
I’m like — ‘My Arab friends would say, that’s Suber!
“My portal will revolutionize food delivery”
I’m like — ‘How? Are drones going to serve the food to customers? How are you going to be any different than the 167 companies that already do food delivery?
“I am building the facebook for school students”
‘Why? Because Indian school kids don’t have access to facebook?’
“My startup is doing drinks delivery around town”
What? You thought you’d do drinks because all the other cool dudes are doing food? What if they include drinks in their menu tomorrow?
Please, dear reader, I hope I am not coming across as overly condescending. There are loads of people working on some bloody brilliant ideas, which I am sure will have a huge impact on the world.
But there seem to be too many people building shit just for the sake of building shit. And India, particularly Bangalore, already has a lot of shit. Lying on the roads that is. That the local corporation can never seem to clean up.
And this is why I worry.
What if the investors run out of money and can’t fund a technology which purifies water for millions who can’t access clean water, because they spent their entire kitty investing in food and grocery delivery apps?
What if the investors are so busy running around each other funding real estate portals that they overlook the company which is building cheap housing for the poor (of which there are more than 600 million in India)?
What if they ignore a company which has a potential cancer cure, because they invested $30m in the world’s largest e-commerce portal for luxury make-up brands?
What if all the talented entrepreneurs spend their time scourging Product Hunt for ideas that they can replicate in India, irrespective of whether India needs or even cares for such a product?
What if valuations are already so out of whack that we are beyond a point of no return, where sizeable losses are not only likely, but inevitable? How would this affect funding appetite 5 years down the road? And 10 years down the road?
Here are some glaring problems Indians face on an almost daily basis. Is anyone solving these? Or even trying to find a solution?
- There is garbage lying on the road, and the only folks who seem to be doing anything about it are the stray cows and dogs. But how much can you leave to them?
- Banks (public and private) are plagued with bureaucracy and red tape. You have to spend a lot of time at a branch to get basic things done
- Almost 30% of children (and an equally high percentage of adults) in Bangalore suffer from some type of chest related condition such as asthma, bronchitis etc
- The public sanitation system is a mess — the country is currently battling a dengue epidemic. Water (and some other stuff) from the sewage system is up to people’s knees (or higher) when there are heavy rains. Imagine that! Yum!
- Companies report that most graduates are severely lacking in basic spoken and written communication skills. So much for the thousands of engineers being churned out by the education system
Whaddya think? Is this assessment justified?
OVER. AND OUT!
