There is a lot of talk about whether India’s technology startups are in a bubble, and I think that may be a good thing. I am getting around to the view that more there is talk of a bubble, the less the chances of there being one.
So what is the game? I got some insights last week as I attended The Indus Entrepreneurs’ (TiE) India Internet Day, a jamboree of investors, pundits and entrepreneurs. What impressed me was the way some hard questions were being asked – and this is in stark contrast to the tech bubble of the years around 2000, when dozens of dotcoms went belly up.
It is important to remember that India was then not even into a decade into being a globally open economy, and the idea of making easy money from this thing called the Internet was like a drug, given that the US itself was witnessing a frenzied boom. The fact that India was good at software gave it an easy connection that was in reality unsustainable because India’s Internet penetration was very low.
All that has changed with more than 200 million Internet-linked smartphones in India. But more than that, I think the crucial factor is that we have a new generation of entrepreneurs who think differently, and the ones who don’t are being forced to listen to those who do. This is precisely what entrepreneurship jamborees achieve.
There were two high points at the India Internet Day. First was a candid admission by Sachin Bansal, co-founder and executive chairman of Flipkart, that you need to take money when it comes from investors. One smart corollary: Investors are not angels or gods. Guess what, they can be fools as well! A lot of the money comes from financial cycles (when rich folks who made pots of money don’t know what to do with it). But a financial cycle is not a business cycle and it is up to the entrepreneurs to know how to juggle the two. Bansal is not worried about valuation for his company being lowered because he calls it a “theoretical exercise.”
Brave words, those. I think the key point is that a lot of hard talk by critics, rivals and those who have seen the wounds of the year 2000 is taking the conversation from a “bubble” to a “reality check” and that is a good thing. In this X-ray talk, some down-valuation is not only inevitable but actually healthy.
The second high point at the conference was a brilliant presentation by Kashyap Deorah, a serial entrepreneur who has authored a book called “The Golden Tap: The Inside Story of Hyper Funded Indian Startups” that almost read like a comic script (Somebody ought to make a movie based on this). His gist: Everybody has feet of clay – and smart IITians are not necessarily about great techies inventing awesome products. Some are aggressive hustlers who want to ride the next big wave. This is where the “boom” becomes a “bandwagon” – and as long as there are people who can spot a bandwagon and also able to laugh at it, we are in good territory.
Two more points: Good startups are ready to change their business models, downsize where necessary and sell out or shut shop when the going is bad. The cliché about “failing fast” is now hip, and that is not bad at all.
There was also a lot of joking on startups that try to build without looking at sales and profitability. When hype is replaced by jokes, we can say the bandwagon is tempered by wisdom. If the wisdom stays, some hard knocks should be seen as pinpricks that pre-empt big bubbles.