(Cross posted in: https://siliconvalleyblr.com)
I had blogged about this extensively about 2-years ago (around Sept 2014). I thought it would be a good checkpoint to re-visit this topic to see (and gauge) where we stand today.
Rewind the clock a little backwards and this is what one saw back then: I had not yet joined India’s foremost e/m-commerce company when I blogged about the irrational exuberance prevailing in the Indian startup eco system, my previous startup company was not hugely funded yet by marquee VC firms/PE investors back then and there was indeed a HUGE VC/PE interest in startups of all shapes and sizes, focus on growth (profitability was forgotten!), Many big brands created in India, for India and by Indians were hogging the headlines with large scale funding back then. As with all rising tides, all boats were lifted and there came a slew of startups — both solving someone’s unmet need and those that weren’t!
Fast forward to today and here is what one sees: Lack luster VC/PE interest in startups (especially new startups). Edgy founders. The food delivery startup mayhem took an untimely hit, e/m-commerce startups have almost ground to a halt on their old discounting model to acquire/buy consumers, VC/PE investors are looking to cash out after years of pouring money into startups of all shapes and sizes, investor enthusiasm shifts from growth/buying customers to focus on profitability/reducing burn and the goal to be the first in its category / vertical to reach GP zero from a high GP negative territory! So, how did this come about and what are the lessons one can derive from this choppy ride?
For starters, I think this was not unprecedented. It was totally within the ambit of what any rational thinker would’ve anticipated. The reality was screaming but as with any gold rush phenomenon, people just didn’t look at the problem head-on. Misguided euphoria, A certain lack of fundamentals and irrational exuberance ruled the roost!
Many of the big front page newspaper names became victims of their own successes — they forgot to lay emphasis on fundamentals/customer pain points (needs vs. wants) and a ‘lack of first principle customer development experience’ / ‘moving fast enough aka ‘speed of execution’ mindset.
Experiencing is believing — I myself spent valuable stints at some of the startups in arguably their fastest chaotic growth phases hopefully contributing definite improvements to the Indian e/m-commerce startup eco-system tangibly whilst addressing some of the topmost pain-points that affected these startups at scale.
So, after nearly a 3.5 year stint with the Indian startup eco-system when I decided to switch back to the more predictable, sustainable workplace of my North American and European roots, no one was surprised (myself included!)
Image added by NextBigWhat Team
What are my takeaways from this roller coaster ride and is my jump a mere short-term move or have I lost confidence on the Indian startup eco system at large?
- It is true some founders aren’t mature yet in this eco-system and tend to gravitate towards academic credentials, wearing ego highly up one’s chest and having a very myopic short-term focus vs. espousing long-term thinking!
- It is true that almost all the startup founders pick problems (large and small) that require brain cycles and cerebral capabilities to solve but seldom do they look at how they will bring the product to market (their biggest achilles heel seems to be figuring out the right Product-market fit and a solid Goto-market strategy)
- It is true that constructs like “design thinking”, practicing a ‘customer development’ product first philosophy is still in it’s infancy in India
- It is true that the Indian startup eco system largely gets impacted by the vagaries of the larger Bay Area product startup eco system with VC/PE firms alike — no longer is the adage so true than today: If the US startup eco system / economy sneezes, India catches a cold!
- It is true that the pace of innovation and jugaad in India is an order of magnitude faster than some of the other comparable markets
- It is true that China (I recently visited Shanghai and Beijing China) is at least 25 years ahead of India in infrastructure development
- It is true that Indian startup eco system tries to ape China with Weixin (Wechat) vs. Whatsapp, Taobao/Tmall vs. Flipkart (albeit Flipkart is closer in it’s business model to China’s JD.com), Alipay vs. PayTM etc
- It is true that amazon.com with its deep pockets is ensuring that it doesn’t repeat the same mistakes in India (as it did in it’s disastrous Chinese foray). amazon entered India with an ambition to not to lose the Indian e/m-commerce battle to any incumbents
- It is true that e/m-commerce retail is not a zero sum game. For amazon to win, the others don’t have to lose
- It is true that there is an unprecedented expected flurry of activity in the startup M&A space — there will be consolidation of the larger players and the one’s that emerge will rule the Indian e/m-commerce industry over the next 2-decades!
- It is true that mobile first is not just a fad, it is a philosophy-a way of life and has culminated into a mindset. It is no longer about the cloud services powered by a strong firm mobile app eco-system. At last count, the Indian mobile broadband penetration was over 300 MN users and is inching towards being the second largest market after China in the world (surpassing the USA)
- It is true that the Indian economy supports startups albeit exits are extremely rare! It is not common for startups to burn out before they sell out or IPO
- It is true that the Indian startup eco system is the most vibrant after the USA and China as innovation hubs! When startups are innovating and solving real world problems, we know we can look forward to disruption!
- It is true that the Indian Modi Government is making all the right noises in supporting the disruption caused due to the massive proliferation of social media (Facebook, LinkedIn, Twitter, Messaging media like Wechat, Whatsapp).
- It is true that the next billion $ product company will emerge from a lab out of China or India! It is true that disruption is happening!
- It is true that Indian infrastructure has only worsened in the last 2-years and no true startup has solved or even aimed to solve this problem using modern technologies like AI, Bots, Machine learning/deep learning etc
- It is true that big names in the industry like Ratan Tata, Mukesh Ambani, NR Narayanamurthy Nandan Nilekani have shown a huge interest in the startup eco system. Many of them are even trying to disrupt the traditional platform landscape by introducing newer platform variants like Jio (Telecom space disruption that is just announced!) and/or Reliance/Tata e/m-commerce (their own foray into the flat bottomed out e/m-commerce retail sector)
- It is true that larger companies have seen a slew of execs exiting. It is true that smaller startups have shut down. It is true that companies with a focus on easy VC/PE money but with no objectives didn’t survive!
- It is true that a lot of education startups are now jumping onto the bandwagon of creating startups to foster product management, design thinking workshops etc.
- It is true that Product Management is emerging as a red hot field — almost every alternate person I meet wants to either be a Product Manager or a wannabe entrepreneur. Ask them to name the problem they want to solve and they will squint their eyes a little bit — the gold rush continues
- It is true that leading PE industry bigwigs have seen a reshuffle! Softbank’s prospective CEO elect Nikesh Arora saw a phenomenal opportunity in the mobile and startup eco system in India and poured millions of Softbank $’s into this Indian startup eco system. Unfortunately, despite being proven clean, he witnessed an unprecedented backlash from Softbank’s investors and was forced to exit Softbank, Tiger Global is still trying to find a way to cash out on the Indian e/m-commerce story/its storied investments. Ola Cabs is still facing the heat from Uber in its India operations. Uber sold its stake to China’s Didi Chuxing
- It is true that to change consumer thinking/behavior will require a paradigm shift in how we think — this is never easy!
So, where does this lead all of us to? What next? Here’s my take:
- India’s startups will continue maturing. More defined product thinkers will try to shape the Indian product/platform landscape solving real world problems and the growth will not seek attention seeking TOI headlines anymore in any specific industry like it did before (everyone is cautious now!)
- India’s startups will focus on making money as they will realize it is not easy to keep burning oodles of cash in India and even go IPO — there just isn’t a path!
- Food delivery startups will continue facing the heat. They will realize that supply chain and logistics especially in the last mile is a very difficult problem to automate with technology (let alone, transform!)
- E/m-commerce will evolve. There will be massive consolidation in this sector and incumbents of all sizes might get taken (bought out at much lower valuations) or sold out to larger players (mostly, global!) The smaller ones will either fold up or get acquired for their talent by the larger ones!
- Payments, Financial inclusion, Retail and growing the pie to over 800 MN consumers on mobiles will be the way forward as we look at 2020!
- Services industry in India will increasingly face a challenge with emerging markets — they will face more disruption due to archaic old school business models than due to automation (as is widely predicted)
- Intellectual property creation will remain flat to non existent (albeit it won’t decline!)
- Incubation / accelerator programs for startups and mentors in the industry will rise! Product mindset will start becoming mainstream! This will have a net positive effect on the product industry; however this comes with a caveat: The overall count of either startups being incubated (its not always just the quantity, its the quality, stupid!) or the # of Product Managers being nurtured or being churned out of B-schools/training institutions of all types will NOT increase exponentially — it will continue to witness a linear growth path. Who knows, if by 2020, Product Management loses it’s charm and deep learning architects are the next big wave/fad, then everyone will clamor to get “Deep learning AI expert/architect” on their resume!
- IoT/Augmented reality/Deep learning platform startups and in general, platform thinking, will remain great dreams for most startups (with few getting funded though!) in this space! Many will talk about it, few will do anything to make a dent in the universe in this space — opportunity for all wannabe entrepreneurs!
- Infrastructure will continue to lag the industry and be a major drag on the startup economy