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March 25, 2016

Write Downs to Down Rounds to IIT Buddies & the Cricket Club of India Bar - There are Many More Scenes Left in The Great Indian E-Commerce Drama

Frankie Brown of Investec has an interesting take on Indian E-Commerce in Economic Times. Extracts:
The funding slowdown has revealed as much about the Indian venture capital market as the companies they evaluate. It is a small world of IIT buddies and their gossiping, of egos and posturing, bluff and counter-bluff. Where the fearful see chaos, the wise see opportunity — the market is full of increasingly attractive deals.
...What concerns me is the over-reliance of the market on such a small number of investors. With traditional private equity reluctant to get involved, and offline players choosing to remain wilfully blind, Tiger, Naspers, Soft-Bank and Alibaba have run riot, waving magic wands and making princes and paupers of those they select and jettison. There remains a concern that in the world of “bigger is better,” inefficiencies are creeping into the market.
...Valuations are a matter of conjecture, but what is happening on the ground is indisputable. The seismic shift in consumer behaviour has not been witnessed anywhere in the world. Established players — whether banks, insurers, retailers — hold such a tiny portion of their respective markets relative to the rest of the world that the opportunity for new businesses underpinned by technology is so much larger. Per capita income is likely to double by 2025. There is no better place in the world for genuinely innovative entrepreneurs, and nowhere is the prize larger for the winners. The Indian dream is alive.
... The solution for the sector? Bravery. Bravery by investors to swim against the tide, to ask the tough questions, to think critically, not listen to their mates at the Cricket Club of India bar, but to block out the noise. Bravery by entrepreneurs to recognise that world-leading businesses take time to create, that bigger isn’t necessarily better, and to have faith in creative destruction.
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