I’ve been watching the India startup scene and I think that there are a few observations to be made. The consolidation in SE Asia has just begun due to the high burnout rates and not delivering the valuations that the startups need. First, Lazada was bailed out by Alibaba, which is a very smart move by Alibaba as they get control of the SE Asia e-commerce market and a big platform on which to expand. Temasek, which owns large stakes in Alibaba and Lazada, helped broker the deal, which is exactly the type of consolidation we were expecting in the region.
The same will now happen in India. Admittedly, I’ve not been especially keen on India tech scene because it is the first big wave of home grown on-demand & delivery tech in India following the models established in the US.
This first, new wave that is occurring is where companies learn to scale, and the infrastructure in India matures to cope with an on-demand, delivery economy. Silicon Valley companies are really 4th generation companies, taking advantage of 30 to 40 years of scaling experience and talent. India is just starting off on that curve, migrating from a tech economy which was largely about building things for others, to now building for themselves. Early investors did incredibly well in India; they were bought out by later stage players like Tiger and Sequoia coming into the country. Watch though, these later stage investments will not do as well. Flipkart and others are already seeing difficulties.
However, this doesn’t mean Flipkart goes away. It is very possible that Flipkart is the Alibaba of India, or that may be yet to come. It just means that consolidation will continue to happen, in which later stage investors will lose out on the positions they took in the last 2 years.
But, the India startup scene will bounce back very strongly once consolidation happens. The next wave of bright new ideas and startups will happen – hopefully ones that go beyond the e-commerce and marketplace sectors.
I would wait to invest in India until the next round of seed companies in India start raising in late 2016, or even more likely in 2017 with smarter teams, lower costs and more experience about what works. Plus, taking advantage of the infrastructure helped build the first wave. What do you think is needed to make a successful second wave?
Are you watching any startups in India currently? Let us know what you think about investing in India startups below.
Advisor Abbate 