When to Invest in the India Tech Scene

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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.

Developed & Emerging Markets – Where Do They Stand?

Ever since the term, BRIC (Brazil, Russia, India & China) was created in 2002 by Goldman Sachs, the story of global growth has been emerging markets. Russia was driven by oil and Brazil by commodities, China and India were driven by demographic dividends in their immense populations. However, things have changed in the past three years.

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In 2008, the Lehman crisis put the developed markets in a precarious condition. Debt soared, liquidity tightened, growth collapsed and the global GDP trend shifted out of the developed markets and into the emerging markets. As the share of emerging markets started rising, the share of developed markets started falling. In 2009, emerging markets accounted for 35% of global GDP, while developed markets accounts for 42%. In 2013, emerging markets accounted for 48% and developed markets accounted for 32%.

While the U.S. grappled with low inflation and the EU was occupied with the problem in Greece, things took a sharp shift in favor of developed markets. There was clearly a lot of pressure on emerging markets. As liquidity dried up in U.S. markets, commodity producers suffered. The oil and commodity slowdown just made it all worse. In 2015, the share of emerging markets in the global GDP was down to 34%, but the share of developed markets finally increased to 43%.

I think that this trend is going to become more pronounced in favor of developed markets in 2016. India, China and Mexico will still be the fastest growing economies. However, other emerging markets are going to pay a price for the fall in China’s growth. The US, Canada, UK, Japan and Germany will most likely grow by 2%.

As the US creates record jobs, the EU gets growth back, Russia and Brazil will probably suffer from the weak commodity prices and bad policy decisions. That means that between the slowing of China and negative growth from Brazil and Russia, the emerging markets are going to have a rough year. 2016 may be the year that developed markets get back on track.

What do you predict will happen?

Free Basics, Net Neutrality & Economic Discrimination

Free Basics – formerly, Internet.org is Facebook’s initiative to provide free, but limited Internet to the developing world. Last week, the Times of India reported that India’s telecom body asked Facebook’s partner, the wireless carrier Reliance, to cease the service while it determines whether operators should be able to price their services based on content.

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Mark Zuckerberg emerged from his paternity leave to pen an op-ed article in the English-language daily. Basically, he can’t believe that India isn’t grateful for it. I, myself am still deciding whose side I am now, but let’s take a look at his response to figure it out.

The first time I breezed through his article, I could pick up on the annoyance. On the second read, I realized how Zuckerberg sees India, where about a billion people are not connected to the Internet, as backwards for even questioning Facebook’s charitable endeavor.

“Who could possibly be against this?” he asks passive-aggressively. “Surprisingly, over the last year there’s been a big debate about this in India.”

Even though net neutrality is an issue in the United States as well, Zuckerberg makes it more of a first-world problem, such that it doesn’t apply to India because limited service is better than no service. Net neutrality activists are arguing that Facebook and its telecom partners are gatekeepers, deciding which websites can be accessed for free. While Facebook could add more telecom partners to open up the number of sites and services Free Basics users could use for free, it only has one partner in India.

Zuckerberg does acknowledge that Free Basics does not provide people with access to the full web, but sees it as a step in the right direction. He claims that half of the people that come online for the first time by using Free Basics, buy full internet access within 30 days.

He even tells the story of a farmer named Ganesh, who uses the free Internet service to check weather updates and commodity prices. He asked, “How does Ganesh being able to better tend his crops hurt the internet?”

Something that Zuckerberg failed to address is that zero-rated services like Free Basics amount to economic discrimination – poor Internet for poor people. In the Times of India in October, net-neutrality advocacy group Savetheinternet.in quoted Tim Berners-Lee, father of the internet, as saying: Economic discrimination is just as harmful as technical discrimination, so [internet service providers] will still be able to pick winners and losers online.” Facebook’s walled garden could very well determine the sites and services that will succeed in India.

What do you think?

 

Is A Water War Coming?

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Over 70% of the planet’s surface is covered by water. There are also other forms of water such as ice and gas. The volume of water on the Earth has remained almost constant for more than a billion years at 344 million cubic miles. We could say that water is everywhere…so why do we constantly hear about impending shortages? To start off, 97.5% of the water on the Earth is in the ocean, which means that it is salty and not fit for our consumption. An interesting way to visualize this is if all the planet’s water filled a one-gallon container, we would only be able to consume less than a teaspoon of it.

The Earth is always recycling the water we use. However, we’re stressing the system by not allowing it enough time to replace the growing amounts that we demand. Can we make new water? Our galaxy is actually creating new water molecules all the time, but it is happening far from our planet and it is not possible to transport it here, yet. There certainly isn’t a clear solution and the demand for water is predicted to exceed supply by 40% by 2030.

On top of plants, animals and humans consuming all of the freshwater, climate change is further limiting our supply. The demand is primarily driven by agriculture, accounting for 90% of freshwater use every single year. The same forces that are driving demand for food – a global population boom and increasing preferences for animal protein are placing unsustainable pressure on water supplies.

Climate change and food-driven water demand are creating a disastrous problem that could shock global stability. We have already been seeing sever water shortages on a regular basis. According to the Nature Conservancy, 1 in 4 large cities are “water stressed.” In 2008, Barcelona came within days of running out of water and was forced to import a tanker of drinking water. By 2025, two-thirds of the world’s population could be living in water stressed conditions.

Now, water wars are on the horizon. Last September, the US National Intelligence Strategy released highlights in elevated potential for water scarcity to generate instability. In 2012, a US intelligence community report on Global Water Security warned that “During the next 10 years, many countries important to the United States will experience water problems—shortages, poor water quality, or floods – that will risk instability and state failure, increase regional tensions, and distract them from working with the United States on important US policy objectives.”

Pakistan already has an ongoing dispute with India over access to water – radicals have called for “water jihad.” New Delhi is also fearful that a new Chinese dam project in Tibet will be used to restrict water supplies to Northern India. In March, Ethiopia neared conflict over the construction of a dam that could have limited Egyptian and Sudanese access to water. There is a similar disagreement over a Tajikistani dam that could restrict water access tin Uzbekistan. These are just a few of the tensions over water….so when will the global water happen?

Climate Change and Poverty Go Hand in Hand

“Climate change hits the poorest the hardest, and our challenge now is to protect tens of millions of people from falling into extreme poverty because of a changing climate.”

– The World Bank Group President, Jim Yong Kim

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The changing of the world’s climate has been an important topic for the past decade. We have seen some horrific natural disasters and watched destroyed countries and cities try to recover from the results. The fact is that climate change is already preventing people from poverty.

The World Bank Group released a new report that claims there could be more than 100 million additional people in poverty by 2030. That is, unless we can rapidly develop climate-smart and emission-reduction developments. The report, “Shock Waves: Managing the Impacts of Climate Change on Poverty” will be presented at the international climate conference later this year.

Ultimately, the report discovers that poor people are already at high risk from climate-related shocks. Like what? Think about results of crop failures from reduced rainfall, spikes in food prices after these extreme weather events and increased incidences of diseases after heat waves and floods. These tough shocks wipe out hard-won gains and lead to irreversible losses that are driving people back into poverty, especially in Africa and South Asia.

The World Bank Group President, Jim Yong Kim has said, “This report sends a clear message that ending poverty will not be possible unless we take strong action to reduce the threat of climate change on poor people and dramatically reduce harmful emissions.”

The report shows information proving that the poorest people are more exposed to climate-related shocks like floods, droughts and heat waves than the average population. They lose much more of their wealth when they are hit.

Of the 52 countries that could be surveyed, 85 percent of the world’s population lives in countries where poor people are more exposed to drought than the average.

One analysis of 20 developing countries showed that collecting and redistributing energy taxes would benefit poor people despite higher energy prices, with the bottom 20 percent of the population experiencing a net $13 gain for each $100 of additional tax. Well-designed emissions-reductions programs that strengthen the productivity of agriculture and protect ecosystems could benefit 20-50 million low-income households by 2030 through payments for ecosystem services.

This report was perfectly timed to gather enough attention on how the climate affects the poor before negotiators father in Paris for the international climate talks. I hope that the find to end poverty and slow down climate change can be achieved if they are addressed together. The number of people in poverty is only going to increase and their living situations are going to become worse and worse. Let’s put actions into our development work now.

What is Uber Doing in India?

Uber has been having a rough time in India, but how bad is it?

Economics of the Uber Drivers:

  • Drivers are intelligent. They are aware of the economics and the politics of auto drivers
  • They are honest and call each trip a duty. However, they are prone to “abusing the system” which I will get to later.
  • The current economic situation is not normal and they are scared of things changing
  • Most of them are on other networks like Ola and TaxiForSure, there is no loyalty to Uber other than the money
  • They will tell you they’re being mercenary. They know that if you pay X, they get 3X and Uber pays for the rest.Uber-Pune-Car-Fleet

Economics of the Uber Business:

Uber is often preffered because it is cashless through PayTM or credit card. Ola’s cashless system uses Ola Money, which is a waste of time because you can’t use it anywhere else. Drivers might even cancel your trip if you say you’re using it. PayTM offers cash backs on purchases that you can use towards Uber.

Uber says that it has the lowest fare in Bangalore at Rs. 7 per km, but they actually charge Rs. 13.5 per kilometer.

So, should you just get a car instead? The annual costs of having a car are much smaller now. If your car gives you 12 kms to a liter of petrol at Rs. 1 per kilometer, you are still paying only Rs. 5.5 per km for petrol and maybe Rs. 1 for parking. There is also the convenience of owning a car – getting groceries from hypermarkets that won’t deliver and driving your kids to school.

There is another reason why a car is better. Uber cars are not always available when you need them. Wait times are over 10 minutes most of the time unless you are in a very popular area. There are also a lot of surge prices, which Uber is known for.

So let’s go back to the driver. For 12 rides a day, he gets Rs. 1200, plus a Rs. 100 per ride incentive, plus Rs. 100 per ride as fare which equals almost Rs. 1800. Then he pays Uber 25%. That comes out to Rs. 3500 per day. However, most drivers claim to make about Rs. 2,000 per day so that’s around Rs. 45,000 per month. After the EMI, fuel costs and service, he is left with Rs. 20,000.

uber-e1409187758464Economics of Uber’s Marketing Expense:

  • Uber only gets what you pay, which is about Rs. 150 per ride.
  • After my calculations, Uber still have Rs. 1,200 per day of net losses
  • For 12,000 drivers, that’s Rs. 15 million per day or $250,000.
  • That’s a los of $7.5 million per month in Bangalore alone.

In my opinion, Uber needs to reduce incentives and increase charges. They need to increase them by at least 2.5 times just to break even. Will the Indian market pay that much?

Disruption in Indian Banking

download (3)Five weeks after Kolkata-based Bandhan Bank Ltd began operation, IDFC Bank quietly launched in Mumbai. Previously, the banks fought it out with two dozen contenders to get the Reserve Bank of India’s in-principle approval a little over a year ago. This is besides the fact that the bosses of both the new banks, Chandra Shekhar Ghosh of Bandhan Bank and Rajiv Lall of IDFC Bank are not bankers, they are running their banks more differently than you can imagine.

Bandhan Bank began operating with 2,022 doorstep service centers with 501 branches and 25 ATMs all across India. One-third of their branches are in rural areas and unbanked pockets. However, in the past few weeks, it has increased its branch network and substantially increased their customer base. Bandhan plans on continuing to serve this segment of the market and add small to medium entrepreneurs to its loan portfolio. They don’t want to dabble in corporate loans for now, but will collect deposits from all, including high net worth individuals and corporations.

In contrast, the IDFC bank is aiming to be a smart corporate bank. It began with 23 banks including eight in Mumbai, New Delhi, Bengaluru, Kolkata, Chennai, Ahmedabad and Pune offering corporate and wholesale banking products. The remaining 15 branches are in unserved areas. IDFC’s focus is using state of the art technology to make transactions easier.

There is a new wave of competition in Indian banking and it will continue to intensify. In the past 20 years, 12 new banks have been created, but not all of them have survived. Just in the past seven weeks, two more banks have appeared. In the next year, we can expect to see many more. Both banks are challenging the high street banks to redraw their strategies. They have to take note of Lall’s passion for technology. Some banks have already made big moves into rural India to fight Bandhan’s expansion.

The story doesn’t just end here. More than four foreign banks have approached RBI for local incorporation. Once they incorporate, they can open more branches and buy out weaker banks. RBI could also allow for some strong urban banks to convert themselves into commercial banks. Most importantly, banking licenses for universal banks and specialized entities should be in healthy supply.

Get ready to see huge disruptions in Asia’s third largest economy consisting of Rs.90 trillion. Let’s sit back and watch small banks fight pitched battles with big banks for locations and local incorporate banks lure depositors. Sophisticated corporate and personal banking products are coming to India.

Want to Enter the Indian Market? Create an App

To me, mobile apps are the best and easiest platforms to create and particularly for a country like India where mobile phones are everywhere with a huge customer base – why wouldn’t this be the perfect opportunity? Let me explain some of my reasons first. I have narrowed it down to 5 simple ways that mobile apps are the way to enter the Indian market and be successful.

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Minimal Cost of Infrastructure

By adopting an app only strategies and making your customers trust in their experience, you have the advantage of getting rid of managing multiple digital properties. You can cut the cost of maintaining, upgrading and optimizing website and mobile channels.

Individual Experience

Interacting with an app is much more personalized with features such as saved preferences and customer’s preferences. You can even get updates according to your best interests. These design thinking apps that add to the user experience are the real game changers.

Learn Your Customers

Indian customers are known for not being very loyal and extremely price sensitive. Thus, with a large competition pool, it is very important to be the first choice of the customers. By using an app only strategy, you can reduce the options to click for customers and you become a choice rather than an option.

Fill the Holes

There is a huge customer base that is accessing your app from offices, homes and restricted network areas. By having the faster, more simple and mobile solution, you help your customers complete the purchase journey whenimagesever they want, from wherever they want. Netflix is understands and is making their move on India, too.

Easy Payment

Building off of making purchases on the go, the actual payment process is such an advancement. By storing credit card information, apps are a major facilitator for smart purchasing. The ‘Buy Now’ button is now imperative for any app.

I did write this thinking about the Indian market, but it should not be limited to just one country. The entire continent of Africa is dotted with areas that are exploding in business. With this, phones and service are becoming more available for everyone. With this, these same five principles can serve for this entire customer base as well. Apps are fast and simple, all you need is the right idea and an understanding of your customers to be able to affectively market and advertise.

The Future Is Here – Ultra Pods

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In a small-scale experiment, 21 passenger pods have carried more than 1,000 passengers every day between the terminal and Business Car Park at Heathrow Airport. The five-minute ride entails crossing over seven roads and two rivers. Commissioned by the Heathrow Airport Holding Limited and built by the UK-based Ultra Global PRT, the pods have logged over one million miles and demonstrated cost savings, environmental impact and user-friendliness.

There is no type of railway needed. The ultra pods are actual cars with rubber tires, batteries and all. They are 12ft long, 5ft wide and 6ft tall with enough space for six people and their luggage. At 1,870lbs with a 141lb battery pack, the ultra pod can reach 25mphr while only drawing 2kW of electricity. The pods have a self-monitored battery level and when it needs to, it will excuse itself at station stops for charging.

Environmentally, the ultra pods are very impressive. The system already meets the new Kyoto Protocol 2050 projections. The pods have a 50% reduction in per-passenger carbon emissions compared with diesel-powered buses and 70% when compared with cars. Heathrow claims that the ultra pods have replaced 70,000 bus journeys each year. Another major plus is that 80% of passengers do not need to wait for a pod – the maximum wait time is 10 seconds.

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Inside the pod, touch screens let riders select their destination – of which at Heathrow, only offers two options right now. As the doors open, a recorded voice welcomes the rider. Once the passenger presses “Close doors” and “Start” then the pod backs out of its parking spot and glides away from the station.

Obviously, this closed-course vehicle was much easier to build rather than one for the open road such as the Google self-driving car. Sure, it can’t navigate roadway interchanges, pedestrians and non-autonomous vehicles, but there are a lot of advantages. The pods are made of mostly easy to find hardware parts, are reliable and the lightweight of the infrastructure makes it almost 10 times more resource efficient than usual road or railway systems.

Ultra has ambitious plans for the future of the pods. Right now, they are working with Indian investors to build a 4.8-mile circuit in the city of Amritsar, north of New Delhi. The network will have seven stations and more than 200 pods to transport up to 50,000 passengers per day.

It’s not hard to think of all of the different ways that these pods can be used – here comes the future of private autonomous transportation.