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.

5 Reasons Why Startups Are Failing

Over the past couple of years, the most popular world to be occupying the business world, especially in tech is “Startup.” Even economics sections of daily newspapers and magazines have been filled with news of start up culture.

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In the Mecca of Startups, Begaluru, India, the buzzword has been quite casual and an every day phrase – a symbol of popular culture. From businesses like Uber, Dropbox and local Startups like MuSigma and Flipkart, it is about time that the entire world gears up for a turnaround in the type of businesses that we run.

Even though Indian Startup companies are likely to have received almost $5 billion in funding from investors by the end of the year, many Startup companies fail to make a mark – often dying after a brief period of popularity. I want to take a stab at why this is happening.

  1. Rushing to Fail – instead of creating a feasibly strategy and term based goals, many founders and mentors just want to create visibility in the market. That is all that matters since investors are lining up to provide considerable monetary assistance without taking much contemplation.
  2. Lacking Vision – Time tuned goals, well-knitted strategies and clear vision will always reign. The serious issue with Startups is that the focus is often on business operation and the creation of the product. This takes away the attention from holistic and proven aspects of running a business.
  3. Not Thinking Analytically – You have to realize that the world runs on statistics and numbers. Somehow, Startups fail to use even free resources to analyze market data. They can even use some of their investment money to pay for great resources to do it for them. In some ways, spreadsheets are more important than any programming language.
  4. Inefficient Cost Control – Startups have to preserve the investors’ money and use it optimally because ultimately, if you run out of money before you turn profits, you’re done and that is why most Startups fail. Throwing people big pay packages and acquiring office space in prominent business parks should be avoided especially if the budget doesn’t permit it.
  5. – Most Startup founders are pretty young (especially in India) with little to no experience. Thus, they hire domain experts to manage their business operations. However, business leaders have to constantly interact with their employees and allow them to contribute ideas based on their experience. I don’t think that Startups fully tap into the potential skills and knowledge banks of their employees.

What do you think of this list? Let me know what reasons you see being a huge factor in Startup failure.

Is the Tech Bubble Going to Burst?

For the past few months, there has been a debate about whether the tech bubble is about to burst. There are two men that are making strong claims on each side, but we are going to take a deeper look into the situation ourselves as well.

mark-cuban-reveals-what-happens-behind-the-scenes-of-shark-tankMark Cuban, the “Shark” investor on the show Shark Tank and owner of the Dallas Mavericks earned his money during the 2000 tech bubble. His prescience identified the bubble and he sold his company, Broadcast.com for $6 billion to Yahoo. Now, Cuban is claiming it is happening again.

“So why is this bubble far worse than the tech bubble of 2000?  Because the only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.  If stock in a company is worth what somebody will pay for it, what is the stock of a company worth when there is no place to sell it?”

However, Mark Andreessen, co-founder of Netscape, which sold to AOL for more than $4 billion before the tech bubble popped, disagrees. Andreesen even has a 53-page PowerPoint presentation to tell you why the current situation is very different. So whom should we believe? Lets take a look at what is actually happening in Silicon Valley and what the data shows.

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Well, venture capitalists are pouring money into “top performing” startups like Uber (received $8.2 billion) and Snapchat (received $1.2 billion). Over the past year, total capital investments are up by 38%, but the total number of deals is down by 40% – interesting. It looks like venture capitalists are having their cake and eating it too. These venture capitalists are investing say, $100 million in a later stage startup that is valued at $1 billion and receive protections. So, unless the valuation of the company decreases by 80% or more, then they will still get their money back. They can most likely walk away with at least their original investment, but reap huge rewards before that happens.

This data would make it seem like venture capitalists believe that the tech bubble is stretched thin. Fear is starting to take over instead of greed. As we reflect back on our first investment lesson of, “Buy low, sell high” we need to apply it to the current situation and it seems that right now, it is hard to buy low – that is what is important.

3 Reasons Why You Should Invest In Africa

“We are enjoying in Africa what I call the democracy dividend. The progress we are seeing, economic development are all part of the dividend of good governance, respect for human rights, rule of law. It has created an enabling environment that allows not only foreigners to come in and invest but for Ghanaians to invest. It has created an atmosphere for our young people to be creative, innovative…” – President John Mahama, Ghana

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China used to be where the big money was – low cost workers and huge factories were plentiful. Now, with the Chinese downturn there are new reconsiderations for future investments. One of them is the prospect of Africa. If you have not seen all of the signals that this is the new continent to invest in, here they are.

  1. Africa is growing fast

The World Bank released a report that 6 of the 12 fastest growing countries in the entire world are located in Sub-Saharan Africa. Half of the world’s population growth will be in Africa.

Africa has sure had its fair share of problems from physical geography (landlocked countries will disease-susceptible tropical climates) to manmade challenges such as corruption. However, when you view Africa as a long-term investment, the combination of demography and development make Africa a promising buy.

  1. China is already in Africa

For the past decade, China’s investments in infrastructure like mines, farms, roads, ports and railways have been the big story. However, they have also invested in energy to increase Africa’s raw materials like food, oil, diamonds and uranium.

Now, Africa is both a partner and rival to Chinese manufacturing of clothes, toys and electronics. Yes, right now Africans have to wait and see how much they will be affected by China’s economic slowdown. Most of the attention is focused on low commodity prices and possibly damaging capital flight.

  1. Western countries are absent

In ways of both governmental aid and private investment, the United States and European countries have been pretty minimal. Right now, western governments are cash strapped and have turned from public sector aid to more private sector investment as their global developmental strategy. However, this has not been working out well because the private sector is often deterred by the high risks involved in investing in Africa.

So, when you put these three factors altogether, it does look like the perfect time for American businesses to consider Africa for long-term growth possibilities. In the next 100 years, the consuming middle class African will be a huge driver of economic activity.

In major cities in big countries, the middle class demand is already very real. With better infrastructure, more efficiency, less corruption and more urbanization, investing in Africa will become the new source of wealth.