The startup hype curve!

Not a single day goes by without the newspapers screaming with headlines suggesting <XYZ> E-commerce company making waves and raising <X> USD venture funding. Friends, family etc. everyone are trying to jump onto the e-commerce bandwagon and everyone wants to come to the party and hopefully, make some quick bucks. I see history repeating here in India and I want to caution my readers about the craze surrounding:

1. Startups, 2. E-commerce boom, 3. Startup boom (not as a way to solve real customer problems but as a way to make easy money)

Lets take a step back.

The problem

Redefining a modern form of retail i.e. e-commerce is not new. Its been done to death in USA and China over the past 15-20 years in the form of amazon.com, Alibaba Group holdings successes!

What is however alarming are the patterns I see and the trends similar to what USA and China had experienced as they grew back then. It is almost dejavu; History is repeating itself. Jeff Bezos of amazon commented back in the late 90’s about the Californian Gold rush here.

Why it matters

The Indian startup eco system, as I see it, is still in its initial stages of the Gartner hype curve. This means we have got the required technology triggers, we are in the era of heightened inflated expectations but will soon also see the trough of disillusionment and then the slope of enlightenment before we plateau out to a steady state in a decade from now. The key is to cross the chasm from the inflated expectations to the slope of enlightenment by learning how we need to adapt to our unique Indian startup eco system. This will be the key over the next 5-7 years time. I anticipate a huge gold rush in terms of startups ands wannabe entrepreneurs who want to “get rich quick” without solving anyone’s unsolved problems or without solving someone’s unmet needs, without understanding the nuances of the startup eco system or the tricks of the trade some of us have taken decades mastering and by reading a lot on how other markets have managed to achieve success in building such startups around a vibrant eco system.

What to do about it?

For starters, people have to be realistic. As the book Good to great espouses, companies need some key aspects to be imbibed in their DNA from early on. These include a combination of:

Disciplined People, Disciplined thought, Disciplined action

It can be looked as a combination of:

A. Buildup, B. Breakthrough

A. Buildup

1. A level 5 leader

2. First who then what (focus on getting the right people on the bus and the wrong people off the bus!)

3. Confront the brutal facts (face reality)

B. Breakthrough

4. The Hedgehog concept (the intersection of the three circles: What we care about/are deeply passionate about, What we can be the best at, identifying the right economic drivers to fuel/measure success for growth!)

5. A disciplined culture

6. Technology accelerators

7. The Flywheel and the doom loop

I see almost one new peer come to me asking for advise on ‘startups’ and ‘how to get rich quickly’! I find this hilarious to say the least. There is no magic wand to success in building and scaling startups, it involves a lot of patience, perseverance, determination and the above qualities and that is just the beginning!

Having been in the startup eco system for over 93% (14/15 years) of my career now, I can say one thing for sure: It involves a lot of hard work, patience, stoic discipline, and a ‘can do’ attitude. It also requires a solid A+ team (not necessarily a big team, you have to scale very carefully as in 2/3 of my startup experiences, we have scaled too quickly too hastily and have regretted by on boarding the wrong people on the bus and then it is not even possible to allocate alternate seats on that bus to those B and C players (read: other job profiles!))

I come from the US startup/SMB eco system selling primarily to both the consumer and the enterprise market.

I find the Indian startup eco system having smart people but honestly we need better culture/good values to attract the best of talent. This I believe is a problem that is begging to be solved first. Sometimes, in rare cases, I have found out that the startup founders don’t practice humility here. They carry early wins high up their chest and are too young to be erudite. While they are smart, they are far from the ‘long term players’ one would expect in such a vibrant eco system. This is bad for the eco system as a whole.

The other niggling issue I see with Indian startups is that many of the startups don’t get product. They are primarily service company mentality and just don’t get it. Despite trying very hard to ingrain the best practices of my past product experience in these key employees, they don’t seem to understand the value of product and how well it can scale; if done right.

I see the above two as proverbial death knell in the creation and sustenance of a vibrant startup eco system in India. Add to this the lack of focus on innovation and IP as a competitive advantage is another major hurdle to creation of IP.

Let me spend some time talking about the Angel/Seed funding and the Venture Capital industry here in India. When I started back in the early 2000’s, Venture Capital was little to non existent in the Indian product startup eco system. Today, we have entire Venture funds such as Microsoft ventures, Sequoia, Norwest, Accel, Tiger Global etc. invest heavily in Indian startups. Add to this, a lot of accomplished names willing to angel fund startups at early stages. So, this is for sure a vibrant system that exists already!

I just wrapped up a great book on how the VC industry operates. Here it is! Its an eye opener for making sure there are more exits and for this a more free market economy has to develop where both Private Equity and Venture Capital industry has to mature first!

E-commerce seems to be hogging all the limelight. The Indian ecommerce industry is pegged at USD 5 billion (expected to grow sharply to USD 12 BN by 2015). Large players here are Flipkart, amazon.in, Snapdeal and Tata’s tipped to join the e-commerce bandwagon along with every wannabe entrepreneur trying to jump onto the marketplace model of ecommerce. As with the Silicon valley dot com bust of late 90’s/2000, we will see many casualties but the few that emerge especially those with the early mover advantage will rule this market for the next 20 years.

As they say, there is no smoke without a fire. Opportunity for E-commerce is not without all the hype created! Internet penetration in India is pegged at 243MM Internet users, 117MM mobile Internet users (read: smartphones). Indian mobile broadband users are expected to reach 500MM by 2020. China still is leading the pack with over 600MM mobile broadband users (80% of them are mobile Internet users!) today!

This has also contributed to companies such as Alibaba (NYSE: BABA) to realize sweet success and raise $21BN in their IPO last week (it is the world’s largest IPO!) with a GMV (gross merchandizing volume) of $248BN (bigger than amazon and EBay combined!)

USA has 270MM Internet users (this is a whopping 85% of their population) and 168MM mobile Internet users. Compared to this, the Indian scenario reflects a definite opportunity since we have not even got 20% of our population onto the Internet yet so the untapped opportunity space is really for the next 80% of the Indian populace. To get them connected, we first need to create more jobs, increase their disposable income and then lead them to connect to the Internet as it is the least of their worries as of date!

I get a lot of offers from startups in the ecommerce space (having been a SaaS veteran in consumer and enterprise products for the last decade) in Bay Area companies, it is but natural this is happening but my decisions will be rooted in reality per above concepts that will form the bed rock of my own values/vision/strategy/execution methodology.

So, point is, be wary of this hype cycle and ensure you try to reduce the trough of disillusionment in ecommerce (the purchasing power of the common man via ecommerce has to first improve).

To do this, initiatives such as PM Modi’s Make in India campaign have to take shape! I feel we can try and build a bridge to cross this chasm to the slope of enlightenment soon.

Last but not least, we have to figure the return of investment to stakeholders and VC’s investing into companies and generate value.

One thing common about both Jeff Bezos and Jack Ma is this:

Customer first

Employees second

Shareholders third

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About Naveen Athresh
Disclaimers/Caveat: All ideas/opinions expressed are the author's own and wherever any item has been taken from a 3rd party website, the appropriate link would've been provided. The author will not be responsible for any misconstrued views/opinions arising out of the discussion contexts chosen. All links taken/referred to are the sole copyright of their owners/parent websites and the author has no relation to the content as referred to/updated in those links. The author takes no responsibility to assume that the content going on this website will be error free as it is narrated from the author's own insights/experiences/focus/group interviews/thoughts. This website does not guarantee any sort of a bias towards any particular product or company/product investment advice and anyone doing so is doing it solely at their own risk and The author assumes no responsibility for the same. Readers are firmly adviced to use their discretionary powers to judge if the content used on this website is authentic etc. after verifying it from independant sources.

One Response to The startup hype curve!

  1. Pingback: The Indian startup eco-system / 2 years down the line! | Product Management in India

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