Archive for the ‘funding’ Category
Is the Indian e-commerce market feeding frenzy a greater fools phenomenon?
It has been a long time since I have blogged and I felt the urge to write about the e-commerce frenzy in the startup world as I am starting to see irrational behavior set in to the market. I have been watching in awe as the next baby products or handicrafts startup in India is raising huge amounts of venture investment at crazy valuations Are these valuations really justified or is this some sort of greater fools phenomenon?
I have thought a lot about this space and while I believe that in the real long-term e-commerce will be a very large category, I do not believe that given the current state of the market the feeding frenzy that has started may be justified. It sure feels like a hype cycle has started with the startup focused media focusing >70% of their energy on this category. Let us look at the fundamentals and realities of this market closely:
Is your company fundable? What do VCs look for?
I meet a lot of young bright people in India that have an idea and want to be part of the startup lifestyle. A lot of them come to me for advisory roles or to be a sounding board. The number of teams I meet that I get excited about are just so few and far in between. I am sure VCs who see a lot more startups than I do probably feel the same way and hence the high rejection rate of startups that don’t make the cut for funding – about 99% in India. This got me started to think about what are the things that I personally believe that are the secret ingredients of an exciting startup that VCs want to fund. Before I address these topics let us make sure we understand the term Venture Capital.
Should you fund your product Startup by performing Services?
What prompted me to write on this topic is an email from one of the followers of my blog (completely anonymized) wrote to me seeking advice:
“Dear Abhinash,
I am XXX
I currently run my co-founded startup YYY with a team of 7 people.
The urge to email you started after reading your thoughts at http://randommusingsofabinash.blogspot.com/2009/06/building-kick-ass-team-part-i.html ! Pretty useful insights. However there are few challenges that we are facing and would love to have your suggestions over it.
We are basically a 6 months old startup who is working on social media strategies and as a web dev workshop, originally started with a vision of being a primarily product company we have shrunk to become a services company and see ourself under a deadlock . We need money to run our operations and thus need to make quick money. For quick money , We need to work. However , at the end of the month we end up spending all our time on outsourced projects and thus come in a deadlock of earning and spending.
However, we are doing good and are very positive. We are getting pretty good projects and customer feedback, But as mentioned in your blog post (“if candidate has worked in {ibm|infosys|tcs|satyam|patni……….any services firm in India} then move to Trash”) something tells me inside that this is not something that we were supposed to be doing ! , Outsourcing projects , completing them , Fighting for payments slowly seeming to me a waste of time now.
Would love to have your suggestions….
Regards,
XXX
Co-founder
YYY”
This is something I have heard time and again and watch these companies with bright people just becoming high end consulting shops moving from one short-term project to another. I am by no means a purist and the advice I will provide is not going to take the moral high ground.
