So, is the bubble bursting?
All of us have talked about the valuation bubble which started in the first month of 2015 in India. Market experts saw this influx of funds from well known and heavily respected Venture Capital Firms, as a sign of growing ecosystem and an improvement in entrepreneurial culture of India. Some others saw it as overvalued investments some of which were bound to fail, and they said that it was because of China’s growth and expectation of a similar trajectory from India. And then, the second half of 2015 saw a dip in valuations of various startups, along with stagnation of several early stage companies, with lesser investments in new companies (barring the angel investments which are still on, as an aftereffect of the supposed valuation bubble, and new age investors willing to put their hard earned money in a startup rather than in their savings account).
So, has the bubble burst now? Is it not the right time to start a company?
The answer is a clear Yes and a clear No. This is one of the best times to start your company, because India is at a stage where its going to face disruption in various markets. Since when has influx of external funds become the parameter for judging whether entrepreneurial ecosystem is ripe? Our desire to connect the free flow of funds to growth in ecosystem is the mistake which we are making here. With every passing day, spending capacity of an average Indian is increasing. And that means, with every passing day, we are moving towards disruptive growths in unimaginable sectors. Trying to achieve this disruption by piggybacking on funding is the biggest mistake made by entrepreneurs who do not understand the true meaning of entrepreneurship. But those entrepreneurs who think that they can cause this disruption with or without the aid of external funding and create a profitable business, are the ones who are on the right track.
So, is funding not needed?
Obviously, it is needed. But every startup should think if they can make money without any external fund and then make a plan when nothing is easy out there. Most startups come with a plan showing milestones mentioning Seed Fund in month x, Series A in month y, and Series B in month z (and we admit that we always ask the entrepreneurs to include this in their pitch deck :)). But they should rather focus on milestones in form of Product A in month x, Product B in month y, and Product C in month c. Or, more importantly, Revenue A in month x, Revenue B in month y, Revenue C in month z. This is not to take away from them the fact that the desire to make profits should not ever overshadow the desire to make a strong product. And then, once you get the funds to propel your success, grow at the rate of 100X, because you will not achieve 100X unless you have planned to grow at 10X even without funds.
So, what should be done?
Data is gold but it needs to convert into green wads of cash, and that can happen only if you know how this gold can be mined. GMV is good, but not if the commission is going to be negative forever, and if you have no clear plan of how to turn things around. Downloads are awesome, but not if the downloaders do not use your app regularly and organically. User traffic is very important, but only if you know that they will stick with you when competitors come. So, build a strong base, a strong product, which is amazing enough to allow you to build a company through which another Google (of your domain) can be created.
So, back to the main question, is the current ecosystem right to start up?
India is in dire need of entrepreneurs who can change our lifestyle. We are craving for a change in lifestyle and for growth in every aspect of our existence. And we are ready for that. Just know the right time to launch the right product for the right need, and there will be disruption. Funding is a by-product which is waiting for those who know what’s “right”. And VCs like us will never miss out the right opportunity.