Digital Businesses in India

The market cap of China’s top digital companies (Internet and mobile companies) probably exceeds $75 billion. The top two – Tencent and Baidu – are worth over $50 billion between them. All Indian digital companies (private and public) put together have a market cap of sub-$5 billion — probably much lower.

Let’s look at this another way. The Indian digital companies market cap could be $25-50 billion in 5-7 years, if one looks at China. So, the question to ask is: how will this market cap be created? Which are the companies that are going to be the big winners?

These are still early days in the Indian digital space. More than 90% of the wealth creation is still to happen. That is what entrepreneurs, angel investors and VCs should be looking at.

Internet Portals

I was talking to a few friends about their Internet portals that they run. The Internet portals business is about three things:

  1. Reach: the raw numbers for a basic free service (on desktop and mobile web)
  2. Ads: how can we monetise the free services attention via ads
  3. More: how the free user can be monetised either through premium products (subscriptions) or via transactions (commerce)

On the Internet, portals have mostly focused only on 1 and 2. By itself, just web ad revenue is not good enough to cover the costs or to scale operations. This limits the portals capability to scale. The challenge in India is to also think about how to build 3.

Five Questions

As one thinks about one’s business, here are five questions that one should ask:

  1. Is the market that we are in large enough to ensure our growth?
  2. Can we ensure that the Base business continues to grow?
  3. What are the Boosters that we can add through new ideas / initiatives / recruitments to incrementally grow the current business?
  4. Are there adjacent markets that we can tap into?
  5. What are the Breakthroughs / disruptive innovations that we can do that can create or amplify future growth opportunities – either in the current market or adjacent markets?

One way to remember these questions is 3B (Base, Boosters, Breakthroughs) +2M (Market large, adjacent Markets).

Blog Past: A Manifesto for Middle India

This is from a year ago (during the election season) – and still very relevant now – on thetop anxieties of Middle India that need to be addressed:

  • More Economic Freedom: An assurance that liberalisation will continue, because that is what creates more jobs and opportunities. Over the past few years, liberalisation has come to a halt.
  • Less Government Interference: An assurance that people will have more control of their own lives, without the spectre of a government bearing down on them. This means decisions made on merit, and elimination of unnecessary rules and regulations which hobble us and our enterprise. Also, a government that works to eliminate corruption at all levels and introduce greater accountability in its functioning.
  • Best Education: If there is one thing that can make us more competitive in the global economy, it is education. India needs the education sector to be opened up.
  • Security: Over the past few years, the feeling of security has slowly ebbed away with multiple acts of terrorism coming to our doorstep. India needs to feel safe again.

Weekend Reading

This week’s links:

Voice Conferencing

Over the past six months, I have been increasingly using audio conferencing among two groups of 6 or more that I am part of. I have found it very efficient to keep things moving by doing weekly phone calls that everyone in the group is expected to join in. We use Asterisk, which is an open-source software, installed in my office for it, so the incremental cost for us is close to zero.

At some point of time, doing things only over email or travelling to different cities for face-to-face meetings become hard to do — especially for diverse groups.  A phone call gets everyone together – and gets them talking. That, combined with the discipline of a fixed time every week, can make groups that bit more productive.

Restaurant Reco: Jewel of India

I have had dinner thrice in the past month at “Jewel of India” at Worli in Mumbai. I recommend it whole-heartedly.

The food is extraordinarily good. (I stick to Jain food, and they have no shortage of options.) The ambience is nice – so if one is planning to do a business meeting, it offers a very nice setting. Also, there is a good gap between the tables, so there are no distractions from conversations on adjacent tables.

They have also a wonderful lunch buffet — haven’t sampled that in a while, though!

Some things should stay just the way they are.

Old Failed Ideas

Just because an idea didn’t work at a point in time does not mean it was a bad idea. There are multiple reasons for something failing – and one of them could be that the environment was just not right, and not that the ideas itself was flawed.

I say this in the context of an idea I used to write about a lot 5-6 years ago — server-centric computing. Now, it goes by the much trendier name of ‘cloud computing.’ I think it is an idea whose time may be coming in the Indian context — thin clients, combined with clouds (either on the LAN or on the Internet).

For me, the blog serves as a good memory of many ideas that have not worked. Some I have given up on; others I hope to revive at the right time!

1s, 2s and 4s, 6s

Since this is the season of cricket (IPL), I will use a cricketing analogy to write about an idea that all who are heading businesses or responsible for P&Ls need to think about.

In cricket, one needs a mix of the ones and twos along with the boundaries and sixes to get to a good score. In business too, one needs to get the low-hanging fruit (or call it the bread-and-butter business) going, along with the game-changing ideas. Without the base revenue streams, it becomes hard to keep investing in the big ideas – because one runs the risk of failing (caught out). Keeping the scoreboard ticking is very important. At the same time, one does need to think about how to create a product that can provide a significant competitive advantage and be a differentiator in the marketplace.

Many times, we try and only do one of the two, and that is not good enough if one wants to create a dominant position in the industry segment.

The 4:40 am Alarm

One of my New Year Resolutions was to re-start my daily walk. It had stopped since last August – and I always found reasons to not wake up early in the morning to go for the walk. As so often happens, a New Year offers the chance for a New Beginning – even though logically speaking, it is just another day of another month.

Since Abhishek wakes up at 6 am, I have to finish my walk and be back home by then. So, I worked it backwards and figured I’d have to walk up at 4:40 am. For the most few days, it was tough — it just seemed an unearthly time to wake up. Now, nearly three months on, I have gotten used to it. One change I’ve had to make is to ensure that I go to sleep by about 10 pm.

I like the morning walks in near darkness. No people or no distractions. So, it gives the mind a free run. That kind of uninterruped time is hard to get nowadays!

Blog Past: Entrepreneurship in India

I wrote this a year ago:

  • Entrepreneurship is happening in India, but there isn’t enough of it and there isn’t enough of capital being invested into early-stage companies.
  • There are two issues: lack of angel funding (whatever little was there has now almost dried up) and lack of the first-round funding. Ventures need about Rs 1-5 crore to get started, and about Rs 5-15 crore in first-round funding. Most VC funds in India are either not investing in tech-focused cos. or need to invest $5 million (Rs 25 crore) given their fund size and the commitments they can make. India needs smaller funds with smaller overheads, with more operationally focused partners to mentor and guide early-stage companies.
  • The digital opportunities in the Internet and mobile space both have challenges. The Internet cos. are dependent entirely on advertising (which has stagnated) and the mobile cos. are hamstrung by low revenue shares from mobile operator payouts.
  • I continue to believe that the big opportunity in India is in building direct-to-consumer cos. in the mobile space, but this requires courage and capital.
  • Also, exits in India are few and far between. M&A needs to be part of the process and that is simply not happening in India.
  • Result: we have lots of small companies (since one can start) but few achieve scale. That is what needs to change.

The good news is that the situation is changing – more start-ups are happening now, and angel funding (and some bit of VC funding) is also starting to pick up.  We still need to have much more funding available for the early-stage.

Weekend Reading

This week’s links:

  • India Media Industry in 2010: A KPMG-FICCI report.
  • America’s Broadband Plan: from ZDnet. “100 megabits per second download speed AND 50 megabit UPLOAD speed in 100 million homes by 2020, Build the fastest wireless network in world, Community facilities such as schools, hospitals and government buildings should have 1 Gigabit access.”
  • The Profit-and-Loss Statement: A tutorial by Fred Wilson. “[For startups,] the trended monthly P&L is a great way to look at a business and see what is going on financially.”
  • David vs Goliath: from Fortune. “How 3 small businesses stood up to larger competitors.”
  • Newspaper Economics: by Hal Varian.

A friend from Atlanta

This weekend, a friend is visiting from Atlanta, along with his wife and 4-year-old daughter. I am very much looking forward to spending a couple days together with them.

Our story goes back to a couple of accidental meetings.  The first meeting was about12 years ago — we met on a bus which was taking tourists to Universal Studios! We chatted and then parted. As it happens so often, there was no further contact. The second meeting was at Mumbai airport 3 years later – we happened to be on the same flight to Chennai. After that, we decided that the Mysterious Force does want us to stay in touch!

As we age, it becomes harder for us to make friends. Luckily, this is one relationship which has been an exception.

Market Size Matters

I was discussing this topic with one of my colleagues the other day. The size of the market opportunity matters. For example, we sell Linux-based mailing solutions. That is a tenth of the spend that companies do on Exchange and Notes. So, the question is: how can we target those users?

How we define the market opportunity will either embolden us or constrain us.

In most early stage companies, the discussion of market size never comes up because there is little or no revenue. Once the revenues start coming in, then one needs to start thinking of the future – and how the market opportunity can be expanded.

Mumbai Traffic

I don’t know if we have any urban planners for Mumbai or measure the slowing average speed of traffic movement through the years. As the number of cars increases and with parts of the roads of the city forever in “Dig” mode, traffic conditions are deteriorating. And no one seems to be bothered. It is probably because the change (for the worse) is small enough that we end to adjust and recalibrate our expectations. We don’t necessarily remember how traffic moved a decade ago.

From my own experience, average traffic speed has probably halved in the past decade. I am going to take a single data point – my commute back from office to home (and this is supposed to be against the traffic).  The 6 kms route now takes about 50-55 minutes daily, when I leave around 6-6:30 pm.

Of course, the ones who need to understand the plight of us cannot be expected to do so since they travel in vehicles with red lights and roads are cleared for them. Mumbai’s traffic woes will only worsen until the Ministers don’t have to wade through the same traffic as us without escort cars clearing the way.

We haven’t even started to think about the problem, leave alone come up with solutions. One bridge across the Sea does not speed up traffic.

Civic Discipline

I think we as a people lack civic discipline.

Where we need to queue, we rush. Where we need to walk on footpaths, we walk on the road. (Of course, that may be my habit since most urban areas suffer from a lack of walkable footpaths.) Our driving is more like weaving in and out without any regard to lanes. We don’t hesitate to spit or otherwise dirty public areas.We don’t respect other people’s time – being late in professional and personal lives is taken for granted.

This needs to change. But I don’t think it will happen easily. We should have had this civic discipline built-in to us when we were much younger.

Book Club: Books Discussed

A few of you had written in saying that I should share the books we discuss in our Book Club meetings. We had one a few years ago. Here are the books that people talked about:

  • Switch: by Chip and Dan Heath (on Change)
  • Other Colors: by  Orham Pamuk (Nobel Literature Prize winner)
  • The $12 million Stuffed Shark: by Don Thompson (on contemporary art)
  • Flow: by Mihaly Csikszentmihalyi
  • The Miracle: by Michael Schuman (on Asia’s economic rise)
  • The Checklist Manifesto: by Atul Gawande
  • Instead of Education: by John Holt

Blog Past: Extreme Competition

From a Tech Talk series written four years ago:

Today’s world looks very different from the vantage point of where I reside here in Mumbai, India. It is a world full of infinite opportunities as companies seek to leapfrog the legacy of decades of slow development. It is a world with youthful energy and money being unleashed as one navigates the new malls and restaurants coming up all over. It is a world where mobile phones connect people who never used a landline before—and perhaps will never use a desktop computer, opting for more advanced NetPCs and wireless devices of all manner.

It is also a world where the services juggernaut in urban India is complemented by the largely agricultural rural economy, where hundreds of millions still live in poverty. It’s a world where the old still exists and, at times, even dominates the new. The contrasts may be stark, but there is one thing that is ubiquitous in my homeland: Optimism! For the first time in living memory, there is a belief that tomorrow will be better than today. That perception alone can make all the difference. I see not just the Old India of yesterday, but the New India of tomorrow. It is an India that will be built in a world of extreme competition, and extreme opportunities—powered by transformations and disruptions.

Weekend Reading

This week’s links:

  • The Scary New Rich: From Newsweek. “The global middle class is more unstable and less liberal than we thought.”
  • Building a Better Teacher: from The New York Times Sunday Magazine. “When Doug Lemov conducted his own search for those magical ingredients, he noticed something about most successful teachers that he hadn’t expected to find: what looked like natural-born genius was often deliberate technique in disguise.”
  • Role of Data in the Mobile Future: by Tomi Ahonen. “Like Alan Moore says, this is why mobile phone user data is the ‘new black gold of the 21st century‘.”
  • Top 50 VC-backed Companies: from Wall Street Journal.
  • Reflections on India: by Sean Paul Kelley. Brutally frank. “I’ll start with what I think are India’s four major problems–the four most preventing India from becoming a developing nation.”

Favourite Websites – 2

Continuing with my list of favourite websites:

I visit this at once a week. It gives very good suggestions on business books. Its reviews expose you to new ideas in the business. The sheer diversity of thought that is out there makes it a fascinating read. (On India’s Development)

This is my colleague Atanu Dey’s blog. He is an economist and blogs on issues dealing with India’s development. He writes on what we have done wrong on the policy front, and what are the challenges that India faces on its path to development. He updates it frequently, and I check it about once a day.

This is a made-for-mobile public aggregator of breaking news on many topics (created by my company). I check this on my phone the first thing in the morning. The India-centric headlines aggregated from multiple sources in different topics (national news, business, tech, cricket) provide a very good overview of all the ‘new-new’ happenings.