This easy access to cash also encouraged the wrong type of thinking. It makes entrepreneurs think exits. This is exactly what happened in 2000. The focus for many becomes on the paper valuations rather than building profitable businesses. One big difference from 2000 is that the sheer capital gone into this sector will now make for some big winners. There are real users, there is real demand, there are real transactions.
So, many will fail. But one need not worry about that. This is natural for any new category to be created. In India, perhaps the bubble burst has come too fast. But the positive outcome is that eCommerce will see the emergence of a few solid companies and the digital space will see the emergence of many entrepreneurs who will have learnt a lot about building businesses over the past two years.
The key now is to let failure happen and then fund the entrepreneurs to build new businesses. Some basic business practices must never be forgotten. There is a time for investing in businesses and customer acquisition, and there is a time for focusing on profitability. Good investors and entrepreneurs will know when to make the switch.
Continued tomorrow.
