The Disconnect Between Modi and Me

modi-digital-indiaYesterday, India’s Prime Minister Narendra Modi (@narendramodi) visited ground zero for the home of many unicorns – Silicon Valley. Modi hosted a Digital India dinner to show that India wants to roll out the red carpet for companies to invest in India. Modi is an articulate salesman and its just want India needs. Someone to get out there, cold call, visit countries and get them excited about India and it’s 1.3 billion people.

When I used to live in the US, a colleague of mine at Cisco Systems would always tell me – never confuse selling with installing. In his eyes, they were two distinct activities handled by different teams. The selling was done by the sales guy and the installing was done by someone else. Of course, you really need to make sure the entire process works well or they may not buy again.

Since Modi assumed the office in May 2014 he has been busy trying to handle both sides of the equation. Traveling all over the planet in Air India One selling the vision of India and getting companies to sign on the dotted line for foreign direct investments (FDI). In India he has been battling the Congress party to get many of the needed reforms in place such as the land acquisition act and GST (Good and Services Tax).

For the uninitiated the GST bill will unify the tax code and shifts the power from the States to the Central Government. Currently, each State collects various taxes if you manufacture products and if you move goods from one state to another, it’s like moving it to another country. With GST, the Central Government handles the taxation piece and goods can freely move from state to state, which would be the logical thing to do. Of course, this creates an issue because the guys on the ground that used to get bribes to move the paperwork more quickly are effectively cut from the action.

There are many rules and regulations that need to be passed in order to get India moving in the right direction. Another example is if you are trying to open a restaurant in Bombay, you need over 40 licenses in place to be compliant. My favorite is you need a phonographic license to play music in your restaurant. You can imagine dealing with over 40 departments for running a restaurant will definitely lead to some policy violations and those representatives are all to happy to show up asking for a bribe…welcome to India.

I’ve talked to many people that run manufacturing facilities and they all say the same thing, the Make In India initiative is a joke. The disconnect is Modi is absolutely selling the vision of India but the implementation of policies to operate in India is still stuck in neutral. Fix that.

 

Scale or Fail?

think-bigEvery startup idea that is sketched on the back of a napkin or talked about after 5 beers has the same eventual goal – world domination. If you don’t think big or scale to take over the universe, you suck. And when you talk to VCs their response is the same – they are not looking for small wins, they want their fund to be the next Accel Fund IX (which invested in Facebook in 2005). The Accel Fund IX is reported to be one of the most profitable VC investment vehicles in history.

If a startup fails along the way that is okay, because to get to scale you need to put everything on the line. I see more and more startups in India buying into this way of thinking. They are scaling up but their core offering is suffering. They rather be in 10 cities with a mediocre offering, then in 3 cities with a superb value proportion (yes, I just threw in a term VCs love to use at least twice in a conversation). What is painful to see, is startups that fail because of decisions from external forces – extremely vocal angel investors, over bearing VCs or a board member.

However, there is a 3rd option – organic growth with real revenues and amazing profit margins. The poster child for this option is the project management SaaS product called Basecamp. Some may call this option a lifestyle business. If that means you can throw down $4 million dollars for a one-off Pagani Zonda supercar, then sign me up. (David Heinemeier Hansson is a partner at Basecamp who reportedly paid that much for the Zonda.)

Usually, the 3rd option starts to appear once all the hype around a hot sector dies down and investors start to look at real business metrics. Not cocktail party metrics like unicorn tears, GMV, app installs or number of MBAs employed. It’s about tracking how much money is coming in, talking to customers to add more value (read: charge more), understanding how your sales funnel is working, etc… As they say, whatever it takes to make the cash register ring.

Of course, the 3rd option is not sexy enough for the press or cocktail party conversations. But, in the long run it is viable and many people have gone down that road – it’s just that you don’t read about them on TechCrunch or hear about them.