They say Customer is King. What the saying really means is – Money is king. In the sense, whoever pays money for your product/service is king. It is common knowledge that the Indian consumer is “Price sensitive”. Meaning us Indians do not pay for squat. Discounts, sales and free products/services are an essential growth hack for internet businesses in India. The end user is rarely the one that pays for a product/service. Effectively, product/service design is driven by immature founders fueled by billions of rupees of dumb capital. Enter Venture Capital (VC).

Dumb Venture Capital money drives strategic and business decisions in our country. A ton of venture capital money was thrown at Indian startups during the period between 2014-2016. Businesses and founders received capital that they did not necessarily deserve in the first place. As a result, there is an entire graveyard of dead Indian startups that did not survive 2016. This graveyard is less talked about because it ruins a VC Fund’s chances of raising new funds. News outlets that cover Indian startups publish what is provided to them (by Investors and Founders) by way of press releases. Major startup news that was published during the aforementioned period is funding news. You will also notice the Investors name in the first two or three words of the headline. That’s a press release from an Investor. VC’s often drive founders and businesses to scale rapidly. It’s all got to do with VC economics. Whether it will be adopted by the market is secondary. How else do you drive up valuation? There is no market yet? Create it. Spend on marketing. Scale! Scale! Scale! How do you scale when the user base is not large enough? We’ll cross that bridge when we get there.

And therein lies the problem. I believe Indian venture capital lacks empathy. The fact that founders lack ethics and spine is a different issue altogether. Have watched many a VC go on panel after panel talking about building for India. These VC’s, in my opinion, have no clue what India, beyond metros, really is. They have no clue how distribution works, how product design for India works. They have no clue how people interact with technology outside city limits or even how much those people earn a month. There is not an iota of an understanding on India. I’m in no way claiming that I know all the answers to the above. Not a chance. But I’m learning, I’m observing. VC’s are usually city dudes that vacay in the US, Europe or Australia. Seeing what they see in the west and copy-pasting business models for India. Salaries for most Indian VC’s starting from the analysts are close to twice as much as a starting salary for any other job. Even in cities. Sure, Indian cities contribute the bulk of India’s consumption but ask any lending company where a bulk of their borrower requests come from and you’ll know where the volume really is. Out of this cursory understanding, VC’s and startup news agencies have concocted the term India and Bharat to differentiate between the two. For the uninitiated, India equals Large Value, Small volume (think Metro/Tier I cities). Bharat is Large Volume, Small Value (think every other city than Metro/Tier I cities). I hereby state on record: I hate these terms of differentiation i.e. India and Bharat. Build for one India. Scale for one India. Below I elaborate more on why I believe VC’s lack empathy.

Venture Capitalists Cannot Relate with the India outside Metros:

Most venture capital funds are based out of cities with access to great talent, technologies and products. I believe their understanding of end user application is limited to how people in those cities use these products. Business models are rarely evaluated for use beyond city limits. Sure enough, most businesses may not have any use beyond city limits nor would those geographies be targets for the startups. There are only 4 Metro and Tier 1 cities in the country: Mumbai, Delhi, Bangalore, Kolkata. How then does one expect to scale? Because measuring consumption patterns beyond metros is tough, to say the least, it is assumed that metro cities drive consumption. More often than not, that is not the case. Moreover, people in Tier 2, 3 and beyond barely earn much a month. A declared salary of INR 40,000 a month is far fetched. Legacies of farm land and agricultural incomes are what’s paying for consumption. Their livelihoods are impacted accordingly. People are aspirational though.

VC’s are unable relate with the the Balance Sheet of the average Indian Household: 

Earning a large salary is good. Most people should. Unfortunately, 95% of employed Indians don’t. ~300 Million Indians live below the poverty line. Wages are meager. VC’s don’t even know a person in their circle that earns below ~INR 25,000 a month. An average household has four members with one bread earning member. The whole household survives on that monthly income level. Understanding such household assets and liabilities is a far cry. Insurance penetration is low, therefore, major risks aren’t covered resulting in increased, high-cost, informal borrowing. Assets are largely held in physical form. liabilities are unsecured and informal. They cannot even think about aspirations just yet. They’re merely trying to make ends meet. Entrepreneurs will find it tough to build a large business (in terms of revenue) when 95% of the country’s population lives like this.

Concept of India and Bharat

I hate this concept with a lot of passion. I proactively hate people (VC’s, Investment Bankers, India Stack people among others) that bring it up in their panel discussions. India and Bharat are the same. Not different. Geographies are different, languages are different, cultures are different. Everything else is the same. We all think alike, we have the same aspirations, we all seek convenience, we all want to improve our employment prospects, we all want higher income, we all want an improved quality of life. This concept of India and Bharat is just some marketing speil used by people that don’t understand Indian households. I believe it’s just a way to cover up failed investments of the past and reinvent new marketing jargon. The VC’s that use it in media these days are just trying to trick people into believing this concept is God sent, accept it as gospel from now on. VC’s are very savvy at changing the narrative to hide facts. Reminds me of a certain ruling government.

Technologies aping the west

This is another reason why I believe VC’s have no empathy for Indians. Indians and people of the west have different experiences and interact with products differently. We are at completely different times in history in terms of development. Sure, we’re leapfrogging, but that still requires contextualising products for Indians. Copy-Pasting products from the west for Indians is just stupid. VC’s are typically US returns that have seen some technologies become incredible successes in the west and believe India should have that. Sure, India should have those products but not implemented in the same way with same user experience and same user interface. Indians are coming online for the first time. We are not a primarily English speaking country, let alone having to type (write) in English. We need to build technology products that have the same user experience to their offline counterparts but removing all the inefficiencies. To think of it, one of the reasons things get forwarded a lot on WhatsApp is Videos, pictures and pre-written news pieces. There’s not a lot of actual typed out conversations. Think about this

I’ve ranted enough. Honestly, could go on a lot more. But these are my main bones of contention. The way venture capital has been getting away with random investments in the country has irritated me a lot. This rash investment thesis has had a lot of side effects as I have illustrated above. In no way do I claim to be better than any of the others. I’m learning as well.

Throughout 2018, I’ve seen things change, slowly but steadily. I’m hopeful that the next few years will truly foster Indian entrepreneurship. We’ve just begun a long and exciting journey as one Entrepreneurial India.




Leave a Reply