Is indian vas, digital, commerce companies’ valuation a bubble waiting to burst?
The business of digital has its own crests and troughs. Post recession, digital startups in India have shown crests with the help of exponential ideas and superstrong execution. The digital space seems to be on a roller-coaster ride right now, particularly in the Indian markets. There have been investments upward of $100 million in just the last one month in digital start-ups, the most recent one being SMS Gupshup getting $10 million at almost $200 million plus valuation. Most of these have been just pure play investments in various digital startups/enterprises and this is apart from the major Disney-UTV and Google-Motorola deals. There are at least one or two investments in the Indian digital platforms, be they e-commerce driven, advertising-driven, mobile-driven, collaborative commerce-driven or social commerce-driven, almost every week. Take a look: SMS Gupshup has recently raised Rs 50 crore and is targeting Rs 100 crore revenue by March 2012. Motor Exchange, an online market for used vehicles, has raised $13 million in series C funding. Their vision – to become the largest platform for selling and buying of used vehicles. Indiatimes shopping supposedly is selling Rs 1 crore worth of goods online every day. Info Edge invested $3.5 million in 99labels. com. Yournextleap.com, a platform that provides career guidance, also got an investment from Nirvana Ventures. Bigshoebazaar got invested in by Narayana Murthy’s firm. Apparel, labels, shoes, designs, art, vehicles, matrimony, second matrimony, friends, career, second career, it looks like there is a digital solution available for every condition in life today. What’s interesting to know is, despite internet being such a huge monster, each of these platforms find their niche audience and are profitable, or if not profitable, at least get a share of the investor’s pie. I am forced to think if these are the business models that will rule the future and create billion dollar enterprises! As far as high interest of the VC’s and PE players is concerned, I understand well that they do not expect all the investee companies to succeed; even if their one bet works, it is good enough for them. But looking at the valuation of some of these companies in recent times, one starts to wonder if another digital bubble is blowing and around the corner? Most of these start-ups began during the recession either because of the pink slips or because of the whole push by the entrepreneurial networks christening entrepreneurship as the only way to go forward. Efforts in all the directions got focused on finding the next big idea, or the next big pain point of consumers that could be solved digitally. Hence the mushrooming of platforms selling the same Idea, with the same business models, but with an added twist. But are these all sustainable and scaleable? I am not sure. Digital, courtesy its nature, attracts the curiosity of masses to it for anything new, which is slightly decent. There is so much hoopla created about one thing that seems to work for a short time. And everyone follows. There were times when daily deal websites were pricey, today in a clutter, everyone is in the race to get one more consumer. The business models are similar and stakes are higher than returns. Most of the companies that have been funded, haven’t ramped up on revenues and even with their first round of funding haven’t delivered any serious returns. The ideas are not disruptive or exponential but are merely incremental and replace an old world chore and pain point by a digital chore and solution. With little to differentiate and offerings so similar, are the entrepreneurs even thinking about that big idea which will take them through? A major focus on entrepreneurship has especially youngsters getting into it, because of the thrust by entrepreneurial networks. While everyone is going gaga over small start-ups making big, there is very little data available on the success:failure ratio of these start-ups. There are many that have just come and gone, but no one talks about them. There are very few to actually talk about the hardships, challenges, cautions to be taken in order to tread this difficult path. Being a first generation entrepreneur, I know the tricks of the trade and understand it’s not as easy as it seems. Being in the advertising business for this long, I feel these start-ups, with substantial monies in their bank, lack the talent and expertise in marketing , lack evangelical sales people, who can get them business so that they can prove their concepts. What possibly could these entrepreneurs do or what can their investors make them do? Invest in top notch talent in business, strategy, sales and advertising from traditional media companies and reorient them and work in a collaborative fashion with these senior professionals to refine their offerings, customise their offerings, bring credibility to what they offer and also in some case use the brains of these talented and experienced professionals to reengineer what they have got. New age technology still needs the time-tested techniques of money. True and healthy growth will happen only if these new age digital entrepreneurs deal with and change in the mindsets of the whole industry; else they will end up playing in a small bubble which will not take long to burst!!! Feedback: abatra@exchange4media.com
Tags : Media Mantras