Sramana Mitra: It is also an evolution. This was not the case some time back. Startups had a very hard time attracting talent. That has changed. It’s become sexy and cool to work for startups in India. That’s a very good development.
Ashish Gupta: You’re absolutely right. Sexy is the word. In fact, I recently wrote an article giving some assurance to the people who are not in startups. Unlike the Valley where somebody who’s not working in startups is looked upon as a gargoyle, one doesn’t need to start worrying about that phenomenon. You don’t necessarily want people to become entrepreneurs just because it’s sexy. It exacts too high a price from everybody concerned.
Sramana Mitra: What is your current investment thesis? We got a little assessment of what’s happening today.
A couple of points to kick off that discussion, the e-commerce market is very frothy. Compared to the size of the Indian e-commerce market, the amount of money that is flowing into that segment is completely off-the-whack.
On the cloud side, we’ve seen some very interesting companies including global plays. We have a bunch in our portfolio. Other companies like Druva has also broken out very nicely. InMobi is probably the first billion-dollar unicorn out of India. There is activity. Where are you seeing the opportunities?
Ashish Gupta: Our investment hypothesis was in two buckets. One was looking at India from a domestic market perspective because the Indian enterprise does not spend too much money. We are looking at domestic plays that are driven from a consumer perspective. We are looking at global plays that are enterprise-focused because India has a fairly deep understanding of technology products thanks to development offices of all kinds of companies like Cisco, NetApp, and Mcafee. Everybody has product management being done out of their engineering.
Our thesis was global enterprise from India and domestic consumer from India. This is the bulk of our thesis. That is continuing to be fairly attractive. If we dig deeper, mobile first in my view is something where you will start seeing global consumers come out of India also. That is because mobile is the dominant way that the Indian consumer accesses the net.
As a result, the Indian entrepreneur is thinking of things that are only mobile-centric and actually further ahead than several other parts of the world including the US. The US entrepreneur will still think of both the desktop and mobile when they build applications. The Indian entrepreneur only thinks of mobile. As a result, you’re seeing some interesting companies come out of India. For example, Zomato which is a Yelp competitor in the rest of the world but not in the US. They will very soon be in the US.
Sramana Mitra: I’ve covered Zomato. It’s a highly overvalued company.
Ashish Gupta: Absolutely. If you look at product, in the markets where both Yelp and Zomato have gone in, Zomato is winning that game.
Sramana Mitra: This is a sector that I think the business model is fundamentally unattractive both for Yelp and Zomato. That’s a category that I personally I don’t like.
Ashish Gupta: We’ll see how it plays out. The company is close to profitability. Part of it is because a lot of the inside sales get driven out of India which is also what you’re seeing play out in the enterprise sales piece. The jury is still out on some of the pieces that you mentioned.
Is the valuation out of whack? A bunch of people would argue yes. I happen to be one of the crowd that does believe valuation is out of whack. Is the value proposition out of whack?
Sramana Mitra: The value proposition is fine but not everything that has a good value proposition has a good business model.
Ashish Gupta: We’ll probably disagree on this one. Time will tell. If we agreed on everything, it would not be a very interesting conversation. If you look at those kinds of plays which are mobile first, we have a company called MoEngage in our portfolio which is going against Urban Airship and Kahuna. Where it competes, it actually wins. It doesn’t compete in as many places because the company has to figure out its sales, which is one of the interesting challenges for companies coming out of India.
When you come out of India, how do you sell in those places where you need direct touch? How do you sell when you need inside sales is much better understood. When you need feet on the street, the jury is completely out on whether Indian companies will figure out its feet-on-the-street sales. In my view, it’s an absolute work in progress.
That includes several other companies that we take very seriously. Druva, for example. Whether they will get the feet-on-the-street model to succeed is a work in progress. Of course, my best wishes are with the entrepreneurs but it’ll be presumptuous to say that the battle is won.