Sramana Mitra: We have a lot of adoption over the years in India. We’ve been very active in the Indian ecosystem. A lot of the early work in India was concept arbitrage from American ideas. That’s still true. There’s a lot of that going on.
There are new ideas coming out that leverage some of the uniqueness of the Indian market as well. I imagine that the same thing is happening in Europe now. That same kind of high-velocity concept arbitrate is happening in Europe as well.
Hussein Kanji: There’s an infamous company called Rocket Internet, which is originally German. Their entire investment thesis is to take an idea from the US and copy it. They were very successful. Because they were so successful, they caught the attention of the next-generation American companies and some of those founders didn’t want to get their business models replicated.
The next one that they tried to do was Airbnb. What Airbnb did was hired a bunch of ex-Rocket people and decided to scale globally before someone else could copy that. As a result, that went away. For the last few years, they have mostly been doing this copycat business in the rest of the world. It’s not a great investment strategy.
Sramana Mitra: Harder to build and harder to scale.
Hussein Kanji: The friction in the market is much more significant. It’s a tougher business. The message in Europe is because the original American business have gone more global from day one, it’s harder for people to copy. There was a wave. Maybe in the first year of our fund, there were a lot of people who were trying to do copycat businesses. That’s no longer in favor. Even Deliveroo.
The Rocket guys decided to clone that business. Deliveroo got very aggressive in scaling internationally and went to Hong Kong, Singapore, and Dubai much quicker. In many ways, the Rocket guys did a service to the leading companies in the space because they raised the competition game, which meant everyone else had to raise the bar. If you’re capable of raising the bar, you tended to go global much faster. It’s out of favor in Europe. That was definitely true maybe five years ago.
Sramana Mitra: How do you process the current investment climate where capital is moving further and further upstream? We are in the era of much larger funds. The biggest of those is the SoftBank fund which has come into the market like a tsunami.
It’s a trend. A lot of the established venture funds are raising very big funds. How does a seed investor mitigate the Series A gap and play in this kind of a market where the desire or the requirements of the Series A investors almost feel like Series B or Series C types of requirements?
Hussein Kanji: Europe has chronically been an under-funded economy when it comes to technology investing. These global trends don’t always apply in the same respect in Europe as they do in the US. Even India, I would argue, has more money available for technology companies than Europe does.