An Investor’s Observations on Investing and Company Building in an Emerging Market: India
As a technology venture capitalist, I provide funds to help companies reach their next evolutionary level more quickly, efficiently, and successfully than without my cash. My mandate is to also offer non-cash benefit and support that, one might argue, is even more critical than cash to speed ahead of milestones, competitors, and expectations.
In the course of my work, I have had the opportunity to invest in my home market, the United States, and in international and emerging markets including the BRICs (Brazil, Russia, India, China). I’ve also held various operational roles in some of these markets. While working in these places I’ve discovered, unsurprisingly, that the nature of business and entrepreneurship differ significantly from region to region. Sometimes these differences lead to great confusion, sometimes to great competitive advantage. Of the markets I’ve invested in, I seem to always get asked about the highly visible BRIC market of India, where I spent several years as a private equity and venture capital investor. So highlighted here are a few themes that may be of interest to those investing in or doing business on the Indian subcontinent, or thinking about it.
One key theme that crops up repeatedly is the ability of the Indian entrepreneur to build a company on limited resources. Getting more mileage out of the same resources seems to be an Indian talent. This is not simply due to pure frugality (which is an accusation I’ve heard but is hard to believe if one has experienced some Indian weddings or Indian hospitality). Nor is it due to goods and services being less expensive in India versus other regions (because on a relative basis this is not necessarily true). This phenomenon has to do with the very DNA of the populace and to a degree cuts across stratifications of class and wealth.
Generally, Indians think lean; they are orientated to do a lot with little. The understanding of this trait is reflected as a general bias in the Indian investment community which expects Indian entrepreneurs to bootstrap to a milestone or revenue target—whereas it is equally well understood that an American counterpart would need to raise a round to get to the same goal. This mentality also extends to the personal sphere. I recently met with an Indian student attending an MBA program here in Boston who confided that Americans had advised him to budget a horrifying amount for two years; he’s doing it on 40 percent less and says he hasn’t missed out on a thing.
Adjustment is another idea that runs deep in the Indian psyche. The visitor to India is sure to be asked to “adjust” to (admittedly sometimes inane) situations. In fact, adjusting is the only way to survive in India. Ultimately one comes to understand this is how a nation of one billion souls—often vastly different from one another in the physical, economic, mental, and spiritual spheres, and with different ambitions—co-exist without a major civil war. Adjustment is a key characteristic of how businesses are built and run, too. Entrepreneurs who suddenly face a threat to cash flow immediately institute all sorts controls, standard and imaginative, to conserve and extend cash runways indefinitely.
Imaginative and unapologetic cost cutting are modus operandi and occur in cities and rural villages, amongst the educated and illiterate, the rich and poor. In one real example, an Indian CEO … Next Page »