Anand Lunia

12 Sep '18
Real business or real change: why start-up ecosystem may be at an inflection point
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Most of the funded companies have seen their fastest growth in recent years and have hit their targets

As if the news on Flipkart’s earth-shattering deal was not confusing enough for many in the start-up ecosystem, we now have not one, but two food-tech companies becoming unicorns. While Swiggy continuously defies analyst calls on the downfall of food-tech, Zomato has left its ‘product company’ pretensions and is raising large amounts of money for a rather full-stack play. Of course, they will burn all the capital raised because that’s what you do with capital. You use it to make a change; this one in eating habits.

This year has seen many new unicorns emerging: Swiggy, PolicyBazaar and Delhivery. Most of the funded companies have seen their fastest growth in recent years and have hit their targets. One of our portfolio companies, a consumer brand company, has met its 2019 monthly revenue target already. These are just the signs of the times we live in: We are finally entering a phase where India is functioning like a market of one-billion plus. One key reason for the bullishness is the use of smart marketing strategies by the companies rather than mere discounting. The pace of innovation at Zomato with Zomato Gold, Treats, Subscription, etc., or the pace at Ola with ‘Ola-Select’ Ola-pass, Ola-credit, etc., has been note-worthy. It is, however, surprising that the start-up ecosystem is still stuck with the notion that India is too small a market, or India has inefficient market and stupid investors.

Very few entrepreneurs have plans that can bring real change. Some can change lives of normal people, such as Ola and Flipkart, while some others can change how business is done such as Practo in healthcare business.


By and large, all venture capitalists end up funding such ‘change’, notwithstanding the risk and the ‘burn’.

Out of the remaining 99% entrepreneurs, some find ways to survive longer, while the rest shut shop and go back to jobs. In most cases, the survivors find a niche that does not have a winner-takes-all market dynamic. Yes, they are heroes compared to those who quit, but that’s all. Are they the inspiration for the next generation of entrepreneurs?

Analysts looking for a ray of hope hail these as ‘real entrepreneurs’, ‘real businesses’. And then we see a deluge of virtue signalling on all fora by praising those who break-even and deriding those who don’t.


Many investors also went into a shell and started talking about investing only in ‘real businesses’. Apparently, investing in packaged food products became the smartest thing to do. Yes, we all need our defensive bets in a turbulent market, and yes, some investors are really good in that space. But is a fund that invests in fake mayo and organic potato chips the only ‘real VC’ fund? Replace potato chips with a traditional NBFC, or yet another low-cost CRM software, if that helps.

The real change is coming from those who did not look for comfort zones, did not aim low and took all the possible risks in the pursuit of change. In most cases, these founders did not optimize for cushion of profit, or an early exit, but optimized for a change in behaviour in a rather large market.

Ola could have done well by limiting itself to the occasional cab user, but they went after not just the auto rickshaw user, they also went after the car owner as well as the bus traveller. After a hiatus of about two years, we are finally seeing founders starting straight out of campuses. Hopefully these founders make up their minds looking at data, not opinions.


There is always a tweet that can sum up your elaborate essay: Sequoia Capital managing director Mohit Bhatnagar tweeted: ‘Don’t look at the rear view mirror—India is at an inflection point’.



This post was written for livemint & appeared in the daily on 25-July-2018
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