Why should an outsider perspective matter?
I tend to
believe that way too many people have taken Steve Jobs maxim, ‘customers cannot tell you what they need’
at its face-value and in the process probably haven’t realized fully that the
very user-experience
guidelines Apple Inc., so vigorously pursued, propagated to the developer
community made the tech-consumer an integral part of the technological
evolution & hence an “insider” for all practical purposes – After all
within six months of launching iPhone, Jobs recalled his earlier decree of ‘No
third-party apps on iPhone’ :-) - I rest my case here.
Life, tech & the metaphysics of a cyber-quest
The exabytes of sheer information thrown
up by an internet-query and the consequent collateral learning at times gives a
radically different perspective of the principal quest &/or changes the
very course of the search/ research.
That’s precisely what happened when
I set-out with an innocuous query ‘Life+Tech’ to check-on how the marriage of
life sciences & technology is working out as indicated by the quality of innovation
and the investor sentiment towards this emerging IT subset globally and, if India
is in-sync with these trends – I strayed off-course quite a bit soaking up some
non-serious gyan on gamification,
cross-application potential of game
mechanics to health & wellness, dallying a while with the first ever
‘drug discovery’ game, Syrum & eventually decided that I’d do good to first understand how the IT
& ITeS enterprise is poised in India & then go about speculating on
where it could go from here, towards life-tech or some other direction
altogether.
The quantitative & the qualitative sojourn
As I looked into the openly available,
mostly undifferentiated data** & the trends, I used the following
assumptions in order to get as close to reality as possible;
- Wherever the VC activity has been clubbed under PE,
I considered all early-stage & some growth-stage deals as essentially venture
deals
- Where I depended on individual alerts of certain
deals, I considered funding up to series-C as venture funding & series-D
too if that involved at least one VC
- No acquisitions, Mezzanine funding rounds have
been considered as Venture capital (which
of course wasn’t much)
- Since I was looking into IT sub-category trends
& the only categorization ‘Industry
Codes (VEIC)’ by NVCA is surprisingly devoid of some well-understood terms
such as “Cloud”, “Apps” etc., I decided to use my own simplistic terminology
that’s hopefully self-descriptive
**My primary source for the data was Yourstory.in
which derives its own info from Venture
Intelligence alerts & reports. In addition to this I have also used,
primarily for cross-verification of primary category figures, the MoneyTree
reports by PWC & NVCA from data provided by Thomson Reuters ……. phew
True to my enlightened detour,
the not-so-cursory analysis of the available information on IT & ITeS
related investments in India in 2012 drew an interesting picture;
- Commerce
sub-category (B2C e-commerce) hogged
the largest share of 45%
- Services
sub-categories (B2B BPO, Cloud, Edutech,
IT Services, Telephony) cornered second highest 22%
- Analytics
sub-categories (B2B Internet & Mobile
Advertising; web-analytics) that are focused on the increasingly crucial
data mining, analysis and consumer demographic profiling gathered 20%
- Product
sub-categories (B2B Mobile apps; PaaS; Software; Health-IT & Gaming) managed
only 13% share of investments, helped in a large measure by the Mobile Apps
category
From the above observations it
can be inferred that the investor sentiment in India is very strong towards Commerce, strong towards Services & Analytics and weak towards Products. This also could mean that the investment in IT & ITeS in India is driven more by the local than the global potential–while this statement may sound altruistic, the
statistics seem to support it;
It’s an irony that my initial
interest ‘Health-IT’ is very insignificant at 1% of funding – a cursory review
of the ‘mobile apps’ companies also doesn't indicate any healthcare component
being pursued – so much for my principal quest!
Takeaways for the investing universe, primarily for the VCs
There’s only as much space to jostle around on the e-com super express
- The e-commerce opportunity while looks tempting
is surely reaching the tipping point wherein differentiation & achieving of
critical mass is going to be a huge challenge
- Compounding this is the fact that the global biggies
like Amazon, eBay et al that could’ve offered a superior exit option by way of
an acquisition have started to get-in on their own (Junglee.com, ebay.in) –
banking on the relative ease of establishing a virtual enterprise
- It’s also apparent that the likes of Amazon are
now gearing up to ‘Walmartify’ their online shopping and go physical to enhance
user experience! – If not anything, this points out to the cyclical nature of
consumer preference of a buying experience & hence the caution one has to
execute in putting too many eggs in one basket.
The Quants will rule and later they won’t
& then again they would
- The monetization of analytics opportunity will
surely out-pace e-commerce & services given the eventuality of any business is to understand consumer & maximize the consumers buying impulses.
- Quite interestingly the innovation quality of
Indian companies in this domain seems to be pretty high – probably since
analytics combines Math & Jugaad, skills Indians inherently seem to possess.
- I’d also think it makes business sense for the
quant in consumer analytics context to be essentially an ‘insider’ & hence Indian analytics enterprise could
always showcase an edge, a value-add
- Eventually, while the ‘insider advantage could
work in favour of Indian analytics enterprise in the shorter term, the Math + Jugaad
+ Semantics combination could open the world to India in a big way, touch wood.
Hop onto the Gravy (app) train early on & dish out by the dime
- Mobile apps development is essentially a
platform (OS specific SDKs et al)
based innovation that enables small & Individual pools of expertise to
emerge quickly & thus very amenable to garage innovation
- While building of apps is innovation per se’, it
is more ‘applied innovation’ (owing to the afore mentioned platform
technologies) & hence India won’t necessarily face a
quality-of-innovation prejudice
- Added to this is the global trend of healthcare
going mobile progressively, there’s an open opportunity of cellular network
providers tying up with local app developers, for the service &
transactional ease they’d bring in.
- Apps are evolutionary products with a limited
shelf-life (before being reinvented in a
different version) & hence inherently man-power intensive. Given this
context & given the explosion of engineering education making available qualified
young (& economical) tech work-force that can think in English, India has
the potential to become the ‘China’ of mobile apps – if only the rough edges of
campus-to-corporate transition can be smoothened out sooner.
- Using this & some of the 'local' advantages i mentioned under Analytics, I'd think there's no reason why Indian enterprise shouldn't give an India flavor to its Gaming?, after all, all nationalities like to play by their own rules :-) - this would also expose the average indian youngster to the game mechanics that from whatever I read, is poised to dominate every tangible domain in the years to come.
- And finally, a domain where VCs can play
evangelists, stoke the fires of enterprise & seed the self-sustaining
revolution of mobile apps – all with minimal risk & funding :-)
And hey, is Mobile
Hardware IT too? – thought NVCA said so…
- Is it me or wasn't there really any investment
into the super accelerating mobile handset Indian enterprise in 2012? Unless
this is already reaching saturation which I seriously doubt, there’s still a
good open investment opportunity. But of course given the capital intensive nature
of these start-ups, the scope for venture funding may be low and only at very
early stages, but if successful this could turn into a multi-X return by
series-B funding itself.
After Thought:
What’s with financial analysts & their compulsive
fetish for quarterly reporting? – I’d agree quarterly trends do matter in
consumer markets, but I’m utterly confused about their utility in a long-decision-cycle
B2B environment
like investing – enlighten me folks, I’m all ears!
.jpg)
