Hyper-excitement over start-ups

THE GOLDEN TAPS
The Inside Story of Hyper-Funded Indian Start-ups
Kashyap Deorah
Roli Books
248 pages; Rs 595

This book comprises a large number of entertainingly written true stories of how Indian youngsters, born mostly between 1980 and 1990, are building new Internet-based businesses with the help of global venture capital. Some of them are making a lot of money.

A few have made over a billion dollars. A billion means one thousand million - dollars, nor rupees. That's serious money.

The author's style is excited, breathless, staccato and occasionally incoherent as when a little boy comes running to tell his parents how he won a match. He calls himself a "serial entrepreneur". In this book he is almost hyper-ventilating over what's going on in India. But he realises only time will tell whether he is justified in his effervescence.

I read this book in two sittings of three hours each in one day. It is full of most fascinating accounts of what really goes on when money meets ideas and technology.

The author tells the story or stories of how technology is helping to convert good ideas into a lot of money. The Holy Grail, he says, is to become a "Unicorn".

A "Unicorn," in the language of successful start-ups, is a privately-held billion-dollar company. He says globally, three months ago, in September, there were 182 billion-dollar companies that had been founded after 2003.

Over a hundred were "Unicorns", i.e. privately held, two-thirds were in the US and around 30 per cent in China. In India, there are six or so.

That is the new measure of success, not deep learning and erudition in the Vedas.

Who are these guys?

It all started with ex-Indian Institute of Technology types who were not content with being engineers and employees. They wanted the excitement that was coming when risk capital was combined with technology, namely, the Internet.

They started a host of dotcom companies, the economic contribution of which was to cut out or reduce intermediation. Business became directly with the consumer and it didn't much matter whether the consumer was a person or a company.

The game was to start, make a point, scale up and go public when the time looked right. At first, all the action was in the US but then it began shift a little but to India where the "ecosystem," as Mr Deorah calls it, for such things was developing.

What were the elements of that ecosystem? Indian brains, subsidised engineering training, native entrepreneurship, foreign venture capitalists plus Manmohan Singh. Woya!

Yes, it might seem unbelievable now but Manmohan Singh, with his reform and business-friendly credentials, was an important part of it then. Now Narendra Modi has taken his place.

Dr Singh disappointed in the end because of his sullen boss. It remains to be seen how things pan out under Mr Modi.

What's going on?

Mr Deorah confesses he has no idea what's going on. "New funds were writing large cheques based on video calls and short visits to India without having an India-based fund manager who made decisions... The average age of entrepreneurs who were able to get funds and scale up their businesses fast had dropped by about 10 years... There is a sense of mystery about it all. Is it a bubble...?" and so on.

When he joined IIT-Bombay, he felt he was paid a compliment when a senior at the institute told him he was "an unintellectual bastard". He did start reading, then, but has some catching up to do.

What's going on now has been going on ever since Cristoforo Colombo in Italian or Cristóbal Colón in Spanish or Cristóvão Colombo in Portuguese was financed by the King of Spain to go look for wealth, mainly gold. That king was, as it were, the first venture capitalist.

There have been a few thousands after that. Most have fallen by the wayside but a few have hit the jackpot.

In most cases the trigger has been a technological innovation like the the invention of the magnetic compass, or the steam engine, or electricity, or penicillin and so on coinciding with a big moneybags looking for higher returns in spite of the inherent risk in new-fangled technologies.

Mr Deorah knows the answer to the question about what has happened this time. But he doesn't realise it.

In 2008, he says, two things happened that have changed the world: the collapse of Western finance and the launching of the first app by Apple. Both led to a massive disruption.

One had a massive negative impact, the other a positive one. Together they have changed the world.

Happily, this time India is in the game in India and not just Indians in the US.