Why The Y Combinator Model Does Not Work In India
Y Combinator exists in an entirely different environment from what we have in India. For any healthy VC/seed/angel funded start-up ecosystem to exist, it requires two things as must-haves. The first is the existence of reasonably sized exits at regular intervals via the IPO route or through the M&A route. The second is the existence of large enough markets to support at least two to three profitable players in any domain.
YC exists in an environment where the two conditions are well satisfied, leading to a situation where there is a considerable premium on a quicker access to funds (for the start-ups) and good talent/concepts (for the investors) where there is often an excess in supply on both sides of the table. India, on the other hand, has a real shortage on both fronts – good start-ups and good investors.
The main problem is that the Indian market for digital goods and services is tiny. In a non-existent market, neither product finesse nor pricing can make much of a difference. There is barely enough size in the digital domain to sustain large profitable companies. At best we see companies that are small and profitable or one market leader who is struggling to grow in its domain or diversify out of it.
In such a situation you can't get into the early-stage/start-up investment scene armed only with effort on your side. For the fight in underdeveloped markets the right gun is money and you need plenty of it. If you walk into it with effort and connections as the only weapons you won't go anywhere. Sustaining a first-mover disadvantage is a costly exercise in greenfield areas. If you don't have the money to sustain your portfolio companies, the effort alone won't save it. It is a finite non-scaleable factor.
In trying to sustain the number of portfolio companies mostly through effort than funding, the incubators/seed/angel investors won't be able to give the companies the time/effort required to grown them. Thus they actually reduce the ability/probability of the portfolio companies to succeed.
At the current market size I don't see the possibility of any of the smaller-scale funds being able to do a great deal of good. Their possible exits are so small that I can't imagine too many LPs being happy with the rate of return the GPs can bring to the table. If you invest in the region of ~10 lakh per company, the domain that you are investing into is also likely to be very small. Since we don't have well developed markets, it is not possible to start small into a big product.
That said, the parties who can play big in this – the VCs – are also increasingly moving away from their traditional roles and behaving more like PE funds. This is understandable since there are not enough big success stories in the market that can come close to the kind of rate of returns required by the VCs, thus they wind up investing in established companies than early stage companies or start-ups.
This is, obviously, not a healthy state of affairs. In fact it is quite regressive and it does not bode well for the country as a whole. Everyone can see the untapped opportunity, but the overall direction we are headed in is making it extremely unlikely that we will ever tap into it.
Read MoreDecline of Branding, Context And Death Of The Homepage
As we move further into a heavily aggregated, curated and crowd-sourced world of distribution for media, one challenge that the established players (in both digital and traditional) face is a loosening of grip in the context and branding related to the content they publish. In a world that existed before the advent of Twitter, Facebook and the aggregators like Techmeme, the sole point of distribution for publications was their own website. Briefly, there was a belief that RSS readers would change that, but it never picked up enough momentum to be ever called a tool that was used by the masses.
A common theme that I am hearing consistently from publishers of all sizes is the increasing volume of referral traffic from the new distribution channels. While this windfall in traffic is definitely is not a bad thing, it also points to a future where the concept of a homepage will gradually decline and your primary mode of reaching out to your audience will become something over which you don't have anything beyond a small degree of control.
Leveraging these new channels also mean that you are exposed to risks like fake profiles & accounts (seen in the case of the fake Twitter ID of BP) and change of terms of service that is one-sided, leaving you open to a significant loss traffic and revenue if you were to run afoul of the rules of the platform you are riding on. This also brings about a problem of a loss of branding and context when you are not a primary source for the information you publish.
Death of branding in such a situation happens in two ways:
1. The platforms enforce their own rules regarding appearance. Twitter, for instance, only allows you to put up a background image that can't be linked to anything else. Compare this with your regular home page. The difference is significant. In the matter of Facebook the difference is even more stark.
2. There is also the loss of form factor since most of these platforms allow you to access the data over their APIs, which further strips the content of any form of branding. You look and feel similar to twenty other accounts a user may follow. There is little difference between you and the “what is your favourite kink?” quiz.
Death of context happens when you get linked to contexts completely outside your control. In the pre-social world, linking was from the homepage/section page, to the story page, which was a completely controlled environment. In the current world, for a controversial topic or publication, there is always the chance that you get linked to something that has a “LOL” attached to it. With real time search results now being made a part of regular search results, the chances of these results erasing the original context is a major problem.
To get around these issues a two-pronged strategy is required:
1. Ensure that your readership/audience is engaged on all major platforms primarily from your own accounts. You need to own the conversation on the platform. This, though, is not for everyone and it can be major problem for smaller players in terms of cost and sustainability.
2. Capture the interaction of your regular audience on your own domain, thus providing a substantial value differentiation in what a member gets on the external platform and your own domain. When you find the people who interact and contribute consistently, reward them and incentivize others into doing the same.
In short, the new forms of content distribution are wonderful things, but do not grow it at the cost of your own domain by neglecting it. Build proper funneling strategies to measure engagement, retention and churn. If you value your own place in the pecking order, don't sign your death warrant by helping build a distributed iTunes store.
Read MoreGiving Back
This year I have supported three Open Source initiatives that I have probably used the most. Elgg, NeoOffice and Wikipedia have contributed greatly to my ability to earn a living, learn a lot more than what I would have otherwise ever known and build and express a lot of ideas and concepts. These are not major contributions and they have been made in a personal capacity, but I do intend to push it up a notch every year and once the company steadies itself I will institute a proper program that will identify more initiatives and contribute a lot more.
A lot of what we are able to do on the web these days is possible due to the work of a handful of people who have often worked for nothing in return. If some of the software that enables us were to be billed at the level that most shrink wrapped software is billed, the internet as we know it would not exist today. You can argue about the validity and feasibility of that model, but you can't argue that all of us have benefitted greatly from it. Even though most of the stalwarts who have put together these things have not demanded money as a must-have in return for what they have created, it is a good gesture to make any contribution that you can make.
If it is possible for you, do try to find one of those that you like and contribute in whatever capacity you can.
Read MoreNotes: September 23
Online Publishing
I have been watching the recent discussions on the existential crisis in media, aggregation and other related topics with interest. Not so long ago, I was part of the brigade whose primary responsibility was to publish content in various domains. And one thing I can say (this includes myself too) is that we really don't have much of a clue. Most of the current strategies can be roughly split into 1) Continue doing what has been done all the time and turn a blind eye to the elephant in the room 2) Try anything and everything, hope something sticks.
Everyone is constrained by the scale available in the publishing business, which means that even with a big money push, you can't flip it since there is a glass ceiling that you can't seem to break through. Even the cluster-of-verticals strategy is limited by cost. Just because content is abound does not mean that it is cheap to create, especially if you are focussed on quality. The numbers simply don't add up. What is then left is to explore brand new forms of advertising, which has shown some promise, but even that won't go too far before market saturation catches up with it.
The Instamedia story is pretty interesting on this front. If you take away the corporate speak, the company runs a set of vertical blogs and has a content publishing and monetization platform. But $10 million is still a pretty big round, which I think will compromise the company's approach to the business it is in. I know, there is the age-old wisdom about raising as much money when you can, but I do believe that the size of the round will create a lot of trouble for them. Businesses like Instamedia work only at a particular scale/burn rate. Mess around with the economics of it and you will see the model evaporate before you can spell the word.
Leadership
One lovely thing about the rags that cover the industry is that everyone is an expert in it. Companies are never built in a day, nor are they taken apart in a day. Both processes take periods of time that are much longer. In this context, I find all the rucks about whether Carol Bartz should be fired or retained to be quite funny. I can bet that 90% commenting with a great deal of expertise have never sat on the board of a company or been in a leadership position in a company that is even 1/1000th of Yahoo!'s scale.
I have no love lost for the big Y!. I find the company to be overstaffed, way too layered and stagnant. But, you need not always build a Twitter every year to to be a successful company and if the market valuation is the only benchmark you are going to use to see how successful a company is, I guess you would then term Microsoft as a pretty dismal player.
Read MoreSamsung Galaxy S, GTi9000
My trusted Nokia E71 sort of gave up on me about a month ago, which is never a great thing to happen while you are on the road. Since I was already on the lookout for a decent Android phone, I gave into the lure of extreme gadget lust and went for the latest Samsung Galaxy S GTi9000.
I was very skeptical about getting a touchscreen phone. I like buttons that I can feel and don't quite like the idea of tapping on a sheet of glass to type. It is just not my thing. A month on, I have grown used to typing on it. Swype has helped matters considerably, but the entire flick, pinch, tap routine is still a bit alien to me.
Android by itself is a major paradigm change for me. I am used to phones that do a few smart bits. Even though the E71 is a massive improvement on the earlier phones (you can watch videos, browse most parts of the net, use a Twitter client etc), Android is a world apart compared to that.
The first major change that stares you in the face is that being online and consuming data is not an add-on, but something that is at the core of the whole experience. Of course, it is very much possible to use Android without a data connection, but it is only less than half of what it is capable of when you don't use data on it.
The phone runs Eclair, which is Android 2.1, with update1 on it. The experience has been largely OK and feels more or less complete and consistent, but there is still room for a massive amount of improvement. And I am saying that without having used an iPhone in a while and I have not owned one either, ever.
The weakest point I feel in the whole Android game is not fragmentation. Apple has altered perceptions on this front a bit too far from reality. You can't control the entire ecosystem if you want massive scale. The “i” ecosystem is not about massive scale, it is a high margin play. Android is a different pony from that. So, if you are looking for the Apple experience on the Android, you are out of luck. If you are willing to put up with a few niggles here and there and a largely polished outcome, Android will do fine for you.
That said, the Android Market is one of the weakest links in the Android chain. It feels and works like having been designed and conceptualized by a 2-year-old. It really needs to be done better and I am surprised that Google has allowed it to languish like this. There is very much a lovely market opportunity for someone to start a “certified by xyz” marketplace, where every app is tested and rated. I would gladly pay for something like that and as Android takes on more market share, I can imagine a lot of others too would like that.
What I don't often understand are the constant flamewars between the Apple and Android fanatics. Both are phones/platforms that work well and have their respective strengths and weaknesses. The passion with which each of the groups go at each other really baffles me.
Read MoreOf Habits And Expectations
After being positively addicted to using Chromium for a while now, I decided to give something else a try the past week. I like switching browsers every now and then to see what I've missed out on and for some reason Chromium had become very slow on my machine, giving me another reason for the switch.
So I wound up giving Camnio a shot again and it felt a lot like going a decade back in terms of browsing experience. This is not a criticism of Camino – it is a lovely, fast, no frills browser. It is more a note on user behaviour and expectations.
When I first started using Chrome, I hated two things:
1. The manner in which newly opened tabs opened right next to current tab you are on.
2. The merging of the address bar and the search box into a single entity.
When I switched to Camino, these were the two things that I missed the most. Volte face at its best, I would say.
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