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Go West, Young Man And Other Tales From The Entrepreneurial Crypt

Washington is not a place to live in. The rents are high, the food is bad, the dust is disgusting and the morals are deplorable. Go West, young man, go West and grow up with the country. — Horace Greeley

The context maybe different, but the theme — that the fight is simply not worth it here, aim for the Western market — is a recurring one in the digital entrepreneurial space in India. The difficulties in starting up in India are well known and documented. The most recent notable one was Dev Khare‘s ‘The Silent Killers of Startup Growth‘.

The popular thesis seems to be that it is better not to build a product specifically aimed at the Indian market, but at the global one. This thesis is backed by the two kinds of proof – the first being the success story of Wingify and the second being stories like Linea, which, reportedly, has raised $4 million recently. An app like that would not stand any chance in India, no matter how well executed it may be.

The problem has different parts:

1. Lack of funding.

2. Lack of an existing market.

3. Lack of exits, M&A activity.

4. Product DNA that’s not tailored to the Indian audience.

Most of these factors actually compound each other, so the effect is rather drastic on both activity and perception of the market.

But, Hold That Thought

The story is not all of gloom and doom, as shown by the SAIF Partners’ story. The fund, apparently, made 4x returns on their first fund and are on course to do a 5x return on their second fund. Not bad for a country that seems to be a bad bet for entrepreneurs, eh?

The devil, though, in any story (positive and negative) is always in the details. SAIF’s portfolio is not limited to digital and it is spread across different domains. They also struck out with iStream, which recently shut shop and the prospects for the e-commerce plays are not too bright at the moment (Zovi maybe an exception due to their manufacturing background).

Even then, their willingness to make big bets across sectors and have more hits than misses in a market like ours is remarkable. And, having met the team couple of times, I have to say that they are very approachable and low key.

Let us be honest. The Indian story is not a straight forward one. As pointed out rightly by Archit Gupta on a Hacker News thread, success here can often be about having the right connections. A good product and a great team addressing a potentially huge market opportunity is absolutely no guarantee of success here. Connections, above everything else, matters.

Even when corruption and regulation are not determining factors, who you know in a company and how much you can influence them is more critical to closing a sale here often than having an excellent product. Unfortunately, it is also reality that we cannot choose to ignore if we have to grow in the market.

The way out of this morass is neither simple nor easy. There are some really excellent people in every part of the ecosystem who are good and who are looking to good, but they are nowhere close to being empowered to do it. For all of us who care enough, it is imperative to make all the changes we can make, even if it looks hopeless. It is even more important for those who are in influential positions to make this change.

It will take time, it will be hard, but we can break this wall down, one brick at  a time.

Please Don’t Stop The Music

And just like that Flipkart announced the demise of the Flyte, their digital music offering. And the numbers are pretty damning. 100K paying customers is not a great number, when you consider that even a single track purchase at Rs.5 can be considered as a paying customer and we don’t know the detailed breakup of the numbers.

The biggest downside of this development is that it will now set a sort of benchmark at 100K users for any paid digital content product in India, at a really low ARPU. This will have a pretty damning effect on anyone who is looking to get into this segment as Flipkart’s failure will loom large for a long time to come; at least until the fundamentals of the market changes.

While it is hard to figure out what exactly caused Flipkart to shut Flyte down within a year (sorry, no insider info), from the outside, it would seem that the company miscalculated the market size and costs. The product probably made sense two-years-ago when it was critical for the company to widen its base of offerings and topline; much has changed (drastically) since that time.

Even when you keep aside the licensing costs (the minimum guarantee mess), it still costs a lot to deliver the product. Going by NBW’s 2.5 million downloads/100K users number and Medianama’s Rs 9-12 ARPU, the revenue barely touches Rs. 1.5 crore. Another, slightly more liberal, calculation does not push the revenue over Rs. 3 crore for the same time period. Even the most optimistic scenario barely covers the licensing cost, in a segment rife with issues in hitting hyper growth.

None of this should have come as a surprise to the company, as these are well known facts about the digital goods market in India. What has changed is the outlook in the primary business Flipkart is in and the bleak prospects there. With their road ahead firmly set (grow massively big or die quick), they can’t afford to be in niches that won’t enable hyper growth. Flyte seems to be the first casualty of that.

And, oh, incidentally, if you think the Spotify clones are doing any better out here, you are mistaken. They have to pay per stream (at least the cases I know of), monetization is scant and some are already looking for more money to sustain themselves in the long run.

 


The Community Edition: LocalCircles, Tumblr, WordPress, Quora

Online communities predate the content publisher/consumer face of the internet by many years. The earliest communities were the famed bulletin board services and usenet groups and now they’re making a comeback. This post will take a look at some of them.

LocalCircles

Screen shot 2013-05-29 at 8.37.44 AMLocation-based social networks have a huge amount of unrealized potential and LocalCircles (in invite-only beta) is an attempt to do that in the Indian market. I am a big believer in this product segment and wanted to build a product in it, but wanting and building and two different things. In the U.S. market, a product called Nextdoor has been getting some good press of late and LocalCircles is pretty similar to that.

The big idea is very simple. If you can cover around 500 localities in 2-years and if each locality generates an average of  10000 page views per day (not entirely impossible if the product picks up) it will make for a neat half-a-million pageviews in a day. For a locality to be allowed to exist, it needs to have at least 20 members. You can easily average 200 members per locality once the engines get cranking and in the same 2-year period you can have 100000 registered users who are validated by location, interests and by the fellow circle members.

The monetization options are numerous: Classifieds, recommendations, deals — the list is endless. The true power in the product lies in the core of it — its exceptionally good quality of users.

Now that I have gushed enough about the positives, it is time to look at the problems. It all revolves around one little word called curation. Good communities, as a rule, need to be curated aggressively. Well, there are exceptions, which we’ll tackle later, but a good community is like a good garden. Everyone envies a good one, but few can manage the effort that goes into curating a good one.

The first step for a new product like LocalCircles is seeding/boostrapping individual communities. While the power of network effects is rather well-known, but brand new networks have little of that in their early days. To bootstrap 500 communities in the same manner will take a lot of effort and money. And once you get a locality going you have to then curate for the quality of content and member behaviour (any kind of arbitration/resolution in online communities is tedious). If you don’t set and enforce the rules early enough in the game, it can all unravel rather easily and once it does it is a genie that can’t be put back in the bottle.

Which can kind of work completely against what gets the valuation bells ringing rather loudly these days — the big ramp-up. I can only hope both the company and its investors are aiming for the long slow game than the short grow-like-mad-at-all-costs-and-be-valued-at-a-billion-USD game.

Tumblr

Speaking of curation and the impact it has on the quality/health of a community, I guess it is now OK to come out and speak about the acquisition of Tumblr by Yahoo!. Enough has been written about whether Marissa Mayer will do a Geocities Redux (you have to look up the Fred Wilson connection there. The Geocities deal kicked off his life in the big league.), so I’ll not go down that route. If Mayer had not snagged the deal (once the exclusive talk time was over, the bidding war would have started in earnest), the press and punditry would have roasted her alive and they are roasting her alive now that she’s done the deal. Ergo, the roasting is a given. No point paying much attention to it.

Anyway, coming back to curation, Tumblr is one of the most un-curated networks out there. Yet, the scale of the content flowing through it is so massive that someone had to step up and buy it (for the sake of convenience, I’ll ignore the terrible monetization issues they have and how much it costs to keep it going). In the world-before-Tumblr, posting someone else’s content on your page/site was a complete no-no. Tumblr popularized the reblogging concept, essentially making it easy to produce reams of good content on your page, even if you didn’t produce a single piece of your own.

Now, that sounds a lot like curation, does it not? Almost every active user on Tumblr acts as a curator of fine things in the topic of their liking. Which is why it is a massive hit with the adult content (*cough* porn) community. You have some of the best experts in any domain (there are a lot of them in the adult content niche, it would seem), picking out the best for you, in a format with nearly no ads, no crazy app requests or ‘real name’ issues. There’s only hours and hours and nearly endless goodness.

So, technically, there is curation on the Tumblr network. But it is a network of curators than the curated and therein lies a significant difference.

WordPress

Speaking of being different, we come to WordPress, which recently celebrated its 10th birthday. WordPress is an interesting product (yes, it is a product as the company who manages it is called Automattic). The open source product (as seen at WordPress.org) that is the foundation of the various products is available for everyone to install and use. The company also runs the biggest managed/hosted WordPress network on WordPress.com and it also has a VIP program.

Automattic has been profitable for a while now and they have been one of the quiet success stories of the content and community world. They are also quite a boring company (in a nice way, that is), in that they publish a lot of their stats, saving you all the guesswork, instead of taking the time-tested route of hammering out the ‘explosive-month-on-month-growth’ riff on any stage available. To do the 10-year celebration in style, they even got some money for the early investors and founders (around $50 million at a rumoured slightly-less-than-$1-billion-valuation’) in a secondary deal.

Over time, they have integrated various community aspects into the product (network/Buddypress) and have seeded a less-visible but massive developer community and ecosystem around the main product. There have also been less than spectacular succeses on the community front. Gravtar was an early starter in the identity provider space, but it never really grew into something big. Same is the issue with IntenseDebate, which has been completely eclipsed by Disqus (there goes off the Fred Wilson portfolio alert again).

Fortunately, the core products like WordPress.com and the VIP program continue to do well and will stay strong for years to come, keeping the quiet success story going for both the community around it and the owners and investors.

Quora

To end, I’ll take a quick look at the elephant in the room — Quora. I can’t but be intrigued by a product that is so polarizing on the Internet. The legion of people who used to love Quora and now hate it must be as big as the entire user base of Medium, which is the new pretty one in town. That said, Quora still has a lot of active users (reportedly, majority of them are the minority of Indians, who can write well, seeking refuge from the onslaught of the masses elsewhere) and vital signs seem to be good.

At $60-million raised in three-years (including a good bit of coin from the co-founder’s own pocket),  the company has enough money to last at least another couple of years, in which it will probably find a good suitor. One of the reasons why a lot of people walked off (including the rumoured sidelining of one of the cofounders) in a huff was the aggressive push towards increasing the user base and page views on the site. The hype cycle will play out through the next few years and if the money does not run out first, they will be acquired by one of the larger digital companies who will suddenly discover that they always had a latent desire ” to share and grow the world’s knowledge”.

Sounds much like a future quote from Marissa Mayer, does it not?


A Quick Micromax A116 Review, Some Things Android, Is DEN Going DTH?

On Android

In his post, Android Is Fading Into The Background—And That’s A Good Thing, Dan Rowinski says that Android’s become mature enough now to slowly fade into the background as the devices themselves take their place in the limelight, compared to the limitations of the operating system. Mobile operating systems and platforms represent some of the most opinionated reporting and fan base on the internet. So, a claim like Rowinski’s always trips my sensationalist filter and this one was no different.

The extremely polarized opinion on the mobile front always makes me wary of getting into any discussion regarding the domain. Every day, a large chunk of the world’s population use handheld devices of varying sizes, shapes, brands and prices in spite of whatever positivies or limitations we may find the platforms out there. The reality is that the data-on-by-default mode in handheld computing is a revolution has only begun and only the foolish would claim any sort of victory — be it for iOS or for Android.

Coming back to how much Android has matured, I find it hardly surprising. An ecosystem that tends to large variety of devices (unlike iOS) will always evolve slower and in a clumsier manner compared to iOS. If you look at how Android has developed since the time of the G1, it was always going to be a matter of  ‘when’ rather than ‘if’ when Android would eventually mature and stabilize. And when it reaches that stage, the impact it will be far wider and deeper than what Apple has accomplished in opening the floodgates of the ‘smarter’ devices. We are starting to see that ‘when’ materialize now.

For iOS, as Android matures, its own consistency and polish, which acted as a fair trade off to its major downsides (lack of intents, proper file system access) will increasingly find itself losing the initiative. It is one thing to set the agenda when you are practically the only game in town and a totally different thing to both defend and attack when there are other big players in town. Digital companies, products and platforms have limited windows to react and adapt in the 21st century. If you remain largely unchanged over anything more than a 2-year window, you are going to be in a lot of trouble.

Micromax A116

Those thoughts about Android bring us to the Micromax A116; otherwise known as the Canvas HD in the market. I happened to pick up this phone because my trusted roadwarrior — the Samsung Galaxy S — finally decided it has had enough abuse at my hands by letting the screen crack badly when I dropped it as I seem to unfailingly do every few days. The other option was to go the import route and get a Google Nexus 4, but the warranty situation on it made me pick this one as the temporary choice, while I wait for Google to officially release the device in India.

I already own a low-end Micromax Android phone (the A72) as my backup device, so I’m not a complete stranger to the mysterious ways of Micromax. That phone had a heavily modified version of Android (Gingerbread) and was never updated. While a lot of the changes were quite nice (compared to the travesty that is called Touchwiz on Samsung), it was still not very desirable compared to the stock Android experience. With that in mind, I expected the A116 to be not quite different, but I am extremely surprised by the outcome.

First of all, the phone is incredibly fast. It has a quad core processor and one GB of RAM. But we already knew that about the phone. What I was really surprised by was 1) the OS. It is quite close to stock Android. Yes, there is a bit of modification here and there, but it is nothing compared to what it was on the A72 and coming from a AOSP build of Jellybean on the SGS, I felt instantly at home. 2) The battery life is spectacular. Even with both SIMs on (one is a 3G SIM) and GPS on all the time, it easily lasted a day for me on a single charge. There is the downside that the battery also takes a long time to get to a full charge, but I can live with that a lot better compared to a battery that charges and drains quickly.

The significant downer is the camera. It is 8MP, as advertised, but the sensor is pretty mediocre and it produces mediocre photos. Thankfully, I don’t click a lot with my phone these days, so it is not a big problem for me.

Which brings us to the interesting angle on the price point of Android devices. When I picked up the A72, it cost me a good Rs. 7000. Phones that were in the similar spec used to cost close to Rs 14,000 a year before that. The A72 now retails close to Rs 5000. The A116 cost me less than Rs. 15000. Most of the quad core phones with that much RAM on it will still cost well in excess of Rs 25,000 even now. The point being, the quality of the Android experience is improving systematically across the price range, especially towards the lower end.

In two or three years we can’t make the distinction much between smartphones and feature phones as feature phones will be lower spec smart phones than the dumb phones we are used to these days.

DEN Networks

Why would a cable network company need over Rs. 870 crore in investments in one go? That’s the question that comes to mind If you look at the $110 million raised from Goldman Sachs and $50 million through a QIP by Den Networks Ltd. The obvious answer would seem that the company wants to get into the DTH game. The DTH license is not cheap by any means and add transponder costs, costs for the technology platform and setting up a proper sales/distribution/service network all will cost a lot of money. From that perspective, the money makes sense, especially if the company is still structured in a manner that keeps the Indian promoters above the 51% holding limit.

From the business side, DTH makes more sense than cable. Negotiating right of way in each state in India is one of the most horrible things you can get yourself into. Every big cable network has a local fixer who is there to handle this part alone and god help you if you don’t have the blessings of the local powers-to-be. Moreover, in rural India, DTH is the undisputed king. In 2012, at a place called Pang (on the Manali – Leh highway), which had little power or life beyond the camps for the tourist and the army TCP, we still found a small shop with a television set hooked up to a DTH set up. Rural India is now dotted with the little mushroom-like dishes and while mobile has been our loud revolution, DTH has been the quiet one.

It is no wonder that DEN would want a bite of that, especially as the competition is loaded with debt and still bleeding money. Of the others, both Tata Sky and Videocon D2H are said to be looking for an IPO in India this year. That, along with the government’s push towards digitization will mean that DEN, as an already listed entity, can stand to reap a good harvest both in the DTH marketplace and in the markets.