Open
on scene two weeks ago. I am wading through about 150 business plans
that have come in from around the world for a competition organised
by IIT Mumbai. And I am struck by the number of plans in biotechnology.
In particular, the number in bio-informatics. Quite a few, when
summarised, come down to ''we want to do something in bio-informatics,
we're not sure what that is, and we don't know what to do, but boy,
it sure is cool right now, and every analyst predicts a huge future
for it, so could you just give us the money, hmmm?''
Cut to
a scene 10 days ago. I am at Nasscom in Bombay, and a young eager
soul comes up and asks me what I do-I mumble something about investing
and consulting, and I know what comes next. A look of heightened
interest, and that question: ''So what sectors do you think are
hot right now?'' She is followed by an investment banker who wants
the same answer. Then somebody from that doyenne of 'startup hotness',
Red Herring itself.
Flashback to about a year or so ago. I have
just passionately argued my case to a VC on why he should follow-on
fund a company I have an interest in. He smiles. Says that was a
good presentation. It looks like a good business, he is definitely
very interested. He wants to go ahead. He has just one little question.
Could I tell him which other companies are doing the same thing?
I pounce on that as an opening and excitedly say-nobody! We're the
only ones! We saw it first, and we're already making money off it!
Big mistake, I realise in an instant. A pall
of disappointment falls over his face. But really, Mahesh, he says,
my board will only accept a proposal when we can show others who
are already successful in the field. Or at least if there are others
in the same field who've already got VC investments. Could I not
just give him names of a few companies like mine so the formalities
could get started? I try arguing that venture investing is about
new companies and new fields. Fifty-four in a field of 53, but the
door has already slammed shut. The horse has bolted. We draw a blank.
Oh, I wonder why. Is it because a majority
of our VCs are bankers and fund managers, trained to be risk-averse?
Is it because our media craves writing about ''trends''-inventing
some for stories even when there are none? Or does it go back to
our education, our upbringing, where that spirit of risk-taking
is painstakingly and thoroughly squeezed out of all of us?
Perhaps it's our recent business history-recent,
as in the last 50 or so years. All Indian industry has predominantly
consisted of getting a licence to do something here that is already
being done somewhere else-be it petrochemicals, plastic tubing,
or pizzas. But the new wired world brings a different sort of playing
field. Licenses are fast vanishing along with borders-and a buyer
in Uzbekistan can just as easily buy from the United States as from
Ulhasnagar. Especially when the WTO shakes up the country, regardless
of Mr. Maran's antics.
Look at successful companies in the e-world
today. Who's the No. 2 auction site after eBay? The No. 4 portal
after Yahoo, msn, and AOL? Who cares? It's my thesis that the real
world will soon follow the electronic one in this regard. It won't
matter that you're the leading T-shirt producer in Trichur-you've
got to aim to be the best on Terra. You can't get complacent producing
scooters in Akurdi, because somebody from Akihabara will eat your
lunch-and may already have.
There may be room for three or four profitable
companies in any given sector. Globally. And magazines only call
something a sector when they see a handful reasonably active in
it. To me that means the others that follow are condemned to probable
failure. So I follow a simple rule-if the media calls something
a sector, it means it's already passé. Dead. I should look
elsewhere.
Your best bet is to be one of those first three
or four. Ignore people telling you that X sector is hot and Y is
rising. Stick to your uniqueness, and you may just make it to page
one.
Mahesh Murthy, an angel investor, heads
Passionfund. He earlier ran Channel V and, before that, helped launch
Yahoo! and Amazon at a Valley-based interactive marketing firm.
Reach him at Mahesh@passionfund.com.
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