MARCH 17, 2002
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Stanley Fischer Unplugged
He has the rare distinction of having advised through the half-a-dozen economic crises of the 90s. But now economist Stanley Fischer is calling it quits at the International Monetary Fund, and joining Citicorp as Vice Chairman. In India recently, Fischer spoke on IMF, India, and the global recession.
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Who Cares About Second-Bests?
True entrepreneurs are well advised to avoid the 'hot sector' of the moment.

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?''

  Stand Up And Survive
 
  Going By The Book  
  The Zero-Tolerance Zone  

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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