Rajan
Anandan is Google India managing director, but he is also one of the
country's most prolific angel investors and a passionate startup mentor.
He has invested in over 50 startups and some have become very
successful.
Experts around the world are talking about a startup valuation bubble. Some even compare this to the dotcom era.
I disagree. In the dotcom era, valuations ran up in the public and private markets with even companies with no revenues going public and valued rather highly. The companies we talk about now are all growing with large numbers of users, have real consumer traction, and real sources of revenues. The VCs and hedge funds are willing to give these companies a valuation in private markets that was earlier possible only in public markets. Today, valuations are close to what we are used to seeing in public markets. That is making some people think that there is a valuation bubble.
Many startups are years away from profitability. And money is no longer as easily available. Do you think valuations will moderate?
Valuations are not that high and they depend on what investors are looking at. They depend on what they see they can get from these companies, how the competitors are doing.Valuation is also dependent on the market these companies are in and how it is growing. I think these are still early days. Some of these companies have almost $10 billion in gross merchandise value (GMV) and they will grow much larger. We are in an entirely different landscape than we were seven to eight years ago when there were no app stores. This is a new business model and the old rules or metrics no longer apply. We can't predict such markets.
Do you think sectors like food and taxis have seen M&As a bit too early, considering the markets were just two to three years old?
If you look at a large space, like taxi aggregation, you can only have two or three big players. It is difficult to have more than three and some of these are winner-takes-it-all kind of markets. Sometimes what happens is, early in the evolution, a large number of companies pop up and get funded and it is difficult to say who the winner will likely be. Some where be tween 18 and 36 months, we will have a clearer picture with some of them executing better. In the taxi market, you had TaxiForSure, Ola, Uber, Meru and several other smaller local aggregators. When one of them fails to raise the next round of funding, the founders will have to take a call on whether they are more likely to be successful.
Will early consolidation kill value and competition?
See, there is life beyond acquisition as well. Most acquisitions are share swaps and not fully cash transactions. If you look at some of the biggest e-commerce deals, the investors in the acquired company have gained a lot as valuation has zoomed after the deal. It is a win-win situation and you should not be blinded by the value at the time of acquisition. The TaxiForSure and Myntra shareholders will all continue to make money long after being sold to Ola and Flipkart. Consolidation is good. It is like everything else that happens around us in the evolution of life. It is the survival of the fittest, the fastest and the most fundable.
There is a lot of action in the ad-tech space. With Google and Facebook increasingly taking market share, how do you see the future of this segment for smaller players?
Ad-tech is changing dramatically. How ads on the internet are bought and sold is changing and becoming very tech intensive. I still see a massive potential for India to build a lot of ad-tech startups. What we are actually seeing is more and more fragmentation and startups can provide very compelling solutions. Over the next 12-24 months, global sentiments will be driven by some publicly listed ad-tech companies not doing well. But sentiments are also like growth cycles. If you can build a solution that gives superior value to advertisers, you will do well.
We see a lot of companies moving to US or Singapore.
It is unfortunate but it is the ease of doing business for these companies that makes them move. We need to make it easier to start a company, run one and more importantly, raise venture money, all of which have to be easier in the country than outside. All these things are known to the government and they have been trying to address some of these.
You have recently invested in a startup in the genomic research sector.As an angel investor, what are your favourite areas?
I have been a believer in the B2B sector. If you look at Silicon Valley, there is an equal focus on B2B and B2C. In India, 90% of the focus is on B2C. I'm very bullish on startups whose services are cloud-based big data or software-as-a-service.
Some of the companies I invested in, like Capillary Technologies, are valued at Rs 1,000 crore. Such companies will find it difficult to get traction and attract clients initially since most of them are based in western markets.
Experts around the world are talking about a startup valuation bubble. Some even compare this to the dotcom era.
I disagree. In the dotcom era, valuations ran up in the public and private markets with even companies with no revenues going public and valued rather highly. The companies we talk about now are all growing with large numbers of users, have real consumer traction, and real sources of revenues. The VCs and hedge funds are willing to give these companies a valuation in private markets that was earlier possible only in public markets. Today, valuations are close to what we are used to seeing in public markets. That is making some people think that there is a valuation bubble.
Many startups are years away from profitability. And money is no longer as easily available. Do you think valuations will moderate?
Valuations are not that high and they depend on what investors are looking at. They depend on what they see they can get from these companies, how the competitors are doing.Valuation is also dependent on the market these companies are in and how it is growing. I think these are still early days. Some of these companies have almost $10 billion in gross merchandise value (GMV) and they will grow much larger. We are in an entirely different landscape than we were seven to eight years ago when there were no app stores. This is a new business model and the old rules or metrics no longer apply. We can't predict such markets.
Do you think sectors like food and taxis have seen M&As a bit too early, considering the markets were just two to three years old?
If you look at a large space, like taxi aggregation, you can only have two or three big players. It is difficult to have more than three and some of these are winner-takes-it-all kind of markets. Sometimes what happens is, early in the evolution, a large number of companies pop up and get funded and it is difficult to say who the winner will likely be. Some where be tween 18 and 36 months, we will have a clearer picture with some of them executing better. In the taxi market, you had TaxiForSure, Ola, Uber, Meru and several other smaller local aggregators. When one of them fails to raise the next round of funding, the founders will have to take a call on whether they are more likely to be successful.
Will early consolidation kill value and competition?
See, there is life beyond acquisition as well. Most acquisitions are share swaps and not fully cash transactions. If you look at some of the biggest e-commerce deals, the investors in the acquired company have gained a lot as valuation has zoomed after the deal. It is a win-win situation and you should not be blinded by the value at the time of acquisition. The TaxiForSure and Myntra shareholders will all continue to make money long after being sold to Ola and Flipkart. Consolidation is good. It is like everything else that happens around us in the evolution of life. It is the survival of the fittest, the fastest and the most fundable.
There is a lot of action in the ad-tech space. With Google and Facebook increasingly taking market share, how do you see the future of this segment for smaller players?
Ad-tech is changing dramatically. How ads on the internet are bought and sold is changing and becoming very tech intensive. I still see a massive potential for India to build a lot of ad-tech startups. What we are actually seeing is more and more fragmentation and startups can provide very compelling solutions. Over the next 12-24 months, global sentiments will be driven by some publicly listed ad-tech companies not doing well. But sentiments are also like growth cycles. If you can build a solution that gives superior value to advertisers, you will do well.
We see a lot of companies moving to US or Singapore.
It is unfortunate but it is the ease of doing business for these companies that makes them move. We need to make it easier to start a company, run one and more importantly, raise venture money, all of which have to be easier in the country than outside. All these things are known to the government and they have been trying to address some of these.
You have recently invested in a startup in the genomic research sector.As an angel investor, what are your favourite areas?
I have been a believer in the B2B sector. If you look at Silicon Valley, there is an equal focus on B2B and B2C. In India, 90% of the focus is on B2C. I'm very bullish on startups whose services are cloud-based big data or software-as-a-service.
Some of the companies I invested in, like Capillary Technologies, are valued at Rs 1,000 crore. Such companies will find it difficult to get traction and attract clients initially since most of them are based in western markets.
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