Tag: startup

A fortress of regulations

Prasad AjinkyaLeave a comment

For the past 6 months or so, I have been involved in building up a fintech based business. You might have seen me post about real estate and how the young Indian workforce needs help to own a house. This organization is HomeCapital which provides home down payment assistance for first time home buyers. In fact, it’s India’s first home down payment program.

The product itself is pretty unique and involves a bit of financial engineering. It’s an unsecured personal loan made available to the home buyer at 0% interest. To know more feel free to drop by our office for a chat and a cuppa!

Business traction and growth

The business is doing well and therefore it has quickly attracted a good set of investors. As we are gearing up for a Series A run, one of the question that I am increasingly seeing in conversations is this –

What technology barriers to entry does your business have?

The first time I heard this question, I was stumped. It’s not as if the core product was a technology driven product. Given enough time and money, any competent person should be able to build any of the following systems –

  • Loan origination
  • Application management
  • Loan management
  • Customer Relationship Management

These are business support systems, and they will never be a technology differentiator. The simple reason being that there are too many service providers and SaaS products out there which provide alternatives for them.

Yes, I could always claim a better UX, a robust and secure system. However, these are fast becoming hygiene factors and thanks to cloud based solutions fast becoming a commodity.

How does this impact a relatively new industry?

Read on. It’s a good case of how the mayor of Paris has decided to take matters in her hands in order to stop an overcrowding of a young industry.

There are a dozen electric scooter companies operating in Paris right now. There are so many that the Mayor just announced that she will reduce that number to three with new rules for electric scooters in Paris.

via Low (No) Barriers To Entry — AVC

Artificial barriers are being constructed in order for three of the businesses to be sustainable. The young electric scooter industry is being protected in this case by Paris.

Very similar to this, the FinTech industry in India is relatively young, and the Government of India has taken an active interest in this. One of the instances where the banking and lending industry in India was protected was where RBI drastically changed the P2P startup landscape by limiting individual investors to 10 Lakh INR.

Most developing countries are taking this approach for multiple industries. A wait and watch approach with a beady eye on the innovations and changes ensures that most policies that are being passed are in situ with the economic environment.

Protecting lush markets

What the mayor has beautifully done is protect the largest european market of electric scooters. One reason for more than a dozen startups to spring up in this market was that it was fairly easy for someone to join a business, learn the ropes and then start on their own. However, what will happen if one of these fly by night operations were to suddenly go down under? Suddenly the entire market starts stumbling. Would you as a governing body allow this to happen?

No. I would rather have 3-4 stable operators providing this service as opposed to 12-15 firms. It’s regulation, yes. It’s against the natural laws of economy, yes. However, it is being done to protect the market. Over a period of time this triopoly will try creating a seller’s economy, however the regulation will ensure that no one player can generate super normal profits. This creates a pretty strong barrier. An impregnable fortress of regulations that cannot be overcome.

India and FinTech

If you now look at the FinTech industry in India, then there are many regulations. This is not so much a concern as much as the fact that these regulations keep evolving as the industry evolves.

Take the fact that since September 2018 the Aadhar based KYC norms have come to a standstill. It is only last week that the RBI has allowed for e-KYC to be re-initiated. Now through in a recent trend such as DeepFake in their, and now you have regulators in a dizzy. What the major players in banking and lending are doing is looking up to the regulator to take decisions … these decisons are being taken over a long period of time (approximately 6 months in the case of e-KYC).

That’s two business cycles. Enough time for an upstart to start-up. India is a lare country and we haven’t really started making fintech products for the 66% of the non-english speaking Indians. There is hope of growth there, and hence the regulation barriers will be slowly built in that area.

Is a barrier needed?

A barrier to entry is needed when the market becomes small and the players have to compete for transactions. However, what is unique about billion people economies such as India and China is that the sheer volume of users is so high that there is always room for more.

Even in such a space where every month there is a new lender or two cropping up, the Indian real estate and lending space still remains under utilized. Housing for all still remains a distinct dream, and until then, instead of building barriers, perhaps we might want to think about building bridges.

Stuttering Start-ups

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Stayzilla, an Airbnb for homestays in India, is closing down its service. The company was founded six years ago and had raised $34 million from investors, including a $20 million Series B in 2015. Now is the time to pause and “reboot” however, CEO and co-founder Yogendra Vasupal explained in a blog post. The company reached a…

via Stayzilla, India’s Airbnb for homestays, closes its service — TechCrunch

Another one bites the dust, as start-ups and investors start rethinking their approach to creating unicorns. One of the largest ones being discussed (and also a poster child for Indian e-commerce) is Snapdeal, who in a recent email announced a lay-off of more than 1000 employees.

So why do it in the first place?

Well, it was good while it lasted, and at least the team that started it knows that they gave it their best and things did not work out – due to whichever reasons … be it a bad business model or unbalanced promotions, or whatever.

Over the years, investors have also become much more skeptical on which businesses would they put their money in.

Invest smart!

One of the things that peeves me off is that the investor success stories which have 1000% gains and great exits had the investors not just invest money, but also time and efforts in different capacities.

As someone who works with multiple ideas, one of the key components that I myself do not have much is time. Money is a transient thing, sometimes you are floating in it, sometimes you do not have much to spare. However, as time goes by … one of the key assets that people should look at is the time required to nurture that unicorn.

If that time is not there, then its best that you don’t put in the money – thinking that some smart people will grow that money and give you handsome returns. Somewhere in that dynamic, people are forgetting to create sustainable value.

What is Sustainable Value?

Any transaction happens because of both the parties seeing a certain economic value in that transaction. A buyer gets a good or a service for a price that he can afford. A seller gets a reasonable price for goods/services that he/she are providing.

For a time being, the buyer or seller can extract more value from the market. This could work due to information asymmetry (or third degree arbitrage). However, as information is made available to every user and as customer discovery becomes faster and smoother, this arbitrage is being worn down.

So, how does sustainable value come from … simple, it comes from fair play, it comes from co-operation and knowing that co-operation is the winning strategy when it comes to game theory.

How many start-ups get the sustainable value creation point is something that I am most interested in.

 

Rise of the App Economy

Prasad AjinkyaLeave a comment

As a technical architect and a start-up enthusiast, part of my work is consulting organizations on how to go about implementing and monetizing their ideas. The past decade’s experience of working in this field, as well as having successfully built the product and development teams of two start-ups (which secured VC fundings) ensures that a lot of people are willing to share their ideas so that I can advise them on the implementation.

Continue reading “Rise of the App Economy” →

Food for Thought: Part Three

Prasad AjinkyaLeave a comment

Desperately trying to keep this series to a one a month affair, so that my blog does not look like a link farm … eep! I am even afraid to type that … but I have to say this .. I don’t want my blog to end up being a link farm. There I said it!!

Having said that, there were quite a few articles which I wanted to share this month!

The Top 10 Algorithms in the 20th Century

Computer.org put together this list of algorithms which had the greatest influence in the 20th century. Now, that’s a lot to think about … some of the algorithms which are mentioned, I had studied as a student! I would not say cutting edge, however, they did have a huge impact.

Funny, I did not see the Y2K or the Bubble Sort algorithm (which every green gilled programmer ends up using).

The Ultimate Guide to Leaving Comments On Blogs

I am a big fan of Darren Rowse and the words of actionable wisdom he shares on ProBlogger. Every blogger wants comments on his posts and although I haven’t had much comment love from you folks, I would still prefer genuine comments as opposed to spammy comments from Black Hat SEO agents.

In this post, ProBlogger teaches how to correctly post comments on popular blogs. It’s a great way to get noticed, start interacting with like minded people and get some trickle down traffic on your blog.

Why did Google make an ad for promoting “Search” in India where it has over 97% market share?

In India, Google has a huge 97% market share in search engines. That’s huge! If you have been an internet user in the past month or so, you would have noticed a slew of Ads on Google Search. Warming and touching this Ad reminds us of how we use search and how Google search is now accessible for mobiles.

I am not going to give the answer away, read this article on Medium!

Financing a Start-Up

Starting an organization is difficult. Especially when you have to arrange the financial support to aid your endeavour. This article on Edupristine helps us in finding different ways in which one can raise money to fund their venture.

This article is close to me for personal reasons as well .. not only have I worked with this organization, but also I am trying to start an organization and this article has come of use already!

Deep Learning 101

Step aside Big Data, there is a new buzzword in town … it’s Deep Learning!!

Yes, we already have Neural Networks, and Machine Learning … Deep Learning goes a step further. Do take some time and read this. It’s on the climbing slope of the Hype Cycle right now. If you can talk more about it, it will get you noticed Winking smile

Why I am not canceling class tomorrow

It is not often when students talk in awe of their teachers. I have been fortunate to have met such teachers … some of whom I have already mentioned in the past.

In this case, the university staff were on a strike, but the professor still went on to teach his class and emailed them in advance to come attend that lecture. It’s a heartfelt email where the professor brings the focus on the value one must place on education and how individuals should look at learning.

OLX is not only Badi Badi Baatein

Prasad AjinkyaLeave a comment

If you have missed out on the Badi Badi Baatein ad which has been running on the television for quite some time now, do check it out. I am embedding the ad below as well (I love the melody and the jingle … not to mention that sometimes I do identify with the procrastination tendencies as well!!)

OLX is the india classifieds of the internet. Where people go to the site for searching good deals, selling their stuff or even offering professional services.

Online Marketplace

The market for local online market places is heating up. The once free model of Craig’s List has suddenly seemed more viable and profitable by a lot of Indian players. However, do not worry, the local marketplace model is not only Badi Badi Baatein … there is huge money in this business.

How does this free model turn profitable?

Well, lead harvesting for one. Providing correct information to the people seeking it for another. Essentially creating a marketplace where otherwise there was only ignorance.

Where else would I go for finding a second hand slightly used Samsung Galaxy SIII for INR 20000?

As I said before there are multiple players in this game … but I feel of the lot, OLX is different.

OLX stands out

With a clean User Interface (UI), simpler forms and very easy user experience, I have found that OLX is the easiest to operate. Yes, I do use the site for promoting my companies offerings in the different targeted cities.

The good part about the OLX site is that when my ad goes beyond the listing due to inactivity, I get reminded via an email … clicking on the email automatically logs me in and lets me edit my listing. This way, I can fine tune my listing and hope to generate more business.

Success is not only defined on how well the website looks … if you have gone through any of the different and varied category/city listings on OLX, you will suddenly see a plethora of different listings … people wanting to purchase something or the other, people offering services … the perfect online souk.

Going ahead

In any market, there initially is a lot of people who are shouting and vending their wares … over a period of time as the market matures, the successful businesses buy out the lesser successful ones and the market quietens down. And from there a clear leader emerges. I won’t be too surprised if OLX is among those leaders of online local marketplaces in the future.

The fact that they have received their Series A funding simply goes to point out that people are willing to put their money where their mouth is and that this business is a profitable one.

Start-up? Head to Bangalore

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If you are forming a start-up or planning to start one, then Bangalore is one of the best places where you can set this up. A simple search for jobs in bangalore will give you a huge listing of career opportunities in this city. Bangalore is definitely a contender for being the Silicon Valley of India.

What makes this city such an attractive spot for start-ups?

  • Perfectly located: Bangalore is easily reachable by air, road, rail and water. So cargo freight companies have their major offices in this city. The recent upgrade of the airport also has scaled up the air traffic capacity of the city. Visitors of the city who have been travelling in Bangalore for the past decade would know what I am talking about.
  • IT Hub: Bangalore is one of the first IT mega cities in the country. What this means is better infrastructure as compared to the other cities, a tolerant government and a nurturing ecosystem of good quality labour. Even today, it is still known that to setup a tech-based startup, you need to be in Bangalore
  • Follow the Money: A lot (and I mean A LOT) of Venture capital Firms are based in Bangalore. Firms such as Accel, Sequoia, Argonaut, DFJ are all based out of Bangalore and generally try to see whether the organization they are investing in can shift their bases to this city.
  • Awesome Weather: Throughout the year there’s only one cool temperature in this city. It amazes me as to how this can be, but there you have it.

Obviously, with such great pros there have to be a few cons (the traffic being amongst the main ones there!). Hey, its not Valhalla that we are talking about right? A lot of great tech-based startups are here … Flipkart, Myntra to name a few.

So, forget other places such as Mumbai (too expensive), or Hyderabad (no good programmers). Head on to Bangalore and setup a base there!

Don’t hire dogs

Prasad Ajinkya6 Comments

Dog’s are a man’s best friend. They are considered as faithful, loyal and will always be there to lift you up. A dog will fetch things for you and do silly tricks such as sit, roll over, etc.

In different companies, there is one such breed of employees. Don’t get me wrong, I am not objectifying people, and this is an analogy, if anything. So this breed of employees … they behave in the exact manner like dogs.

They are generally taken from the street or from the wild, they do not have any formal skill set with them. It’s probably because of this reason that they are extremely loyal to the company. They are willing to go the extra distance and spend more time in the office working unrealistic deadlines and striving to satisfy their masters.

Obviously, who would want to say no to such employees! Right?

Well, wrong!! Change is the requirement of all organizations, especially the small ones and the ones which are growing at a fast pace. The problem now magnifies is because you can’t teach an old dog new tricks (yes, I wanted to work this cliché into this post!!). Any organization that is growing at a fast pace (60% – 100% growth YoY) would require such a huge influx of talent, that the loyal dog would now be forced to question his erstwhile unquestionable value in the company.

This is the risk, and it’s a huge one. Why is it a risk? Because at some point in the founder’s life, this loyal employee has done a favor and worked in ridiculous conditions. Now that the dog is tired and cannot do anything new, it has become a liability for the organization. Not only does it sadden the person, but the organization cannot put this figurative dog to sleep.

So if you are an entrepreneur or about to start your firm, do yourself a favor and do not hire dogs.

Addendum

Arjun Bakshi writes –

This phenomenon is not restricted to start-ups:-) Most “Big” organisations are not very different.
I feel HR / Organisations are lazy and want the easy way out. Have a template of qualifications and experience required to hire, short-list such people thru employee referrals and employment consultants and then hire them.
Why take the risk to hire people outside the template and take efforts on them?
In case you follow sports, the recent example of Jeremy Lin is a very good example of the malaise which also exists in our hiring practices. I am sending just one of the millions of articles on him. I think, Malcolm Gladwell also has a few artcles on a similar theme.