Gyaan Sutra On entrepreneurship and technology

Rajesh Barnwal, from Aloo Techie.com has a really long post on the topic ‘Internet Businesses : Is the Boom real this time. The post lists the points which were discussed at the recent Venture Intelligence organized round table event called ‘Internet & Mobile Connect’ on venture capital investing in the internet-based services and the mobile value added services sectors.

Though the complete post is worth reading, I will mention a few points here, which I think are worth discussing.

Avnish Bajaj added, during 1999-2000 the perception was ahead of reality. But things have changed. In 1999-2000 there were about 3-4 million internet users. That number has now grown to about 25-35 million. Earlier, it was required an investment of $8-9 million to build an internet business but today that can be done with an investment of $2 million.

The point that I don’t understand here is that what would an Indian company do with an initial funding on $2 million. As far as the latest rates go, it translates to 880 crores. If you assume that it is to be used up over a period of two years without making any profit, it would amount to Rs 1,20,548 per DAY. Now what kind of an internet business needs to spend that much money daily? You need to remember that Mr. Bajaj is talking about the average money spend, not the maximum.

Considering the kind of startups that are coming up these days, I would not consider that this would be money well spent. I can understand that one might require $50-100k over the first one year, and may something like $500k the next, if all goes well, but $2 mill is just obscene.

Ashwin Damera is dead right when he says,

“If you define boom in the terms of number of people going online or number of companies entering the online space, it’s a boom. But if you consider how many companies are earning enough money to sustain their business, it’s not a boom.

Murugavel Janakiraman, offers a very logical advice when he asks the budding entrepreneurs to try and stop themselves from coming in the ‘me-too’ category. Text, Audio and Video are done, over, so stop trying to make it again.

Then comes, Eric Young, from Canaan Partners, who makes an interesting quotation. He says that you should not look at the VC’s for the next big idea. Of course you shouldn’t, but what kind of dumb-ass asks the VC for the money as well as the idea. Why that hell would you call yourself an entrepreneur if your VC gave you both of them.

Murugavel Janakiraman again comes up to give the most promising advice of the day, he says “Believe in yourself, even if VCs don’t back your ideas. If you believe in what you are doing VC will come,” he said, adding, “I built a business without any funding.” I just seem to love this guy.

Anyways, as Seth Godin rightly says, there are very few business problems that money can solve. So don’t look for a VC unless you really need one. And in case you haven’t heard, read this about how VCs can go around screwing you. It’s worse than a job, believe me.

All in all, I think it is this VC business which is the real bubble, once that goes away (read a few bankrupt VC’s), the internet industry would be back on track.