India’s moment in the Internet world has finally arrived. Zomato’s IPO and its heady valuation is going to be the start of a flurry of listings in the coming months. Investment banks are racing to use estimates many years hence (one even went up to 2031) to justify the current stock prices. What the right valuation and price should be for Internet companies will be hotly debated topics. What’s clear is that the new-age companies, powered by tech, have plenty of headroom for growth. The key to sustaining investor expectations will be crafting a path to profitability. Spends on new customer acquisition can drive growth but only customer retention and maximising revenue from each of them will ensure sustained profits.
A word of caution about India’s Internet numbers was sounded recently by The Ken’s Nutgraf. It estimated India’s annual active Internet customers to be at 70 million, split thus: 10 million at the highest level (digital natives), 20 million occasional shoppers, and 40 million entry shoppers.
Of course, the companies getting listed and the VCs and PEs investing hundreds of millions weekly into India’s digital ecosystem have a different view. With hundreds of millions of future customers, young and eager to spend, a new world beckons. The disposable income of Indians is increasing with economic growth, the number of digital users is increasing, and the options and ease of digital spending is growing. Everything not digital is getting disrupted – from payments to banks, from education to health, from shopping to entertainment. A new future beckons, and investors bet on big winners. And there will be many. Along with B2B SaaS, India’s digital ecosystem offers the next trillion dollar opportunity.
The golden age of Indian entrepreneurs has begun. This is now irreversible. Investor funds by the hundreds of millions are creating unicorns aplenty. With acquisitions and IPOs, this nominal wealth is getting converted into real money. This will find its way to new entrepreneurs as startup capital. Many will fail, but that’s the nature of the game. The winners will be big and that drives dreams for everyone else. These entrepreneurs will help make a better India – solving problems created through the decades by India’s government with its licence-permit-quota-raj. Risk capital was always a challenge in India and that is now getting solved. As long as India’s government doesn’t mess it up (and they cannot make things better) and let the markets work, India’s slow steps to prosperity will start. The initial beneficiaries will be those at the top of the pyramid, but it will percolate down to all in the decade to come. As the startup and digital boom is showing, what Indians need is economic freedom. The only risk to this new future is someone in government wanting to help!