Do you think entrepreneurship will suffer during the slowdown?
Two things will happen. Firstly, the availability of capital will reduce. At this point now many funds will get raised. New capital will not come. Secondly, as the markets have collapsed, everybody’s view of exit pricing will also reduce.
Hence, valuations will suffer. Because of that one suspect, I hope that it does not happen, entrepreneurship itself will suffer. After the 2001 bubble burst, it took four to five years for things to return to normal. Depending on what the recovery time for this mishap is, it will either take this much longer or it will return in a hurry. Angels will be careful with their money because their wealth has depleted. So all this will have an impact.
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| Pravin Gandhi Partner, Seedfund |
On the slowdown, I have a feeling that next year is definitely gone. My hope is 2011 is when you will begin to see the rebounding of the Indian economy. With America and other countries throwing so much money into this, it will take two years for it to trickle down to the consumers. If that happens, we are back in business.
Has there been a change in your investment strategy?
We are still a long-term investor because we invest in the early stages. Our view is that what would have taken four years may now take five years. One has to learn to deal with it. A lot depends upon when the markets return to normal. If the markets don’t come back for another 10 years, then I don’t have any strategy, and nor will anyone else. May be some valuation change may happen. You can perhaps incentivize the entrepreneur more depending on performance. So you pay him/her more if they are performing despite the environment. That kind of tweaking may happen. If an investor has money, he should go and invest, but at the same time, not make a stupid investment.
Some of the sectors where the outlook is bright despite slowdown?
One sector that stands out is healthcare because it doesn’t get affected by slowdown. Second is the Internet. When it is the physical costs that people want to save, it will divert them more to doing things online. So the Internet and mobile are also good sectors to look at. Also because the 3G spectrum is being rolled out, it would provide opportunities for value-added services.
What advice do you have for entrepreneurs who are ready with their business plans?
If you have a good idea and you believe that it should be funded, then you should go look for funding. In the worst case somebody will say no. But why wait if you believe in your idea? However, people should learn to listen. If, suppose, five VCs say that it can’t be funded, don’t blame the VCs; instead, go and review the idea. If you have a retail venture plan, clearly this is not the right time to start one. So look for something on cost savings. See if you can come up with a solution to the real problem.
For those who started last year, I would say do not try to expand right now, but try to stay on course. Conserve your cash and try to break even. All that goes down comes up. You should be smart enough to believe that you will ride out the storm. If you are good at what you do, somebody will find you out and give you business. I would not invest lot of money today in going out and finding customers.
This interview was done on the sidelines of TiE summit 2008, Bengaluru
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written by Ivycat, March 18, 2011
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