I recall watching The Truth About Cats and Dogs in the late 90s. The plot revolved around a plain-looking radio show host, Abby (played by Janeane Garofalo), and her attractive friend Noelle (Uma Thurman). The self-doubt about her appearance makes Abby send Noelle, pretending to be Abby, on a blind date with a caller to Abby’s show.

While the twists and turns in the movie were largely predictable, Abby’s insecurities, and their causes, stayed with me all these years. I’m reminded of that plot by events that have unfolded in the Indian start-up scene lately.

It has turned out to be a feast or famine situation. On the one hand, we have a set of businesses that are able to raise gazillion dollars every few months—at progressively higher valuations.
One hears, and is witness to, these scaled and sought-after businesses being offered valuations that frequently double from a prior round just a few months earlier.
The money raised, as it happens, is twice as well. New hedge funds are being attracted to the India story every day. But this piece is not about the businesses that have seemingly arrived; enough newsprint has been devoted to that already. It is about the impact that gush of money has on the remaining entrepreneurs.
One sees good companies, built painstakingly over the years, finding it as hard as earlier to raise their next round of financing.
To us, the root cause seems that these businesses are not in sought-after sectors such as e-commerce, mobile or Internet.
With a few notable exceptions, this would be true of most businesses that serve other businesses (B2B) and some non-sexy (for whatever reason) customer-facing (B2C) enterprises. There are many such entrepreneurs we meet as part of our daily beat. This quite naturally leads to self-doubt in the form of: “What more do I need to do?”; “Why a different set of standards for us?”; “How come the deep technology solution I have built counts for so little?”; “Why is capital efficiency important just for us?”, and so on.
It is heartbreaking to try and rationalize this chasm to the passionate, hard-working entrepreneurs running these companies. In other words, the Indian start-up ecosystem’s very own 1%-99% dilemma.
To the entrepreneurs on the 99% side of the divide I will point to the old running adage—run your own race. To continue that analogy, most of these are at the 10km mark, or less, in a marathon. There’s a long way to go, and initial bursts of speed (even rocket speed, no pun intended) count for little. But it is worthwhile to harbour no doubt that they will be rewarded if they keep at it—the Gita, anyone?
To the 1%, they hardly need my advice. Some of the new enterprises more than deserve to be there. Humility is a great virtue. It’s best to be well-prepared—the music will inevitably stop.
As for my fellow venture capitalists, and not-so-fellow hedgies, an earnest request to look beyond the obvious. The next winners are as likely, if not more, to emerge from the 99%. Robert Frost’s “…took the one less travelled by..” comes to mind.
I will readily acknowledge that there is a dedicated cache of B2B investors; it’s just that in a beauty-lies-in-the-eye-of-the-beholder world, it helps to have more beholders.
Irrespective of the scenario, it is great times for the ecosystem ahead. Who, even a year back, could have imagined a seven-year-old Indian company will be valued at over $10 billion?
Valuations aside, we at Inventus observe genuine momentum on the ground.
Parag Dhol, a venture investor for 18 years, is managing director of Inventus Advisors India.
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