Indian Startups are Moving Beyond Valuations to Create India-suited Businesses says this Investor
Pankaj Joshi believes the second phase will see a lot of new businesses getting funded, those that will actually address problems that exist in India and not just try to bring a problem that has been solved in another country and try to copy-paste that solution in India while the problem may not really exist
The EB5 program has been growing popularly in India in the last few years. When Pankaj Joshi started EB5 in India in 2013, people had not really heard of it. Today it is being used given the constraints faced on account of H1B visas in the US.
EB5 is an investment immigration program to the United States where a family that invests half a million dollars gets Green Cards for the investor, spouse and all the unmarried children under the age of 21 at the time of application.
The way the EB5 visa program is an enabler is that those who end up completing their education in the United States do not have to wait to clock a job. They already enjoy a Green Card and that helps them in exploring entrepreneurship.
"Families want to secure green cards for their children who are going to the US for undergraduation and graduation studies. They want their children free from any visa issues not just restricting to the jobs in America but also being able to become entrepreneurs in America," Joshi tells Entrepreneur India.
Pankaj Joshi oversees Nysa EB-5's operations in India and as country manager handles the firm's in-country marketing strategy, sales, human resources and training.
Prior to joining the Nysa EB-5 team in 2012, he worked for several years as Managing Director of Nysa Consultancy Services, a boutique investment and management advisory firm serving high-net-worth families and small- to medium-sized businesses.
Upon further conversation, he gave some insight into how he views the start-up ecosystem of India.
Indian Start-ups Moving Beyond Valuations to Creating Real Businesses
Joshi thinks in the last five years, the aim of most entrepreneurs who started their new company in India was to raise money and create valuations.
"Is your business actually delivering the value to someone who will pay premium for it? And by premium I don't mean that will they mean full price for it because right now Indian start-ups are all working on some kind of discounting model. So it's very easy to say – okay, here is something which you can buy from somewhere else for 100 rupees, I will give it to you for 80 rupees. The point is – that's not really a business. None of these companies have turned profitable in anyway. They are not even breaking on operational base. So that has to change," says Joshi.
He thinks businesses cannot be created for the purpose of having valuation because that is going to go away one day. "That is a bubble; you are literally creating a bubble and hoping that it will never burst. But any bubble can burst which is what we are seeing today in the Indian e-commerce space. So, the Indian entrepreneur first needs to identify that they are really addressing a pain point," says Joshi.
He feels Indian start-ups are now past this biggest challenge of chasing valuations and not really chasing business models; primarily not really chasing the Indian models considering Indians take time to accept formats hence leading to delays in building an actual workable business.
He is confident going forward, India is going to see its second phase of Indian entrepreneurship and the capital will start becoming available from Indian investors.
"There are lot of Indian family offices that are now looking at investing into start-ups or investing into new areas, which I think is a good space to be in and good capital to have because these are people who understand the Indian business environment and the way India does business," says Joshi.
He believes this second phase will see a lot of new businesses getting funded, those that will actually address problems that exist in India and not just try to bring a problem that has been solved in another country and try to copy-paste that solution in India while the problem may not really exist.
Advice to Startups – An Investor Perspective
Joshi advises start-ups to take money only from an investor who is ready to sit on their side of the table.
According to Joshi, somebody who comes and sits behind you and backs you should be a start-up's pick because the entrepreneur is the risk taker. He/she is the one who has everything to do and if they are curtailed in the ability to take that risk, the business will never reach the frontiers it can because somebody needs to push the boundary.
He believes it is the entrepreneur who pushes the boundary and not the financer. "So take money from the people who give you the freedom to actually do the business," says Joshi.
Joshi also cautions against taking investment inappropriately. "Don't over take money because if you take too much money you won't know how to spend it and you will waste it. So it's always better to be capital starved in the beginning and really run it like a bootstrapped company even if you have the money because it is very easy to spend the money but very difficult to earn it back," says Joshi.