Tag Archives: flipkart

If India Overcomes Its Inferiority Complex

Walmart’s acquisition of Flipkart has created shockwaves in India, with the realization that the vast majority of its $16 billion price will go to foreign investors, namely Tiger Global, SoftBank, Naspers and Accel Partners. Now Indian investors are kicking themselves for missing out on the largest e-commerce exit ever. But they have no one to blame but themselves: Flipkart tried hard to raise money locally but was ridiculed and turned away, leaving only the foreign giants to rescue it.

This pattern will repeat itself until India’s investors realize that the best opportunities are not in Silicon Valley but at home. Frankly, I sympathize with Flipkart founders Sachin and Binny Bansal because I, too, have seen the Indian inferiority complex at work.

In a talk I gave at INK India in 2014, I predicted that a billion Indians would gain internet connectivity through their smartphones within a few years, and that this would begin to transform the country. Tens of thousands of startups building health sensors, robots, drones and commerce and infrastructure tools and hundreds of thousands of application writers addressing local problems could solve not only India’s problems but those of the world.

See also: India’s Coming of Age in Digital  

I also tried educating the executives of Wipro and Infosys. When they told me of the huge funds they were setting up to invest in Silicon Valley, I warned them that no one there cared for their companies or investments; at best, they would be offered bottom-of-the-barrel deals and be left chasing rainbows. And that is largely what has happened.

I live in Silicon Valley and am a professor, not an investor. I did, however, get involved with one Indian startup, because it had world-changing potential yet was dying on the vine. Indian investors ridiculed the notion that something of such magnitude could emerge from India; all they did was waste the time of the founders.

The company, HealthCubed, develops a compact medical-grade device that provides more than 40 measures and tests, including blood pressure, electrocardiography, blood oxygenation, heart-rate variability, blood sugar, blood hemoglobin and urine protein and is able to diagnose diseases such as HIV AIDS, syphilis, dengue fever and malaria. These are the same tests that labs and hospitals provide — but for less than one hundredth of their cost in the U.S.

Simply having the lab results immediately constitutes a huge benefit in a rural health clinic. Additionally, the data can be immediately uploaded to the cloud, allowing for rapid evaluation by a remote physician. And analysis of the bounty of data thus collected will enable fresh insights into many conditions.

I rarely have a problem getting Indian executives and VCs to return my emails. Yet when I wrote to them about HealthCubed, most didn’t even respond. Ironically, the investors who did respond said the valuation of the company was too high — without even asking what it was.

So I gave up on India and advised HeathCubed CEO Ramanan Laxminarayan to register the company in Delaware and move the intellectual property to the U.S. Then I invested my savings in the company and joined the board. James Doty, MD, a world-renowned neurosurgeon and entrepreneur who founded Stanford University’s Center for Compassion and Altruism Research and Education, did the same. He found the technology to be more advanced and more effective than anything he had ever seen.

Acumen, a New York–based impact investment fund, also invested in the company, as did American moguls Ray Dalio, Ross Perot Jr, Bridget Koch and actress Sela Ward and her VC husband Howard Sherman. One of Silicon Valley’s most respected investors, Raju Reddy, and an alumnus group from BITS Pilani also readily supported the company.

The product is now helping hundreds of thousands of villagers in more than a hundred districts of four states of India, thanks to the Aditya Birla Group. The world’s largest NGO, BRAC, is using it to improve health and create employment in hundreds of villages in Bangladesh. Tens of thousands of Rohingya refugees in United Nations clinics outside the borders of Myammar are being diagnosed with it. And it is now set to roll out in Ghana, Senegal and Nigeria.

See also: What India Can Teach Silicon Valley  

I expect that, by the end of 2019, HealthCubed will have done more than 100 million diagnostic tests; and that eventually products such as this will disrupt the U.S. healthcare system itself and will quickly spread throughout the Americas — and that India’s VCs will have another cause for regret.

That’s not to say Indian entrepreneurs shouldn’t take some of the blame. As Silicon Valley’s Hemant Kanakia said to me in an email: “Part of the problem I have observed while being an investor in Indian startups in the last six years is that Indian entrepreneurs have a short-term outlook; they want to make money and live the lifestyle of the rich. Sachin Bansal had no ambition like founders of China’s Tencent or Baidu have — of conquering the world.”

Yet even Silicon Valley was like this when its ecosystem was in its infancy. I’ll bet that as a generation of founders such as the Bansals achieves great success, they, too, will develop grand ambitions.

India’s Coming of Age in Digital

Walmart’s acquisition of Flipkart demonstrates both Indian e-commerce’s coming of age and a repetition of history.

U.S. giants will spend billions in India because they see huge opportunities, and this will produce a short-term boon for Indian consumers. When the dust settles, though, prices will rise and consumer choices will become more limited than they had been. Foreign companies will mine data and manipulate consumer preferences. They will have once again colonized India’s retail industry.

Protectionism for physical goods and services is usually a bad thing, as it limits the incentive to innovate and evolve, stifling a country’s competitiveness and productivity. India’s protected domestic companies became lethargic, offered substandard products and services at high prices, and hobbled India’s economy.

In a digital economy, though, things are very different. The value resides in the ideas, which spread instantaneously via the internet. Entrepreneurs in one country can easily learn of the innovations and business models of another country and duplicate them.

As core technologies advance, they become faster, smaller and cheaper — and accessible to everyone, everywhere. Startups constantly emerge, putting established players out of business. So, speed and execution are key to business survival and competitiveness.

Valuable competition and innovation can arise from within the domestic economy itself, without having to invite foreign companies to the table.

Technology-based industries, such as retail, electronics and distribution, that require large capital investments handicap the small players, because money provides an unfair advantage to the larger ones.

See also: Copy and Steal: the Silicon Valley Way  

The latter can use capital to put emerging competitors out of business — or to acquire them. It is what U.S. technology giants do as a matter of course.

Amazon, for example, has been losing money, or earning razor-thin margins, for more than two decades. But because it was gaining market share and killing off its brick-and-mortar competition, investors rewarded it with a high stock price.

With this inflated capitalization, Amazon raised money at below-market interest rates and used it to increase its market share. It also acquired dozens of competitors — just as it tried to do with Flipkart.

Having become the dominant player in the U.S. e-commerce industry, Amazon has its eye on India. A company that it left in the dust, Walmart, is desperate not to also lose the Indian market. Both are doing whatever they must to own Indian retail and then split the spoils between them.

That is why controls are desperately needed on this kind of capital dumping. And such controls won’t reduce competition or throttle innovation. As they did in China, they will stimulate competition and, through that, innovation.

Chinese technology companies are now among the most valuable and innovative in the world. In addition to having a valuation that rivals Facebook’s, Tencent’s WeChat e-commerce platform is far more advanced than any rival in the West.

Baidu is building highly advanced artificial intelligence (AI) technologies as well as self-driving cars. And DJI (Dà-Jia ng Innovations) has become a global leader in drone technologies. Had China not imposed controls, these companies may not have survived at all.

It is probably too late to save Indian e-commerce from modern-day East India Company-style colonization. But there are many other industries in which Indian startups can still lead the world.

See also: Too Much Tech Is Ruining Lives

With the exponentially accelerating advances occurring in technologies such as sensors, AI, robotics, medicine and 3D printing, practically every industry is about to be disrupted, and there are opportunities for Indian entrepreneurs to create solutions that benefit India and the rest of the world.

India urgently needs to wake up and protect its entrepreneurs from foreign-capital dumping. And it needs to provide incentives for Indian — and foreign — companies to invest in its startups, just as China did for its own.