Theme now is value creation, not valuation: Deep Nishar, MD, SoftBank
SoftBank, which has backed Snapdeal, Ola, Oyo Rooms, Grofers and Housing, is among the deeppocketed investors behind a slug of capital coming into Indian internet companies.
Nishar, a well-respected name in Silicon Valley with more than two decades of product expertise, was hired by Nikesh Arora last year as an integral part of SoftBank's investment team. The IIT-Kharagpur alumnus who's in India every few months to spend time with the group's portfolio companies says the local startup ecosystem has gone through a sea change in 2016. Last two years, the theme among entrepreneurs was valuation but now it's value creation, he says.
SoftBank, which has backed Snapdeal, Ola, Oyo Rooms, Grofers and Housing, is among the deeppocketed investors behind a slug of capital coming into Indian internet companies.The Japanese internet and telecom giant has ploughed $2 billion in India, most of which came in the past two years. Its founder Masayoshi Son said on a recent visit that the group's commitment of pumping $10 billion into the country remains intact.
While SoftBank has not made any new investments this year, Nishar said theirs is patient capital unlike venture funds, which are structurally challenged. We have a 10-year horizon for India and that's when the market will start to give returns and exits for investors.
For now, the ex-Googler has been spending time with founders to help them grow profitably. “Snapdeal has generated a more profitable customer base this Diwali compared to any other year.Grofers is increasingly doing more business with a low cash burn. I've been involved with all the founders to better their data science and tech capabilities, which will bring value to the business,“ he said. Most of these companies are understanding that the lifetime value of a customer has to exceed the user acquisition cost, Nishar said.
While talking about the fight for raising capital, which has been the crucial differentiator in sectors like online commerce and ridesharing, Nishar said there is still a lot to come and that India is not a single-player market. Even in the US, Amazon is big but Walmart hasn't disappeared.
Recently , two of the most prominent Indian founders, Flipkart's Sachin Bansal and Ola's Bhavish Aggarwal said publicly that their foreign rivals were “capital dumping“ to win market share. Many said the protectionism plea was unwarranted considering both the companies are funded by foreign investors.
This situation is like the money machine where dollar bills fly, but then the buzzer will ring and the cash will be gone, Nishar said. “Why does one player feel the need to spend so much more money than the second player and effectively give away rides?
Clearly , that means the market share is not 50-50. Logic would dictate if you are in an equilibrium, then both parties will agree to make money and not keep spending,“ he said, hinting at Uber.
Amazon and Uber have been investing heavily here after both failed to conquer China. Nishar said that if the only game is to give away money to consumers, two can play that game.