With the Fed holding rates once again there seems to be some optimism around the investment world at the moment. Speaking of strong sentiment, you may not be surprised to hear that tech firms are overtaking valuations of more traditional businesses. However, you may well be forgiven for thinking some stalwarts such as Goldman Sachs are just too valuable to be comparable – it may be time to think again. According to this article Jack Ma’s Alipay may now be worth more than the mighty Goldman Sachs! Of course, the argument is privately funded companies may have inflated valuations and unrelastic price tags – which I can’t necessarily argue with. However, there is no denying tech firms are catching up, and fast! On the topic of valuations, AirBnB are reportedly in a phase of fund raising at a potential $30 billion valuation. Why do I think this is significant – well mainly because I believe it proves there are many technology-enabled businesses like AirBnB which have a big part to play in the world of technology investment but my belief is more so in India. Nothing describes this better, from an India perspective at least, than terms like “sharing economy” or “gig economy”. We strongly believe there is a massive opportunity in India in this space and at Earlsfield we definitely consider this area to have big potential.
We all know (mainly because I speak about it quite regularly) that internet adoption in India is happening mainly through the use of smartphones. That’s why it’s always encouraging to hear of new entrants into the smartphone production space in India. This time it’s another Chinese manufacturer, Huawei, who are planning to start production in the month of October. Affordability is something that needs to be considered up front by these new and existing manufacturers alike. Samsung, who incidentally have the largest share of luxury handsets sold in India, for instance, this week announced the launch of mid-budget smartphones. Once the hardware supply is in place there is a natural need for affordable data packages and with RelianceJio initiative I reported a couple of weeks back there was inevitably going to be repercussions. Initially, there was some negative press, however, now there seem to be more positive moves by competitors. For instance, India’s largest telecom service provider, Bharti Airtel has hit back by offering a new package including free data. It seems even international players are taking the challenge thrown down by RelianceJio seriously, with Vodafone India receiving an equity infusion from parent company, Vodafone Group Plc to, among other things, improve service quality. This seems to translate into the expansion technology deployment for 4G and 5G. What does this all translate into? Well, as regular readers of this post might be familiar, the ability to penetrate markets and create large market opportunities. A small example of this in the Indian digital classified industry which according to KPMG, is due to touch $1.2 billion in the next 4 years.
Something I’ve mentioned a few times in the past is that B2B is an market we believe has a lot of potential in India. It seems we are not alone in our estimation, as Alibaba ramps up its B2B commerce play in India. Some may question why India is attracting so many players/investors, such as Jack Ma/Alibaba. A reason may be the ability to set up a business with a skilled workforce at reasonable cost. Certainly, when Bengaluru (aka Bangalore) is mentioned in the same breath as Berlin and Beijing, among others, as one of the top five places in the world to launch a start up, they must be doing something right. Add to this the growing culture of purchasing online, one can see why India might just be moving towards something special.
There were two more stories this week which I simply had to leave until the end. Firstly, Apple is in talks with McLaren (yes the super car maker) for a potential acquisition to give the tech giant the car manufacturing expertise it perhaps lacks to make its secret car project a reality. What this does tell me above all else is that even the biggest tech players are willing to buy versus build when it comes to areas they lack expertise (hey, everyone can’t be Elon Musk, now can they!). Secondly, and admittedly, more anecdotally, there are likely to be many entrepreneurs/founders out there who want to know what the ‘secret sauce’ is to get acquired. Well, wonder no more because Google believe to be ‘acquisition ready’ a business has to have focus and clear vision.
Author: Dishang Patel