Beginnings of the year are usually a good time for reflection or say, self-correction. The year 2019, has been a year of ‘entropy’ to say the least, with unexpected events across economic, political and business landscape: be it the scrapping of 70-year-old Article 370, the plausible return of Cyrus Mistry at the Tatas or unity among the arch-rivals in Indian telecom to survive.
If anything, it has shown us that things don’t run according to a fixed plan – foreseeable and undisturbed. Or how we tend to over-emphasize on the set-up – the optimal starting point- and interpret every little repair work as the flaw in the plan. According to author Rolf Dobelli, the most common misunderstanding about the good life is a stable state or condition but the reality is , it is , achieved through our ability to correct and revise or constant readjustment.
So, as we prepare to move into a new year, unexpected events are likely to dominate, even accelerate, in coming days. In context of the fast- paced tech Startup/ VC ecosystem and amidst the ever-changing world, having a perfect business strategy, a perfect investment portfolio, a perfect training is no more than a myth, it is now worthwhile to take a hard look at some of the trends.
How long will the Blitzscaling continue?
Losing money to win or what has come to be known as the famous Silicon Valley growth doctrine – ‘Blitzscaling’ is a term was popularized by Reid Hoffman, LinkedIn co-founder, and Chris Yeh, Cofounder and investor of Wasabi Ventures. By their definition, Blitzscaling (derived from the blitzkrieg or “lightning war” strategy of Nazi general Heinz Guderian) prioritizes “speed over efficiency, ” to achieve massive scale at incredible speed in order to seize the ground before competitors do and risks “potentially disastrous defeat in order to maximize speed and surprise.”
Consider one of the most valuable companies of the day – Amazon. Amazon prioritized growth over profitability to build a massive advantage in technology, customer base and infrastructure. In his bid for hyper-growth, Jeff Bezos took unimaginable risk, borrowed billions to fund his ambition. And as companies began to be “Amazoned,” Venture Capitalists and startup entrepreneurs picked up ‘Blitzscaling’ as the new mantra for creating tech-monopolies.
However, the recent drumming of some of the flagship startups, that rose to fame as torchbearers of this Silicon Valley strategy, in public market has raised serious questions on this growth centric strategy. Now, there is an increasing chatter amongst VCs now on the viability and sustainability of ‘Blitzscaling,” as a growth model. It remains to be seen, if 2020 could be in inflexion point for VCs/ Startups banking on ‘Blitzscaling.’
Watch: Mega trends 2020 in VC-startup landscape
Will SoftBank change its investment strategy?
The year 2019 has been the litmus test for SoftBank, as its famed Vision Fund reported a $6.5 billion loss – first quarterly, in the last fourteen years – due to failure of its marquee investments, Uber, Slack and WeWork. The investment thesis of building monopolies by prioritizing growth backed by virtually limitless capital with an end-game to control market and prices by killing competition – is now being called out.
There is a lot of commentary claiming that SoftBank may be gearing to change its strategy, of funding hypergrowth, while others predicting death of the famed late stage investor. However, often our judgement is biased by ‘availability heuristic,’ i.e. biased on information available in-front of us. The reality may turn out to be quite different. Do we foresee a world without the Softbank advantage – is the answer a qualified “yes” or a “no”.
Will high value startups consolidate and monetise?
Last decade, we have seen tremendous growth in technology space, driven by innovation and massive capital. Now it is time for consolidation and monetisation.
First, there are increasing soundbytes coming around that several startups, such as Freshdesk, Pepperfry or an Ola, are contemplating listing. It is yet to be seen who will do the public float first and which markets will they choose – a NASDAQ listing or listing on Indian bourses.
Second, several tech-Unicorns that ramped up across several business lines are seeking opportunities for consolidation – such as UberEats with Zomato – of their core and non-core businesses. Consolidation will help the Consol-entities capture a larger market share, establish market domination and control market better in a bid to move towards profitability.
Can 2020 really mark the onset of merger and acquisitions across high value startups to consolidate market and prioritise profitability over growth, and opting for public listing – that too at home markets. Who will bite the bullet first?