Of Investors’ Seven Deadly Sins And “Crazy” Ecommerce Investments In India

I see both side of the table – right from startups sharing their term sheets (for feedback/suggestions) to VCs sharing how crazy have valuations moved up in the last few years. Over the last year or so, there is almost a ‘herd’ mentality (of funding ecommerce business) that has obscured the funding space in India.

Based on my interaction with startups, VC firms and their *off-the-record* reasons to invest in ecommerce business, here is probably the most apt correlation that I could come up with – that is of seven deadly sins and ecommerce space in India.

Here it goes:

Lustseven deadly sins

Lust is an emotional force that is directly associated with the thinking or fantasizing about one’s desire, usually in a sexual way (wikipedia).

Leaving the sexual part aside, it’s almost a fantasy to be with an ecommerce player.  In fact, You are NOT a Real VC if you do not have your finger (s ) in India’s ecommerce pie (that’s the market perception).

There is quite a bit of peer (+LP) pressure to invest in ecommerce business in India.

Gluttony

Gluttony, derived from the Latin gluttire meaning to gulp down or swallow, means over-indulgence and over-consumption of food, drink, intoxicants or wealth items to the point of waste (wikipedia).

Every VC firm wants to grab the most of India’s ecommerce pie. Some of the VC firms have investments in competing startups and the good news is that all ecommerce startups are now vying for Amazon’s (and other US companies who are entering India) love.

Gluttony? Well, it’s super-gluttony to the point that it just might burst out.

Greed

Greed (Latin, avaritia), also known as avarice or covetousness, is, like lust and gluttony, a sin of excess. St. Thomas Aquinas wrote that greed was “a sin against God, just as all mortal sins, in as much as man condemns things eternal for the sake of temporal things. [wikipedia]

Mix the above 2 sins and there you go.

Most of the VC firms have given up on margin and are now talking about the growth story of ecommerce business. Is there a fundamental to the growth story? Only time will tell.

Sloth

Sloth can also indicate a wasting due to lack of use, concerning a person, place, thing, skill, or intangible ideal that would require maintenance, refinement, or support to continue to exist. [wikipedia]

In general, sloth translates to being lazy and I’d call VC firms (a bit) lazy when it comes to overlooking the sectors beyond ecommerce. There is a lot happening in Indian startup space, but most of the VC firms these days are primarily looking for investment in ‘anything’ ecommerce.

So much so that when we shared the UnPluggd finalist names, a few replied back and asked why we didn’t have a single ecommerce company in the selected list?

Wrath

Anger is an emotion related to one’s psychological interpretation of having been offended, wronged or denied and a tendency to undo that by retaliation [source].

Like Angry birds, many VC firms are angry with other firms who have jacked up the valuation of this entire industry. But they can’t ignore this market and will continue to invest in this space. Very often, I get to hear from VC friends that startups are acting too pricey because somebody else has invested in a similar space for some crazy valuation.

The good news is that this works in startups’ favor (as long as the economy is doing good and there is no pressure to show profits).

Envy

Envy (also called invidiousness) is best defined as an emotion that “occurs when a person lacks another’s (perceived) superior quality, achievement, or possession and either desires it or wishes that the other lacked it. [wikipedia]

Like I said earlier, You are NOT a Real VC if you do not have your finger (s ) in India’s ecommerce pie. If you have, others are envious of you. And if you don’t have, you just need to get over your bad luck.

Pride

Pride is an inward directed (feeling) emotion that exemplifies either an inflated sense of one’s personal status or the specific mostly positive emotion that is a product of praise or independent self-reflection.[wikipedia]

We certainly hope that VCs take a pride in their ecommerce investments, which so far looks more of a herd race. Amazon’s entry in India could be the testing ground of hypothesis surrounding the entire investment philosophy and we certainly hope that startups reap the max benefit out of this (exits included).

What’s your opinion?

[Image credit: PATRICK BOEHNER/Flickr]