Business & Investment

swaminathan s anklesaria aiyar: Swaminomics: Why India Needs More Startups crorepatis

Globalization and the proliferation of giant digital companies have fueled the fear of over-concentration of wealth and power on a few giants like Google and Facebook. In a past column, I emphasized how the same process spawned a fast-growing start-up called a unicorn. Unicorns are worth an estimated $ 1 billion or more, even before they are listed on the stock market.

Last week, an Indian company, Fresh worksProviding Software as a Service (SaaS) made its first initial public offering in the United States, with 500 staff immediately owning the shares at that price, 69 of whom were under the age of 30. Within a few days, market prices rose from $ 36 to $ 47, creating even more chlorepati. Rather than concentrating wealth in the hands of a few, the explosive growth of unicorns is spreading wealth in previously unthinkable ways.

There are more than 800 unicorns in the world. India has over 50 in the traditional way (although Credit Suisse uses different definitions to get over 100 estimates). This year we have already seen the rise of more than 20 new unicorns.

Historically, businesses had to prove profitability before attracting huge amounts of external money from investors. This means slow growth and cautiousness, with old business houses taking up to a century to reach the $ 1 billion position. But now, with the birth of global venture capital and private equity funds (such as Softbank), we are ready to direct trillions to promising start-ups around the world with the ideas and enthusiasm to become giants. This allows them to grow at an alarming rate, with some reaching billions of dollars in just seven years. They are focusing on expansion without worrying about profitability. New types of investors are betting on the growth of profits, which will result in huge losses in the short term but will bring huge profits in the long term. The dot-com boom and bust at the turn of the century has shown that many start-ups are bust, but some, such as Facebook and Google, will be the largest in history. New global investors have cast the net widely, aiming to profit from a few superstars to make up for others who have failed.

There is no guarantee that Freshworks’ new crorepatis will remain crorepatis. Some unicorns go bankrupt when they can’t keep growing, become globally important, and ultimately generate high profits. Freshworks reduced $ 9.8 million in revenue in the first half of 2021 with $ 169 million in revenue, but lost $ 57.1 million in revenue of $ 110.5 million in the same period last year. It looks promising.

Many of the most promising unicorns are in the software as a service (SaaS) sector, also known as cloud application services. SaaS uses the Internet to deliver applications to customers through third-party vendors. Vendors manage all technical issues such as data, middleware, servers, and storage. Large companies may prefer to have their own hardware and IT staff. However, small businesses have no time or prepayment for hardware or advanced IT staff and are willing to pay SaaS providers subscription fees. SaaS is ideal for short-term projects that require fast, easy, and affordable collaboration. For applications such as tax software. For applications that can be accessed from both the net and mobile phones.

Girish Mathrubootham, founder of Freshworks, says he already has over 40,000 customers. He believes SaaS is comparable to the traditional IT services industry with today’s $ 194 billion in revenue. He believes that many other Indian SaaS providers will follow in his footsteps and boost the explosive growth of the sector.

Global venture capital and private funds, which provide huge amounts of money to start-ups, dominate the majority, with Indian promoters as minority shareholders. With Flipkart sold to Walmart, financial firms could eventually take over the Indian promoter or ask a giant multinational to sell it out. Some say this is the wrong route and companies should stay in the hands of India.

However, there is a positive side to being sold out by promoters. They now have billions in their pockets and are usually funders of new startups by others. It uses the skills of early sellers to reduce India’s reliance on foreign lenders and help newcomers. This helps accelerate the dissemination of creative wealth.

Many critics believe that India (and the world) has too many millionaires and want to reduce them to check for wealth inequality. I go in the opposite direction and create thousands of new chlorepati every year. It also reduces inequality and reduces the Gini coefficient (which measures inequality). It means leveling up, not leveling down, and expelling the old giant by the new giant. That is the way to go.

swaminathan s anklesaria aiyar: Swaminomics: Why India Needs More Startups crorepatis swaminathan s anklesaria aiyar: Swaminomics: Why India Needs More Startups crorepatis

Back to top button