Mr. Piyush Goyal and his bitter pill for the Indian Startup ecosystem

Piyush Goyal Sir has sparked a great discussion in the Indian startup ecosystem. Interestingly, two months ago, I wrote an article on "Why India doesn't come out with innovations like Deepseek". In the article I said:

"Try going to most Indian VCs with anything that’s “new” and not an exact copy of whatever that’s already been done in US or China atleast a few years ago. They’ll look at you as if you’re a guy without a job who has asked for their daughter’s hand (while also insisting on Dahej).

And this isn’t an anecdotal observation. It’s a pattern."

I gave several examples to support the above stance, covering many years of investment decisions driven by short term thinking and herd mentality. Like when Thrasio came up in US, "house of brands" came up in India. When NFTs started to rage, Indian VCs suddenly found Shree Krishn. When Uber worked in US, clones of Uber propped up in India. And so on...

I then went on to sum it up by saying:

"So while possibly having good intent, Indian VC ecosystem is fundamentally against innovation. They’re private market, risk capital investors on paper, but essentially retail type stock pickers with a 7-10 year horizon. While that may be good for them, it’s obviously bad for people who are passionate about innovation and are willing to put in 100 hours a week (straight out of Mr. Narayan Murthy’s dreams)."

Now the article went viral back in the day, and mostly everyone agreed. The part which really resonated with people was:

"Right now, it’s AI. So anything with AI is being considered for funding. But don’t come up with something that hasn’t happened before, or anything that’s too “incomprehensible” for these guys. You won’t have a nice call.

And if your startup is not in AI, well then, don’t think about reaching out before you’ve built the product, are doing revenues, are extremely profitable, and are showing terrific growth. In other words, when you don't need it."

Normally, when it comes to criticism, people usually look at the government, and perhaps for good reason, but in the article, I had covered that ground. I wrote:

"In fact, if you think about true 'innovation'. Things that India came up with and the world might follow. Things which truly broke ground here. They didn’t come from the private industry at all. They were, quite interestingly, government initiatives. Of course I’m talking about UPI and ONDC.

UPI and ONDC. Both extremely innovative, were totally designed and implemented by the Indian government, and then taken over by the private sector. Usually, the government is supposed to be many steps behind private players, but in finance tech (and even space), Indian government actually led the way.

We really need an early stage funding ecosystem."

It feels great to know that Piyush Goyal Sir picked up on the exact sentiment that countless entrepreneurs had been living with for a long time. I'll now come to my personal story and then what Indian VCs can do to improve.

This is very important feedback.

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I started my first company in the first year of college. By the time we were graduating, we doing over ₹1.2 Cr in revenues, with ₹20 Lakh in PAT. That company (The Testament) was built without having ever raised a penny (even from my parents) and had us planning and executing Marketing, Sales, Market Research, and Recruitment drives for companies across the nation. In our experience, we managed over 1500 recruits, touching base with close to a million people (mostly small businesses, but also end consumers), spread across 300 cities of India. I was the only sales guy, and we collectively sold services of ~ $1 Million.

Fortunately, I realised pretty early on that making money would not be a big problem for me. I then started to look at slightly bigger things like creating truly innovative products which solved real problems. One of these turned out to be the viral movement around Seneca: The Distraction free Smartphone.

Ever since I started using a smartphone in 2017 (I resisted the urge for many years, much to my benefit), I realised it was extraordinarily addictive. It was an extremely useful device, sure. But the benefits of the machine were getting far outweighed by the addiction loops that were getting people "hooked". People, much like zombies, were spending way over 1000 hours every year looking at the screen, for absolutely nothing. Unbeknownst to them, they were just unpaid labourers for social media/entertainment companies which were using their attention for hits and clicks. It was horrible. People involuntarily and helplessly wasting over 6.5 hours a day on the screen, day after day, month after month, year after year.

As a passionate entrepreneur, I looked at solving this problem through many ways. I explored apps, android launchers, parental controls, and so on. I realised they didn't work. Not just for me, but for anyone. They worked much like bandaids, but ones that didn't even stop the flowing blood. People who tried these solutions came back to their old ways within a few weeks, quietly "accepting" their problem and moving on. I even explored creating a "Slightly blurred screen guard" which made it less appealing to look at the phone. Needless to say, it didn't fly.

It is then I came out with the Open Pitch for Seneca: A Distraction Free Smartphone.

I envisioned Seneca as a super utility, distraction-free smartphone, which does everything except wasting time. How? The phone provides an environment where all the utilities of the modern smartphone (like navigation, finance and payments, mailing and messaging, travel and commerce, and learning and education) work seamlessly, but without the addiction traps of social media, gaming and entertainment.

As soon as I wrote the Open Pitch for Seneca, it went viral. I started to get investment offers from angel investors across the world. In no time, I got $200k in commitments from angels based out of US, UK, Germany, and even India. Then I got a call from a leading technologist of our country, who joined our mission and even worked on a prototype. Soon after, I created a paid waitlist for the phone, which got joined by over 1100 people within a couple of months, thereby giving us booked revenues of over ₹1.5 Crores (all without a website, or even a Linkedin page for the company). And finally, I got one of the leading education companies of India to send us a written word stating that they'd like to explore distribution of our phone to their captive student audience (which is in lakhs, every year).

So far, so good!

Now it came to institutional investors to back the project. We needed ₹28 Crores to make the phone come out in the market, out of which we had already raised ₹1.65 Crores from angels and had ₹1.5 Crores in booked revenues of the phone (plus the interest of a major education company in what could possibly be a multi-million dollar recurring revenue deal). The support of institutional investors would have helped us bring a greatly valuable product which millions of parents have been wanting for their kids (and for themselves). A product which had already become a viral movement online, getting me over 20 Million impressions on my writings on Linkedin and over 42,000 followers. A product which could not just be an extremely valuable business in India, but also be a great export of technology from Bharat to the world.

Yet when we reached out to raise funds from institutional investors in India, what happened? This was the question we were asked:

Why don't you make the phone, sell it a little, show some revenues, and then come to us?

Now this isn't a smart question at all. It's like telling a rocket company, "Pehle uda ke dikha do, fir hum paise lagayenge". This is an absolutely dumb question which doesn't suit people who've had any education at all. In fact, I was once talking to a father of one of my mother's students. (My mother is a teacher at an MCD school, and the man I talked to was Rickshaw puller). When I told him about Seneca, his eyes lit up, and he asked me a question which was better than what I had heard from most VCs I had met:

"Beta, is phone ko aap kam se kam kitne paise mei bana kar market mei nikaal paayenge?"

That one question made me think and reduced our ask by a factor of 35%.

Ask better questions, VCs. Even if you can't help. Indian entrepreneurs deserve at least that. It'll change everything.

Mr. Piyush Goyal on Indian startups.

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