The high point of the ET Startup Awards was an illuminating discussion on the topic of ‘Building to Scale, Building to Last in a Dynamic Policy Environment’. The panel featured some of the brightest minds who are pushing the boundaries of India’s tech and internet ecosystem — Infosys chairman Nandan Nilekani, Ola cofounder Bhavish Aggarwal, Flipkart cofounder Sachin Bansal, Kalaari Capital managing director Vani Kola and OYO founder Ritesh Agarwal. Archana Rai, Editor-South, The Economic Times, moderated the discussion. Edited excerpts:
Economic Times (ET): Ritesh, given OYO’s push into China that has caught the attention of the startup world, how does the policy environment in China contrast with that in India?
Ritesh Agarwal: I feel China has been relatively easier for us than India. China has a significant degree of clarity in guidelines, which means that it might be hard but you know what you are getting into on day one. The second thing is talent. India is going through its first generation of talent. In China, we have been thankful to get talent from Didi and Alibaba. A lot of these companies have groomed talent, who are very ambitious. They want to make a difference to the society. They understand that stock options can be very meaningful in the long term and why deferred gratification is important. I think that makes it easier to get talent together. These are two specific positives or the brighter side of operating in a market such as China.
ET: Bhavish, you moved from an emerging market to a market ranked much higher in terms of ease of doing business. What does India need to do in order to catch up?
Bhavish Aggarwal: In our (taxi-aggregation) industry, the government has been very supportive. I think we were lucky that our industry grew when there was a lot of clarity on policy. When we look overseas, those countries have a more established setup of doing business. Opening a company is much easier. The tax laws are more straightforward and there is a lot more history that these countries have gone through. But when it comes to new industries, I believe we are at the forefront and at the cutting edge of an enabling policy environment. (Compared with) the kind of environment you see in Australia or the UK, in many ways I believe our country is much ahead. When you think of the policy around employment, India is more liberal and forward-looking. I look forward to us as a country and as a regulated regime taking the lead in newer industries.
ET: At a broad level, do you see a reformist stance across the government, across policymakers? Is there an intention to reform?
Nilekani: One of the biggest priorities today for any government is job creation and the wider concern about jobs. If we go back and look at the IT industry, one of the reasons why policy was favourable was because the industry created jobs and it earned foreign exchange when India did not have enough. So, the government’s and the nation’s goals, and the business of these startups were aligned. Once you show alignment, everybody will give you all the support that you need.
ET: Do you see data localisation as a step to provide backing for India-based companies as against the larger ones from overseas?
Bansal: Some of these policies are still at a very early stage. Overall, directionally, it is very positive because it is not just about supporting Indian entrepreneurs, it is also about making sure that we create our own local ecosystem around capital and entrepreneurs. This is kind of in the positive direction but I still sense a bit of a lack of trust between entrepreneurs and bureaucrats in Delhi.
In some ways, data privacy laws are trying to mimic what is happening in the West — Europe or the US. The kind of problems we are solving here in India are very different. They are very basic. We need to be a little balanced.
ET: What are you hearing from younger companies on policies? Do they think policy only supports larger companies?
Kola: I do not see entrepreneurs come and talk much about policy to us. The policy becomes a factor when there is scale; when (startups) are below the radar it matters less. I do not see entrepreneurs talk about policy much. May be sometimes they should. May be sometimes ignorance is bliss because I think policy will shape itself when the industry is at a certain maturity level. You generally cannot create policy for emerging sectors well before you even know what that sector is all about. And if you did, perhaps you would not do such a great job.
ET: As an investor, are you seeing any changes since the Flipkart-Walmart deal?
Kola: From when we started in this industry, in 2006-2007, and to see where we are just a decade later, feels unbelievable. At least to me. When I look back at what my aspirations were in terms of working with entrepreneurs and coming back to India, and what has happened in the overall ecosystem, and what has been achieved by the Indian entrepreneurs...
If we look at the India story of the past 10 years, I feel very proud about where we are. It is a very important ripple effect that is being created. I really do see what has happened over the past 10 years as a critical inflection point. I see that every day from the maturity of entrepreneurs, their aspirations and the momentum being faster. It took 8-10 years to create these companies and I think that cycle is reducing and that is important.
ET: One of the big things that has changed is the understanding of the rights of entrepreneurs, the ways in which a founder can shape firms, retain control. What are your views on differential voting rights?
Bansal: Flipkart started in 2007. The whole tech sector (in India) was virtually nonexistent before that. What the (Flipkart-Walmart) deal has also done is shown that valuations are real. Yes, there was GDP growth, internet user growth, but does that translate into businesses that Indians can build and create shareholder value?
I think that proof is now there. That is now translating into more tech companies raising funds at larger valuations. To me, it is not about generating or raising funds at larger valuations. It is also that the ability to raise large amounts of funds has gone up, which is helpful for us. The tech sector requires a lot more funding than what is available today in India.
One of the policy suggestions in the draft ecommerce policy about differential voting rights is a great initiative. But even without that, there are lots of other opportunities for entrepreneurs to have more control, even if they have to raise large amounts of money.
ET: What are your views on scaling up?
Ritesh Agarwal: You begin by getting inspired by Bhavish (laughs). I remember that a few years ago, I saw a lot of Ola cars on the street and I was like, look if they can scale so fast, and we were just one property, then we can (also) have three properties. The single thing you can do for scale is bring solid talent and empower them with a singular mission. We have 11 CXOs and everyone has been around for 80-90% of the time that the company has been around.
ET: Sachin, if you have to come back again into the fray, what is the one requirement that you think is necessary for scaling up?
Bansal: I think large companies start from thinking big. I see a lot of entrepreneurs. But they are chasing small opportunities. The market opportunity has to be big. That is a fundamental thing. I think the only change I would like to see is for entrepreneurs to focus on things that affect millions of people, whether you are in healthcare, education, hotels or in travel. Secondly, build great teams. Do not compromise on talent.
ET: Nandan, do you think it will take more time for the IndiaStack vision to come through?
Nilekani: About 1.2-billion people are on Aadhaar, about 1.2-billion digital transactions happen a month, four-million KYCs a year, UPI has had 250-million transactions, and is going to have a billion. The last piece of the puzzle is the data piece, which is the infrastructure for data empowerment. The Ministry of Electronics and Information Technology came out with an electronic consent policy almost a year ago, and RBI is coming out with an account-aggregator strategy, which for the financial sector, will now enable scale for data.
The only piece of the puzzle that has not yet scaled up is the data piece, which in the next 3-5 years will have massive scale, especially in financial services. The deepening and the sachetising of credit markets, smaller transactions, better pricing, more consumer/individual-based risk analysis — all that is going to create a trillion dollars of market cap.
ET: Vani, are you having these conversations as well? Are entrepreneurs looking at opportunities that Nandan is talking about as being the next big scalable businesses?
Kola: Almost any business is at a scale plateau at one level or the other, and this requires entrepreneurs to rethink and re-pivot. For every step and function, success requires them to rethink at a talent-level, process, systems, strategy, everything. Sometimes you have great markets, great ideas and passionate founders, but they may not be able to cross that in time. There is also a time factor. All this has to happen very quickly without really having a historical experience to draw upon. Scale requires companies led by their founders to really rethink, and one big factor of that comes down to culture and hiring.