<div><strong>Sandeep Bamzai </strong>says sink the money and wait for the shoots to emerge</div><div> </div><div> </div><div><em>Mobile analytics startup WizRocket raises $8M from Sequoia, Accel </em></div><div> </div><div><em>OYO raises $100M from SoftBank & existing investors to expand branded budget hotels </em></div><div> </div><div><em>Snapdeal reportedly secures $500M from Foxconn, Alibaba and SoftBank </em></div><div> </div><div>These are some of the top headlines this morning. Almost daily, I am finding it difficult to wrap my head with these figures. The element of irrational exuberance has manifested itself once again. Hype and hoopla are back in the mix, but curiously only in the e commerce start up space. Private equity and angel funding is gushing in with liquidity and money is being poured in at dizzying valuations which belong in the stratosphere. My irrational heart says - good on you mate! - my rational mind asks what about revenue streams going forward? Yeh sab paisa wapas kaise aayega, what about return on investment? At the Library Bar of a tony hotel, I posed this question to an old and dear friend, one who understands money and till recently headed a top notch private equity fund. His counter came pat - there is an astounding amount of VC and angel money sitting on the sidelines and it is finding its way into start ups in India. Yeah I know that, but why before curiosity kills me. Again on the front foot, he countered me buy saying investors are loathe to investing in India, there is still no clarity on second and third generation reforms, the executive is moribund, it is waiting for legislation to resolve the imbroglio and the parliamentary logjam means that there will be no movement forward in that regard. Till the govt decides to use its executive powers and come up with transformative ideas, all this money will go into the start up space because there is no regulation there. </div><div> </div><div>Hallelujah! Precisely my concern, money pours into an unregulated sector, the bubble bursts and there is hell to pay thereafter. Now let me give you more dope from VC Circle which tracks the fund flows - "Snapdeal has already raised $1 billion from SoftBank Group Corp, eBay, BlackRock, Bessemer Ventures, Kalaari Partners and Nexus Venture Partners. The Delhi-based company also counts Ratan Tata, chairman emeritus of Tata Sons, as a private investor. Japanese internet conglomerate Softbank alone pumped nearly $657 million in the online marketplace in October last year, becoming the largest investor. The new round of funding comes a month after Flipkart was rumoured to have secured $700 million more from existing investors such as Steadview Capital. Amazon is said to be readying a $5 billion wachest for a bigger play in India." Scary, this is infinite. There is no end to this deluge. At the same time these are serious and canny investors who see an opportunity in the e commerce market place. Everybody and his aunt is cooking up some broth to bag the bulge bracket bucks. Yesterday I saw localbanya.com, your kirana store will also be transplanted on to the web and you will be begging for more online. </div><div> </div><div>Is this one crazy party or what? Are they all smoking a new Manali strain or is this all good to go. Wait, like moths to the flame, there will be many who will be consumed by the fire because they obviously don't have the wherewithal, funding and expertise to sustain their buisinesses. So, the big boys will survive simply because they are well funded and the horizons for them are more elastic, for instance Snapdeal CEO Kunal Bahl expects to generate profits within three years. But what happens to the mom and pop shops that have sprouted lured by the lubricant doing the rounds. Are we then likely to see a bust and just a handful survive? I am reminded of the dotcom boom at the turn of the millennium. Prefix investing went belly up in the US and of course it was mirrored back home too. On January 10, 2000, America Online (now Aol.), a favorite of dot-com investors and pioneer of dial-up Internet access, announced plans to merge with Time Warner, the world's largest media company, in the second-largest M&A transaction worldwide. The transaction has been described as "the worst in history". Within two years, boardroom disagreements drove out both of the CEOs who made the deal, and in October 2003 AOL Time Warner dropped "AOL" from its name. Conversely ebay, aamazon.com and google became industry leaders. Here are three examples of what hype can do:</div><div> </div><div><strong>Boo.com</strong> – spent $188 million in just six months in an attempt to create a global online fashion store that went bankrupt in May 2000.</div><div> </div><div><strong>Books-a-Million </strong>- Saw its stock price soar by over 1,000% in one week simply by announcing an updated website on November 25, 1998. The company's share price rose from around $3 previously to an all-time closing high of $38.94 on November 27 and an intra-day high of $47.00 on November 30, before quickly pulling back to around $10 two weeks later. By 2000, the share price had returned to $3.</div><div> </div><div><strong>Broadcast.com</strong> – Acquired by Yahoo! for $5.9 billion in stock, making Mark Cuban a multi-billionaire. The site is now defunct and redirects to Yahoo!'s home page.<br> </div><div>At home, this was exemplified by the audacious hometrade who got celebrity endorsements to make money. Nobody ever figured out what he bought or sold, nobody had a clue what his business model was, nor did anyone know what his tagline - Life Means More - meant. But Sanjay Agarwal and Co got Sachin Tendulkar, Hrithik Roshan and Shah Rukh Khan to endorse the mysterious product’ In November 1999, Rajesh Jain made a stunning putsch, he sold his internet venture, India World.com, to Satyam Infoway for a staggering Rs 499 crore. Somewhere along the way Sabeer Bhatia sold hotmail for an equally staggering amount, only this time in dollars. Rediff.com survived through the burning fires, flameouts included caltiger.com, go4i.com, ideasnyou.com, broadcast.com, purpleyogi.com, arzoo.com, india.com. skumars.com, jaldi.com and a myriad others.</div><div> </div><div>One only hopes that the second coming is better than what transpired 15 years ago. Sadly there are no answers forthcoming on return on investment or revenue streams or sustainability and profits. Dang, that ugly five letter word which eludes one and all. Meanwhile, sink the money and wait for the shoots to emerge, happy investing. </div>
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