We have a simple investment rule: avoid businesses with regulation.

It is not to say that those industries aren’t financially attractive, but we are technology investors, building new business models. We are not well versed in the art of navigating the government. This approach has served us well, but in the modern climate where technology is disrupting traditional industries, we have to be more vocal to ensure policies don’t negatively impact the risk-taking environment that has quietly emerged over the past decade. The best thing government can do is to work towards creating an environment conducive to failure. Entrepreneurs deal with unpredictability in every aspect of their quest to change the world; the government needs to focus on easing the burden by offering predictability on policy. Entrepreneurs and investors are in it for the long term. We are building businesses that are focused on improving people’s lives.

Celebrate the Crazy

Ecommerce companies in India have invested $6 billion over the past three years in a quest to discover a sustainable value proposition to both buyers and sellers. None of the investors or entrepreneurs involved in these businesses thought they were running an NGO or engaging in a kamikaze mission to kill offline retailers. When we invested in Shop-Clues, we understood that the most effective model for the fragmented Indian market was to enable kirana shops. This conclusion did not come from regulatory considerations, but from a business-model reality. The US is homogenous, but India’s diversity has resulted in a customer base that has varied tastes. It is impossible for any platform to effectively predict and hold the required inventory. So what emerged was a marketplace approach that leveraged the best of both worlds. This is a long, expensive game, but one that entrepreneurs and investors have engaged in to chase a piece of what will soon be a $100-billion market. We can question the rationality of these assumptions. However, as long as the consumer is not being hurt, they should be allowed to chase crazy dreams. There has been a claim that discounting adopted by platforms hurts the kirana shop. Kirana shop owners are probably the savviest entrepreneurs. They realise that ecommerce marketplaces give them access to a bigger audience without spending a rupee. There is another contention that brands are being harmed as these ecommerce platforms undervalue the brands’ products. Ecommerce platforms recognise the value of these.

Collateral Damage

The internet revolution will drag many industries through radical change, where incumbents will lose their crowns and new leaders will be born. This will not be easy and there will be pressure to stymie the tide of change. The government must resist. If consumers are not negatively impacted, the government should stay steadfast to the objective of enabling an entrepreneurial ecosystem to flourish. Businesses will die and will be reborn in another avatar. Advancement will wreak havoc on traditional systems – email hurt the postal system (and we all know that “video killed the radio star”), but the growth of ecommerce has rejuvenated the delivery business and the postal workers are back in the game. It is encouraging to see Prime Minister Narendra Modi promote Start Up India, but the time has come to put that sentiment into action and recognise that the best thing the government can do to foster entrepreneurship is not be an active player in the game. They should focus on enabling innovation, not protecting legacy. Retail may have needed some regulation, but the current policy focuses more on protecting than enabling. Let the game play out. Let the crazy ones experiment and let those that can’t keep up move aside.

Read more here.

First Published in Economic Times
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