with the growing euphoria where new age business are going public below are my thoughts on it
its a great respect for this entrepreneurs and their team who have taken there organization to this level and made it public. I would say they have accomplished their journey from 0 to 1.
This guys have created a great eco system to new generation to chase their dream irrespective of various challenges in India with community ideology / education systems etc .
now they need to take a journey from 1 to 10 many of them sure will involve from here on this journey...
we all have to observer them in this journey our forecast industry will not be able to understand this entrepreneurs and vice versa even this new age entrepreneurs will not understand the question raised by forecast industry and they need to learn to deal with them.
Note: our forecast industry itself has not involve much no new algorithm to analyze data patterns / human psychology / global changes / technology changes etc same old questions when will you make profit / how much margin / can your business sustain in longer duration / can you explain your business model blah blah blah...... how many analyst out there can forecast what food will be made at their home for dinner today without asking anyone at home ? so simple question ? the forecast industry in India need a change I am sure someone will come and turn the table in this industry with technology + simple common sense for analysis.
how many forecast analyst ask question to explain how your product works not in terms of making money but in terms of its functionality ? if you dont know how the product workflow work how will you analysis how this product make money ? most of them are analyzing from user usage prospective which I think is not correct.
Forecast industry doesn't have the edge to foresight people's ability and skills where its moving towards hence they hardly adapt and visualize the change at very early stage.
if this entrepreneurs think about this question all the time I don't think developed country like US which you see now would ever have reached to this point where its called developed economy.
companies chasing dream / learning / adapting in public eco space is hard and life itself is hard so why not to do the hard job rather going easy. What will happen more than just a failure its also a lesson to learn and grow again.
many of this companies has given a fair deal of exit to existing investors via IPO as they have being with the organization to support them for so long and its healthy to give fair deal of exit.
beware some companies are well aware their growth will get saturated hence better to cash out from IPO.
lot of public investors feel its not fair for them to invest with such a high valuation. This are the same groups of public investors who are complaining who made a lot of money via IPO listing so my question is what's unfair valuation which is for all the IPO's not just 1 or 2 or your greed which didn't get fulfilled ?
so its simple stay away and wait when you are comfortable with fair valuation keep observing this companies how they take decisions growth model executions in upcoming years if you see patterns of changes which you are comfortable then take your decision based on it rather having a herd mentality.
my thoughts and observation on Vijay Shekhar Sharma and their team(Paytm) this are the guys who dreams connect adapt learn from failures their brains works like a child which is always curious hence you will observer their answers to analyst questions will be different than the normal executive as child speak from their heart full of emotions not manipulated brain and sure they will handle it better in upcoming days.
when such a team learn and adapt the growth goes unmatchable for rest of the industry to reach to that level in the same space and other companies start partnering in their growth(this is early pattern which is key to look out for ) but when such team don't learn and adapt then it falls under below category.
Many will not survive in long run for growth and profitability example nykaa / policy bazaar / car trade/ zomato and many upcoming which are in singular segment either they will get killed slowly in next 5 to 10 yrs unless they keep it upgrading ahead of market making it local to global and I dont see that hunger in their management team for growth or some large player will buy them out.( patterns to recognize for down fall looking for aggressive acquisitions / equity dilutions very often / investing in other startup / partnering outside their domain of businesses and many others which can be recognized in upcoming annual meetings and conference calls through their psychological behavior and talks)
I have not put paytm in the list of survival for growth and profitability for now ?
part A) paytm has a huge user / customer base and its rapidly increasing to all smartphone devices this gives the customer / user a trust relationship factor which get build earlier then rest of the players - this is their current key MOAT. How many analyst will consider this as MOAT ?
any new digital services launched by other players paytm has an opportunity to explore and copy the same model of services on its platform to this huge customer / user base this gives them an add on advantage for fast scalability for the same compare to rest of the players in this space of super app /payment/finance or upcoming services. It hard for a customer / user to switch out to other app just for few cashback or reward points or extra margin gain unless there is any new player to burn cash for next 10 years and keep better offering.
also note paytm need to be very quick in copying or launching any new digital service on its platform upcoming in market.
it also need to maintain the same trust relationship with its customer / user keep it compounding without any greed - there will be many allegations / stories created by other player to break this trust MOAT in this journey.
example : UPI services
it was last in the league to provide UPI services but the add on advantage made them to reach in top 3 in a short duration of time.
Part B) paytm is not the only fintech solution available there are many and you need 4 to 5 players to do the all the data point collection for each individual users to a central point which can be shared to each credit providers to design a better credit products also while validating new credit offering to borrowers and reduce bad loans and its happening across the global this will also support to move toward cashless/cardless system to move currency into the system digitally and reduce the cost of capital.
part C) we just cant be dependent on NPCI as a monopoly for transaction solution and settlements there is need to have 4 to 5 players which can build similar solutions and reduce the dependency on single largest players like NPCI.
while moving toward digital movement what happens when NPCI solutions goes down for 2/3 hours the whole of system gets hold if we are in a complete digital mode hence here as well fintech solution can be build which will provide complete robust transactions solutions and settlements
part D) there is a generation which operate in cash , there is generation which operate in cheque there is generation which operate in net banking and there is generation which now operate only via mobile
as a billion users where avg age of person is between 25-28 there is need to serve this new generation with this new medium called digital bank this will also support to reduce the cost of capital
We still don't know whether paytm will be one of them or not only time can answer it
there should be 4 / 5 player to service this generation as digital bank so competition will give them an edge to grow and provide better services to its customers as well as better credit products and collection methods.
this data points should already be on the table of regulators to allow private players for payments settlements solution similar to NPCI for robust digital economy and to have digital banks as well for full fetch financial services.
once regulatory policy and license are build this should give such fintech to know in which direction to move and which experiment to stop giving them a clear direction where their business should move towards.
disclosure : haven't invested in any of this companies will wait to see some patterns out only then I will bring them in my portfolio and my thoughts can also be wrong or different from yours.
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