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Look-at-Business--outside-in
Avnish Bajaj
Managing Director-Matrix Partners
Sunday, July 1, 2012
Avnish Bajaj is the Managing Director of Matrix Partners. Matrix Partners India is an investment firm with Rs.3,000 crores under management. They invest in companies primarily targeting the Indian market and have a sector independent investment strategy focused on generating exceptional returns.

The firm invests up to $30 million in each new investment and aims to be a trusted, long-term partner in building market leading companies. Matrix Partners India in partnership with Matrix Partners, a 30 year-old investment firm with a consistent track record of delivering exceptional returns and partnering to build market leaders. Some of the portfolio companies they invested in are Apple Computer, FedEx, Sycamore Networks and Veritas.


Trends

There are two trends that separate early investment to early growth investment. One can observe that the data usage has finally taken off both on the Internet and mobile. There are significant convergence of mobile and PC internet around the tablet, and this would be the next big trend. 2012 is the third big year when the shipment of tablet is much higher than those of PC and in fact PC shipments are starting to decline year over year whereas tablet is exploding. In the next three to five years, there is going to be far more viable company creation and investment based on these trends which will help such businesses that earlier did not work in India to move forward.

We have a few in our portfolio like Ethiopia Mobile and Asklaila, all of these have relied on USSD protocol, which is SMS based protocol. Unlike the early days, Gaming and data based application are expected to take off.

On the early growth side, the consumption story in India has been very strong. The sector that Matrix Partners focus is education and healthcare, which are generally recession proof. We have not seen any impact over so far being rolled out on these sectors. In financial services and consumer product and services, the stage in which we invest is beneficial, since they are generally smaller businesses; there is so much head room to grow.

The Hottest Technology

Given our focus area of investment, we are consumer investment platform, so we do not just follow hottest technology for the sake of it. But if we do not observe any potential for adoption of something, it becomes less interesting for us. Even social related trends in the market like social e-commerce will be successful in gaining our attraction.

We are watching, how people are going to take advantage of this social networking. When Google became large a lot of people created on the back of SEO, SEM, most of them started to figure out and bet on it. For us watching some of them and how opportunities for Indian companies to innovate are very interesting.

For example, Ethiopia Mobile helps connect Facebook and Twitter platform through SMS users. A little bit of innovation that we found in the company and what attracts us is how people are going to innovate and make some of these global platforms extend broadly across the Indian landscape.

The new areas of innovation

Replicating business idea has been a historical problem in India and I was a part of it too with my first venture, Baazee.com, which was the copied version of eBay. However, unlike the first decade of this century, now the market is not deep enough. When the market is not deep enough, then it is easier for one to bring the model that you know has worked somewhere else and try that out, thus reducing the risk of failure.

Now as the market has become much deeper, there is plenty of opportunity to build business only for India which I would encourage entrepreneurs to do very strongly. So entrepreneurs should start thinking what the local pain points are that need to be solved and focus on that.

Advice to the entrepreneurs

Do not start a business inside out by sitting at house, researching and then coming up with the idea. Rather, the most successful businesses are those that solve genuine pain point. My advice has always been to look at businesses outside in, and figure out in the market what is the need rather than sitting at home and trying to do so.

For instance, in India household help is a big issue. If there are sites which will aggregate and provide you listings of the entire potential helps in every category, when they are in use, when they are waiting, and others, will this solve a pain point? Absolutely, the next question that arises here is if there is a business model that can be built around by understanding the challenges and can it become very large to scale a huge business? Another important element is the skill sets that are required to build any successful business and if you do not have it with you, you need to partner with people with such skill sets which will help you build big business.

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