Categories
Angel Investing Bitcoin Business Cryptocurrencies Entrepreneurship Ethereum India Startups Venture Capital

Funding news for Instamojo and Whiz.ai, OYO Rooms & Big Brother, Ethereum and Grin

Please accept YouTube cookies to play this video. By accepting you will be accessing content from YouTube, a service provided by an external third party.

YouTube privacy policy

If you accept this notice, your choice will be saved and the page will refresh.

Instamojo raises a series B, whiz.ai closes their seed round, OYO Rooms shares guest details with authorities, Ethereum bug pushes Constantinople again. Grin ups the ante in the privacy coin game.

I want to dedicate this song by They Might Be Giants to the Ethereum community:

Related Posts:

Categories
Bitcoin Business Business and Economics Cryptocurrencies Economics Entrepreneurship Finance Government India Investing Investing Markets Startups Venture Capital

InvestStream – Our New Podcast

A few weeks ago, my friend Harjit, and I decided to start recording our conversations about the economy, startups, and tech in the US and India and sharing it with people that may be interested. We are calling this podcast InvestStream. We’ve done two episodes so far and plan to do it weekly.

We’ve discussed everything from market stats to central bank monetary policy to fund raises by startups to where the blockchain and cryptocurrency worlds may be headed. We would love some honest, critical feedback on this experiment and what we can do to improve it. We are still playing with the format and we could really use your feedback on what you find useful.

We will plan to keep the conversation from 20-30 minutes and we will have both audio only versions on SoundCloud as well as video.

The audio episodes are available on Apple Podcasts, Spotify, Google Podcasts, Breaker, and others.

The full video episode Youtube playlist is below.

Please accept YouTube cookies to play this video. By accepting you will be accessing content from YouTube, a service provided by an external third party.

YouTube privacy policy

If you accept this notice, your choice will be saved and the page will refresh.

We’ve also broken up the second episode into snippets around specific topics. This allows for much shorter videos ranging from 2 – 7 minutes and allows the viewer watch only what they find relevant.

Please accept YouTube cookies to play this video. By accepting you will be accessing content from YouTube, a service provided by an external third party.

YouTube privacy policy

If you accept this notice, your choice will be saved and the page will refresh.

Snippets Playlist

Please subscribe to the YouTube channels and share your feedback.

Related Posts:

Categories
Business India Investing Startups Venture Capital

Startups, Angels, Venture Capitalists and the 2017 India Budget

It is Indian budget season for the new fiscal year starting in April and just like every year, the pundits are all weighing in with what they would like to see and what they expect to see. We’ve seen some very positive moves by the India government in terms of setting up a company and various benefits under the “Startup India” program. However, there’s still a long way to go before the true potential of the Indian market is realized.

This is a very important budget for Indian startups and investors. 2016 was not a very pleasant year for global startups but especially Indian startups and investors. Many startups raised follow-on rounds of capital but most struggled to raise the next round of financing. In 2016, the pendulum definitively swung to favor investors once again. Many investors took advantage of the lack of capital by sticking unfriendly terms into agreements, others, simply battered companies with down-rounds. I hope to see more moderation over the long run and expect increased competition amongst investors to create better terms and pricing in the market.

In 2014, I had written about various initiatives which I felt would be beneficial for startups and investors. We’ve seen some of the ideas implemented in various capacities and there’s no doubt that the overall Indian ecosystem has matured significantly since 2014.

I still maintain that the best thing any government can do to spur innovation is to remove or, at least, minimize regulations, provide for a highly educated workforce, enable a robust infrastructure (physical and digital) and get out of the way so that private markets can move unimpeded. However, I’m pretty sure a laissez faire approach to startups and tech investing isn’t going to be the norm in India anytime soon, so below are some suggestions that can have a high impact with some good planning and execution.

  1. Ease of Doing Business – The Indian government needs to understand that over-regulating any industry will put it into a strangle-hold, even with the best intentions in place. Fledgling industries like tech startups, venture capital and angel investing are no different. In fact, they are more susceptible to dying a premature death because of the high risk nature of the business.

    Startup India and other government initiatives have had an overall positive impact but very few startups have been able to take advantage of the various benefits because of continued red tape and regulations left to interpretation by bureaucrats.

    Solution: Simplify or remove specific regulations that continue to make it difficult to do business or invest in India. A large portion of the focus should be on foreign investors for reasons highlighted in the next point.
  2. Downstream or Follow-On Capital – Additional capital at later stages continues to be a major constraint, even after several new funds closed money in 2016. Perhaps the cooling off by foreign hedge funds, mutual funds and corporate investors has had a larger negative impact than was anticipated.

    Solution: Make it simpler and less onerous from a compliance perspective for startups, angels and VCs. India needs to attract more capital domestically and internationally. Make it easy for these stakeholders to participate in the Indian innovation economy with more speed, thru less regulation and less onerous or duplicated compliance.
  3. Accredited Investors and Qualified Institutional Investors – Define what accredited individual (angel) and qualified institutional investors (venture capital funds, accelerator programs and incubators) are in India. For example, in the US an accredited investor is a person who earns $200,000 per year over the last two years or has more than $1,000,000 in assets, not including their primary residence. In India a similar definition could be used.

    Solution: A one time, online only registration with SEBI should allow accredited domestic and foreign investors to easily fund startups with no additional compliance requirements placed on the startup or the investor.

    For foreign investors, the unique identification number can easily be submitted to the RBI when wire transfers are received from international sources. Thus, removing additional compliance steps (and costs) for a startup when it receives an investment from a foreign investor. Many of these suggestions can easily be used outside of investing in just tech startups.
  4. High tax rates and a complex tax code – The current tax rates are very high. Investors take significant risks when investing in startups which have a very high failure rate. Coupled with a very complex tax code, investors, especially smaller ones providing risk capital, don’t have significant financial benefits when investing in high risk startups.

    Solution: Give accredited investors a zero tax rate on long-term capital gains when invested in technology startups. Perhaps a modest 15-20% flat short-term capital gain tax would be appropriate. Currently, foreign investors are subject to 40% withholding.
  5. M&A – It is still incredibly complex for an international company to acquire an Indian startup. It’s also very expensive for all parties involved. This limits the number of smaller acquisitions or acqui-hires that can take place in India. Smaller companies finding modest exits (less than $25 million in value) also helps turn the wheel of tech startups and needs to be addressed.

    Solution: Regulations should be simplified to allow both domestic and international companies to easily acquire or merge with Indian companies. Specifically, smaller companies. In the worst case, a one-time review by a single window, online, clearance entity to approve international acquisitions with minimal government related paperwork or government compliance can be put into effect. This could be an entity under SEBI with participation from the RBI and Invest India.
  6. Single-window clearance for the Startup India program has been wrought with typical Indian bureaucracy. The program needs a complete revamp. Rework the program to automatically grant “startup” status to any company funded by accredited investors (foreign and domestic venture capital funds and angel investors). Status should be granted via a single online form submission with validation from the investor/incubator/accelerator.
  7. Pervasive users – Digital access is still too expensive for most of the non-english speakers in the country.

    Solution: Make “broadband” accessible and affordable.

    1. By putting more government services like BHIM online, citizens, especially those in rural India, will have an additional need to have Internet connectivity.
    2. Fiber optic infrastructure has been put into place across much of India but it’s been expensive to provide. Consequently, demand has been low because price is high and usage beyond WhatsApp or Facebook for much of India has been unnecessary. TRAI should redefine broadband as, at least, 25 megabits per second preferably, closer to 100 mbps. Anything less that this leaves video and audio content out of the hands of hundreds of millions of people.
    3. Encourage telcos to re-invest into infrastructure and provide minimum broadband speeds of 25 megabits per second over wired and wireless. Provide tax incentives for them to re-invest in India’s digital infrastructure and even bigger breaks if they provide higher speeds in rural parts of India at discounted rates.
    4. Invest in an ultra highspeed national Internet backbone.
    5. Invite international companies (e.g. Google, Facebook, NTT Docomo, Verizon, Deutsche Telekom, Telenor, etc.) to invest in the Indian digital infrastructure and compete on a level playing field while maintaining the fundamentals of Net Neutrality.
    6. Provide subsidies to the poor and rural parts of India to get online. Require an Aadhaar card to be eligible.

All of this aside, I think the government will have more far-reaching issues to address in the budget, some will likely be linked to demonetization and the affect it has had on GDP but we can all hope that Indian startups and investors get some love this year.

Related Posts:

Categories
Business and Economics Entrepreneurship Finance Government India Venture Capital

Fighting Fraud Thru a Cashless Society

Photo by Flickr user Weldon Kennedy

Emerging markets often leapfrog technologies. For much of Independent India, it was very difficult to get a fixed-line phone. They were expensive and the wait  could be as long as five years. In the 1990’s came the mobile revolution and people across India were able to get a communication device for a relatively small amount of money and they could take the device with them everywhere. Most importantly, they didn’t have to wait years, but only a few hours for the phone to start working.

When it comes to the adoption of non-cash payments, India is in a similar position. Cash has been the preferred source of making and receiving payments since Independence in 1947. Credit cards still have very low penetration across the country. While debit cards have slightly more penetration, mobile wallets (a method of storing credit/debit cards and cash on a mobile phone) have seen quick and widespread adoption. By some estimates, there were 19.9 million credit cards across India in 2014. PayTM and MobiKwik, two of the largest mobile wallet providers in the country, claim to have 20 and 12 million active users respectively.  It’s pretty evident that India is fertile ground for cashless transactions, but also has plenty of room to grow.

With the recent developments in government, essential steps for promoting the use of electronic payments, including withdrawal of surcharges, service charges, convenience fees on cards and digital payments are soon to be rolled out across the country. While the adoption rate of mobile, card-based, and online transactions is currently lower than many other countries, payments via online platforms still accounted for 14 percent of all spending in India last year.

India, with most other emerging markets, faces the challenge of regulating transactions and removing illegal “black money” from the system. A recent study has India ranked fourth in the world for illicit money outflows with an astounding $51 billion leaving the country per year between 2004-2013 alone. Yesterday, Prime Minister Modi took a bold step in curbing the use of “black money” by changing the status of the ₹ 500 and ₹ 1,000 notes as no longer legal tender. This could have short-term implications on GDP since cash purchases still made up a large chunk of the Indian economy. The Indian government will eventually introduce new notes in addition to the ₹ 2,000 that was just launched.

These changes are going to create a significant amount of intended strain on the country’s parallel “black” economy but it’s a blessing for Indian startups and new age, digital first, financial services solutions. It also helps advance the government’s policy of financial inclusion by bringing the unbanked into the financial system.

The Solution to the Black Economy: Going Cashless

Cashless transactions with the right security measures in place would remove customer reliance on underground markets (also known as the “parallel economy”). At the moment, high transaction fees, time to complete a transaction and potential security problems are hindering the popularity of cashless transactions, but legislative progress on both fronts does suggest a positive outlook moving forward.

Enabling people to make inexpensive and easy payments using a phone or a fingerprint is convenient both for buyers and sellers and offers tighter security. This ultimately limits fraud and decreases the circulation of capital in the shadow economy, which, in turn, will lead to more tax revenue.

Shining a light on the parallel economy is something that has challenged governments all over the world for ages, even in established Western countries. In Italy, these underground activities are believed to make up 21% of the economy.

The Indian government understands that a cashless society will make it easier to curb the illicit outflow of capital and is taking steps to encourage technology solutions that scale with the size of the Indian economy.

Trust in a Transaction: Know Your Customer (“KYC”)

Knowing the parties in a transaction has always been difficult but in the digital age, a whole new level of uncertainty and potential for fraud exists. It’s part of the reason banks make customers jump through hoops for seemingly minor and mundane information to authenticate identity.

The ongoing work by the Unique Identification Authority of India to collect biometric data and issue all residents a universal ID number (called the Aadhaar) is unprecedented and early results are promising. The program has continued to grow rapidly over the last seven years with recent enrollment passing one billion citizens. However, the infrastructure needed to effectively implement Aadhaar throughout the country still needs workaccess to localized bank branches and ATMs, for example, is not readily accessible to millions – yet. Though the program is still in the early stages of implementation, it represents a major leap towards a financial infrastructure with strong safeguards in place.

The tweet above by Sanjay is indicative of how Aadhaar is going to change the way verification of parties in a transaction (“eKYC”) and transactions themselves take place for more than a billion people. The largest mobile wallet in India, PayTM, has reduced paper based KYC to 1%.

In order for cashless transactions to catch on, mobile-to-mobile payments also need to be streamlined. Last year the National Payments Corporation of India launched the United Payment Interface (UPI) to make mobile-to-mobile payments easier. The system allows for the quick transfer of funds across different banks with the use of a single identifierremoving the need to exchange sensitive personal information during financial transactions. 

All you need to do is download a UPI enabled app and let the fun begin. Startups like Instamojo have been pushing the limits of how digital payments can be made or received for years. Now, with the policy finally catching up, they can make it even simpler to send money or receive payments with nothing more than a cell phone.

Transparency and Portability

The Aadhaar number is a good step in bringing a scalable identification system to an incredibly diverse population of more than a billion people. However, coupled with blockchain technology, solutions providing more financial transparency to the entire country can easily be developed. With blockchain, an open ledger of all transactions could be recorded in a secure and transparent network linked to the legacy banking system.

With a blockchain, customers could have account number portability when moving between banks. That portability is something that politicians in India are already calling for. Imagine, switching banks or brokerage accounts to a new service provider and taking your account number with you. Potentially, not having to deal with changing routing numbers or providing your employer with new banking information ever again.

NASDAQ is currently testing blockchain technologies in a trial program. Last year, nine of the world’s biggest banks announced a partnership to create a blockchain framework that could be used globally.

The Future

With all of these developments on the horizon, disruptive technologies and solutions around payments, financial inclusion, remittance, public market investing and broader financial services are going to be boundless. As India adapts and implements the proper security measures and makes bold policy decisions, digital transactions will continue to become accessible, easier, less expensive, and, hence, more frequent.

Customers will have peace of mind about their accounts being protected thanks to biometric security. Business professionals will also find comfort in knowing that blockchain technology records all transactions and protects them from fraudulent activity.

Arguably the biggest winner of all will be the Indian government. With such a system in place, it could greatly reduce its much-derided bureaucracy. The government will also be closer to it’s goals of banking the unbanked, stamping out corruption and black market activities while simultaneously increasing revenues and GDP (by adding in cash transactions that were previously not being captured by official mechanisms).

While India still faces some complex challenges, the country is certainly heading in the right direction with regard to a more sustainable cashless society. If history is any indication, India will, in fact, fully embrace the shift just as it did with mobile a decade ago, though, not without some teething pains.

Related Posts:

Categories
Finance India Investing Startups Venture Capital

A Quick Introduction to FinTech in India

Related Posts: