Are startups in India all about funding?

Bengaluru based food tech startup dazo shuts down due to lack of funding

Thank god I am not running after the startup frenzy aka showing prototypes & raising millions. A business is not just about how much you can raise from VCs and be billionaire on paper but keep burning cash. I believe it's about doing something you are passionate about but makes economic sense. I can sell a 1000 buck product at 500 and show a billion dollar sales in 1 year as long as I ve $500 million funding in my bank and get a 10 times sales valuation of $10 billion making myself notional billionaire. What's that?

I think in India we are repeating of what happened in U.S in 2000 and could cost India dearly. Startup.com (https://www.youtube.com/watch?v=ibuiUXOTE4M) documentary filmed in 1999 is an eye opener. There is nothing like doing something on your own but being a Marwari I understand the importance of starting small, scaling gradually and not do something that requires huge amount of incremental capital to start. I am an old school guy but I like to take home my profits even it's very small and use that to grow the business gradually with small doses of fresh capital. That helps me not go bust even if I do a blunder, which is bound to happen in your early stages of starting a business.

SENSEX in 2007 vs SENSEX in 2010

There is lot of skepticism and fear among the people on the street. The crash of 2008 has left an impression on investors which is horrific and tough to forget. But where would people invest if not equities. People who remain hibernated till today have the leftover feeling now and trying to renter the market, but market this time is not obliging them. Most of the falls that are happenning are very shallow and tough to time it. This time the market is diametrically opposite to what it was in 2008.

The biggest difference is that the valuation that the sensex was trading at 20000 in 2008 was close to 25 times, whereas this time when sensex is at 20000 it is trading at a comfortable valuation of less than 20 times its estimated earnings.

The other noticable difference is the fear and skepticism prevailing in the market today. In 2008 there were wide spread optimism and everyone who was in the market was making money without any effort. I myself know many people who left their job as they were making much more money in the markets then their job, and they were new investors. I was myself making lot of money and started thinking that all the investing principles I have learnt are so easy to apply and forgot the basic principle that success without effort & experience is a house build of cards and would collapse even with a slight headwind. And that is what exactly happened. Subprime crisis came in just when we were at bubble kind of valuation and when no body was expecting such blowout news. People panicked and pressed the exit button. Then the situation was similar to the situation of a stampede in a temple full of crowd. There was blood bath every where. But things are different this time around. People are well prepared for any catastrophic news, hedged and under invested.
99% of the people have not been able to participate in the rally from 8000 to 20000. they are now waiting for a chance to get in and that is why every dip is being bought immediately.

Third is the the small & midc cap stocks valuation. In 2007 there were hardly any good quality midcaps available at less than 10 times PE multiples. But today even when SENSEX is at 20000 there are many good quality midcaps available at less than 10 times PE multiple. This also signifies that retail participation is not there which is usually responsible for creating panic like situation in 10-20% fall.

All these factors would prevent a major correction in the markets and every dip would be bought by the new investors. 10 to 20% fall is possible in any kind of market but a crash seems to be not happening in near future. It seems from the market movement that it will spend sometime near 20000 and would slowly move up. The mid caps and small caps would eventually catch up and would outperform the large caps over the next 1 year.

So the best approach now would be to selectively look for quality stock available at cheap valuations and avoid investing in hot stocks available at rediculous valuations.