Technology, Venture Capital, Private Equity

Was in Dubai for a few days on work and had the chance to witness the view from the top of the highest building on earth – the Burj Khalifa. And, there couldn’t be a more apt metaphor for the situation in Dubai than the Burj itself. While there has been much drama about both the tower itself and the opening ceremony with the last minute renaming and all, which purportedly has more than meets the eye, standing at the top I couldn’t help wondering what the economic rationale for Dubai to host this otherwise magnificent tower could be.

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Morgan Stanley’s annual technology report has been released for the year that just passed i.e. 2009, downloadable here. This edition focuses on the mobile internet. I have been a regular reader of these reports for the past few years, and have to admit that the 2009 edition has been the best so far. The theme this year has been the mobile internet. The report throws up some very interesting statistics on the phenomenal growth of the mobile internet such as the following:
* The penetration of technology in every computing cycle has been 10x the previous one in the following pattern – Mainframes:1MM+ units, Mincomputers:10MM+ units, PC:100MM+ units, Desktop internet:1B+ units. Therefore, the anticipated adoption of mobile internet is expected to be 10B+ units.
* The cumulative wealth creation of the top 5 companies that dominate each era has been higher than the previous one
* Mobile internet adoption on iPhone has been 8x that of desktop internet adoption on AOL in 9 quarters since their respective launches
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Financial Information Networks and Operation (FINO) has raised Rs 70 crore in a new round of private equity funding from HSBC Private Equity. Existing investors Intel Capital and International Finance Corporation (IFC) have also participated in this round. FINO provides transactional systems to the unbanked sector and also provides enrollment for customer acquisition. It provides these services to clients like banks, microfinance institutions and insurance companies.

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The news flow this week and the manner in which media, especially Indian media has reacted to it has in many ways corroborated what’s been on mind for some time now, which is – the media’s role in precipitating boom bust cycles. From the “World is coming apart, again, because of the Dubai debt crisis” to “We are back in business thanks to smashing GDP growth in India”, the difference in projected moods could not have been starker. One could argue that it is expected of the media to report actual happenings and if that’s the way things are unfolding, so be it. However, it is not the Dubai crisis or the impressive India GDP nos in particular, but the general manner of news reporting in India itself that I’d like to touch upon.

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…and had pitched to a VC, he would’t have been funded….because the VC would have asked the following:

Where are you going?
Why?
With whom?
Why you?
How are you going?
To discover what?
What is the market for discovering India?
If if is really so lucrative to discover India, why is Microsoft not trying to discover it?
What if Microsoft also tries to discover India, how will you beat them to it?
What if you reach India first and Microsoft follows you and throws you out of there?
Show me the route you’ll take…
No no… I want the entire route… along with the exact days between each stop…
I think this is a very aggressive route… you should budget more number of days in Portugal…
Who will accompany you on the boat?
But Joe doesn’t have experience in steering small boats… he has only been on big ships…
Ok, who’s the cook?
You mean you don’t even have a cook on board? So, what will you eat?
What if you run out of pasta on your voyage?
But, you said the same last time when you were trying to discover China and abandoned it half way…
I still don’t understand what else is balance to be discovered…
Ok, I am willing to fund you if you give me half the loot from India if you get there, or allow me to sell your boat if you come back emptyhanded…

Had gone into a slumber for long (as far as blogging goes i.e.) partially due to increased work loads and partially because of laziness. Had a few ideas I was contemplating on to blog about. But, thought I will resume with a post on the “creative” world of advertising. Was watching an interview on a business channel recently of one of the most prominent creative directors of a leading ad agency. The journo asked him on whether he thought that having an understanding of business or domain knowledge of the client’s industry was a requisite for being a good advertising professional, to which the expert’s answer was an emphatic “no”. He said in as many words that he viewed an ad agency as a “factory of ideas” and that just as an IT company produces s/w code or an auto company makes cars, ad agencies “made ideas”. Therefore, it was not expected of them to really have too much understanding of specific industries or companies. I have to admit that I was almost petrified by that answer. I have had the chance of working with media companies in the past as a consultant servicing them. And coming from the IT industry at that point in time, it was some kind of a culture shock to me. Every industry has its idiosyncrasies. If pinstripe decked, tiepin adorned “suits” typify the now much maligned investment banking industry, then the pony tailed, floater flaunting “creatives” are their professional cousins in the media world. And any professional manager working in the media industry will probably admit in private that keeping reins on them is as unenviable a chore as managing a bunch of unruly kindergarten brats.
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This is a graphic depiction of what has happened to the market values of the top banks over the world. RBS, Barclays and Citi in particular make for an “interesting” sight. (Click on image to enlarge).

Just finished reading Malcom Gladwell’s “Outliers”, where he describes the role that unaccounted events/circumstances play in bringing about extraordinary results. He uses this mostly to elaborate on the achievements of exceptionally talented individuals, but what was also interesting is some of these examples that he uses to describe the causes for human accidents such as airplane crashes and industrial disasters. For example, he analyses the Three Mile Island nuclear accident in Pennsylvania in 1979. He states -

No single big event went wrong at Three Mile Island. Rather, five completely unrelated events occurred in sequence, each of which, had it happened in isolation, would have caused no more than a hiccup in the plant’s ordinary operation. The first minor problem was a blockage in the plant’s polisher (a giant water filter of sorts). This blockage caused moisture to enter the plant’s ventilation system which tripped closed two valves thus preventing cold water from entering the plant’s steam generator to control its temperature. These two problems by themselves would not have caused a problem since the plant had a backup cooling system set to activate in such a situation. However, for some unexplained reason, the valves of the backup system were closed that day. But this too should not have caused a problem since there was a light on the engineer’s control panel that illuminated indicating that the backup system’s valves were closed. Unfortunately, the warning light was blocked by a repair tag hanging from the switch above it. But there was still another backup system in place that should have cooled the reactor when it started heating up. But, as luck would have it, the relief valve wasn’t working properly that day either. It stuck open when it was supposed to close, and, to make matters even worse, a gauge in the control room that should have told the operators that the relief valve wasn’t working was itself not working. By the time Three Mile Island’s engineers realized what was happening, the reactor had come dangerously close to a meltdown.
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