Venture Capital in India: Ashish Gupta (Part 5)

SM: What is happening on the retail side?

AG: Lots of interesting stuff is happening in retail, financial services, and education. One way to look at India is as a readjustment of a standard of living. Everything that goes into standard of living is in a boom phase. In retail, there was a time when a lot of the guys were growing completely uncontrolled because they had unlimited access to capital. A lot of those took a step back, shut down some of the stuff they were doing, and continued on with growth in profitable areas.

You are seeing examples of very good growth in practically every area you can think of, whether it is pharma chains or new brands of clothing. Retail services is going well. We ourselves have investments in a beauty salon chain and in a quick services restaurant chain. The entire food business continues to grow. Logistics has enormous opportunity for improvement, and a lot of people are stepping in and making those adjustments.

SM: Who are the entrepreneurs? Are they people coming from business families?

AG: One of the points that really reassures people like me is that the people starting these businesses are not people with a long history of owning businesses. In fact, the bulk of them are folks who worked as execs for an existing chain, had no independent wealth or business roots, and are first- time entrepreneurs. By bulk,  I mean over 70%. They are first-generation, non-tech entrepreneurs.

We have seen more of them than we have seen folks who are family-oriented business guys trying to reinvent the wheel. They are high-quality execs. A 22-year-old who has great ideas on innovation is not necessarily best suited to run one of these businesses. These are folks who are in their forties who have 20 years of work experience under their belt and are willing to break out on their own and work for a startup salary. It is incredibly promising.

SM: Education is a very big space. That is an area on which Indians like to spend money.

AG: And there is a huge need because the government has dropped the ball. Private entrepreneurs are filling the gap. We are seeing practically every form of venture in this space. They start with pre-schools. Then you go to K-12, and there are also people who are setting up private schools and growing those franchises significantly. Even though there are regulatory issues, the government is turning a blind eye to several of the folks who are skirting the regulation. We think that this is very needed.

Undergraduate education is also included. There are private colleges that are doing billions of dollars of revenue. There are at least 3,000 private engineering colleges. It is just a huge business.

SM: Who teaches in the engineering colleges?

AG: The teacher-training portion is going to be interesting in determining how far we can go. The quality of teachers is not very high. I have seen business schools in which the same person teaches finance, marketing, and strategy depending on time of day. You can imagine what would be going on.

There are problems. Some students spend four years and a bucketload of money to get a degree that they find out is not recognized once they graduate.

SM: So much of it is turning into a scam?

AG: Not entirely and not in large measure. Net/net there is some damage, but overall it is moving forward. These colleges will get sorted out. The opportunity in the education space is clearly there.

SM: I think it all comes down to faculty. You cannot deliver quality education without quality faculty. This is the fundamental problem. Who is going to teach at an engineering school when you can make so much more money working in the private sector?

AG: A number of companies are taking exactly what you are saying to heart. It is resounding clear that faculty is the biggest liability. These companies are producing canned teaching material that will be teacher-assisted as opposed to teacher-delivered. That keeps the jokers from teaching. It is glorified proctoring converted into self-learning. The bottom line is that institutions and vocational training of every single form are thriving.

This segment is part 5 in the series : Venture Capital in India: Ashish Gupta
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