First ever AI city in UP - Will it succeed? | #Roundup #138 | The Startup Operator

[00:00:00] Hello and welcome to the first episode of the year, this is Roundup 138, I am Roshen Carrierpa And I am Gwynjensaha and together we break down the biggest highlights from India's growing startup ecosystem

[00:00:13] For the first episode of 2024 we have of course will take a look back into the state of startups in 2023 And the next we try to understand why the $20 billion deal between Adobe and Figma fail to close

[00:00:26] These are two industry giants they want the brink of collaboration that could have potentially revolutionized the creative landscape but somehow it went south Then we explore the government's plans to amend the IT Act and introduce new rules for AI and generative AI

[00:00:42] And we also take a look at India's LLM race and see what's in store for 2024 We'll also recap how we use the internet in 2023 and I don't know if you know but Indians downloaded over 26 billion mobile apps last year 26 billion mobile apps So let's get started

[00:01:05] But before we jump into these topics, well if you're returning, let's know please consider liking this episode and sharing it with your other friends And if you're a new listener tuning into this channel, we talk a lot about startups, we talk to investors, founders and other operators

[00:01:20] So make sure you subscribe for regular updates Ross and kicking off the first episode of 2024 What were your biggest highlights of 2023? Well first of all I'm excited to be talking to you folks again

[00:01:32] Of course I'm looking at a camera and I'm looking at Gwynjens face and the producer here But it's funny how the producer is just the producer There's a certain enigma attached to that but 2023 was a fantastic year

[00:01:47] I should say right, I mean a lot of learnings coming out of it To me I think two or three themes first is the whole push to profitability Obviously we were coming off of the zero interest era And 2023 kind of made that real

[00:02:01] So whether it was private companies, public companies etc There was a greater focus on profitability and startups to remarkably well Rather than here of fundraisers and e-sop by backs and whatnot

[00:02:15] I mean it was a good change to hear about people being evita positive, having positive contribution margins etc etc I mean this is a new term that we were introduced to Particularly if you look at some of the public companies

[00:02:31] I mean who's stock had taken a battering whether it's Nikas or Matto, PTM etc I mean all of them had tried to innovate in 2023 to get better I mean to adjust to that quarter to quarter the mentality which is not that easy

[00:02:47] You know for a startup because startups you know move fast break things think long term And all of those things I mean it's it's that whole juxtaposition of you know being nimble like a startup And being reliable and sustainable like a public company

[00:03:02] I think 2023 was a big learning for some of these startups that way And things flowed top down I should say And so you know whoever you talk to whether it is founders of you know seed stage companies or grow stage companies everyone

[00:03:18] Had the pivot you know ready on their lips, you know at all given times The other theme for me emerging from 2023 was the focus on deep tech and AI You know we had folks like Kowshik Mudha of ethereal machines which you know you guys know I mean

[00:03:36] Was a super hit podcast for us right and a few others as well Proved that you know India is ready to make the leap from software to hardware and beyond right So that was fantastic and you know we will have to get more fundamental innovation

[00:03:54] The right and and really I mean I hope the 2024 is a is a year we talk about science and R&D and you know Innovation at the chip level perhaps right LLMs are a start right I mean at least the right direction. I will say

[00:04:09] So so that was heartening, you know and there's capital flowing into these neglected Areas previously neglected areas as well So overall I think those were the two very big themes I should say and you know aside from all of the gloom and doom of the markets elsewhere

[00:04:29] You look at you know you look at how nifty and sense X have performed I mean where at all time high is right so much So that I'm wondering you know if you know if if I really have to stop some of the SIPs and what not right

[00:04:42] I mean it's a yeah, it's it's an interesting time. I would say and you know 2024 obviously Will be a continuation of some of these things But you know we have a bunch of variables right we have the Indian elections the US elections

[00:04:54] Probably half a dozen other countries that are going into election mode this year Right and and all policies downstream from politics So we don't know you know how Some of the economics of startups and VC and investing will change

[00:05:10] So yeah a lot to look forward to in 2024 and I hope you know it's kind to all of us Yeah, well this has been a good year for us as well right I mean when we started 2023 we got this banking news studio

[00:05:24] Yeah, we did our first you know startup operator on the road. We did our first startup operator live event And I'm just excited for what's more to come in 20 a lot more of these

[00:05:35] And I think what I'm most excited about is to you know interact with founders from TU 2 TCS cities we had many of them in the podcast last year and hopefully we'll have many many more in this in the same as well

[00:05:47] Yeah, how many episodes do you think we put out last year? I think definitely around 75 75 Yeah, I mean few and how many days I mean how many episodes per day is that He's like a massive man We're wait 75 35 Alright, we'll be back after a short break

[00:06:09] 5 days for one episode is not bad Well, it's certainly better than you know I would say 95 97 person of the podcast us out there So yeah, we got that Okay, let's look at playing with in terms of some numbers

[00:06:24] Indian startups till date have raised a total of 146 billion dollars in funding and we have 112 total unicorns in the ecosystem India is now the second largest startup ecosystem globally second only to the US Of course there were challenges last year

[00:06:39] We saw around 35,000 layoffs and the shutdown of 17 startups that raised a total funding of 214 million dollars But despite this challenges companies like grow fractal, indefi and cart rate performed really well The total funding in 2020 was 9 billion dollars which was a 35% decline year on year

[00:06:59] But the startup ecosystem still remains resilient. We have a lot of learnings and of course A lot of more potential for the Indian entrepreneurial community Yeah, so we just in continuation of the third point I made on market exuberance in India

[00:07:13] I mean that extends beyond the market itself I think there's a certain optimism in India that we sort of take for granted It's not the same outside, right? You know there's this guy Josh Bull who's a VC at Lux Capital Who's just visited India right?

[00:07:30] I mean incidentally like two three others have visited India during these holiday seasons Season and you know, you should look at his timeline The things that we take for granted are the things that most surprised foreigners And there's a sense of optimism here that is not common elsewhere

[00:07:48] I know I've had people a lot of people visiting as well in fact one of our guests Shruti Gandhi as well right from Ares VC I mean she visited India and she had a lot of nice things to say about

[00:07:59] You know infrastructure and general startups in and so on Right, so so that I think is something for us to be you know Really kicked about I think Yeah, we'll even do our deeper spent on use in India so priorities Alright, let's talk about Adobe Figma deal

[00:08:18] Adobe had attempted to acquire Figma for approximately 20 billion dollars But this deal was blocked by the European Commission and the competition and market authority These are the regulatory authorities of the UK and EU respectively Adobe XD which is the product that most closely resembles Figma

[00:08:35] It is internally considered to be a failed product and from what the general counselor to say is that There's absolutely no overlap between the customers of the two products Regulators have been very focused on the newer doctrines of antitrust law

[00:08:50] They say that the future competition is a critical part of the antitrust analysis The only way to solve a future competition issue is not to do the deal And that is essentially what the regulators were telling them

[00:09:03] Now Roger, no opening comments you mentioned that key are these this was always doomed to fail Why did you say that? Look, before that I mean Adobe has struggled forever to make the transition from app to internet Right and not just that

[00:09:22] I mean, basis that you know from being like a single player only to you know a more collaborative approach And many different folks have tried to you know solve this whether it is omnia or sketch and plenty of others

[00:09:34] But Figma has just really run away with that market Right, I mean the clocking 700 plus million dollars ERR Which is an insane amount of money Right and and probably what in the last four or five years that's about it

[00:09:48] This was doomed to fail because obviously this would you know get in the Getting the eyes of you know all of these whether it's the federal trade commission or whether it is you know some of these European regulators and so on and so forth because

[00:10:02] This was actually I mean, I think it's way higher than 20 billion right because the Adobe stock jumped after this news And considering that it was you know part cash and part stock I mean it is way more than 20 billion itself

[00:10:16] So it will have a certain chilling effect on startups. I would say less so for Indian startups in that sense because I mean again 20 25 billion 30 billion We've not had those kind of exits in India right I mean the highest is being about you know 16 billion for flip card

[00:10:33] Right and that has been an outlier right, I mean we haven't had anything even remotely close over the last you know 20 years or start a packed routine in India

[00:10:42] So it will have a chilling effect in the sense that look I mean if you think about exit options for startups

[00:10:48] What are they there either you know they can go public or they can you know have some kind of a money through these sort of deals right now

[00:10:57] If you rule out deals at a certain level let's say you know 20 billion right, but is it 20 billion or is it 15 billion? No, is it 15 billion or is it 12 billion we don't know right we really don't know

[00:11:11] So the ceiling hasn't been defined in that sense right so a lot of these larger M&A deals have common discruteny

[00:11:20] And this Adobe deals Adobe and Figma deal was just one I mean there were others as well around the same time two three others. I mean I'm not able to recollect

[00:11:29] And all of it is bound to have an impact more so in the US I would say right than cure So luckily for Figma they had some kind of a breakup fee baked into this entire arrangement in the sense that I mean if they emanated and happen

[00:11:43] They would get a billion dollars and likely they will get that right I mean of course, it's not as straightforward and it'll go through some sort of you know push back and whatnot

[00:11:53] But for Figma I mean they can still list in the markets. They won't get that kind of premium that you know Adobe was offering right markets even for the best of best companies in the US

[00:12:04] I mean they're trading at single digit high single digits at this point so that is not the you know 20 25x valuation that they were kind of getting with the Adobe deal So maybe the employees will be a little sadder

[00:12:19] Right there a few billion short but yeah, I mean we'll see how this kind of pan-salt you know the FTC with Lena Khan has been fairly active Right and the European Commission obviously you know I mean they have a

[00:12:36] They have a real life for all this sort of antitrust and whatnot So should be interesting. Yeah, but this would have been an interesting Deal right because Adobe designer's hate Adobe

[00:12:48] Yeah, I mean because of all the licenses and upgrades and this and that and whatnot right. I mean yeah You can also produce or I mean they absolutely hate Adobe But yeah, I mean they can celebrate as opposed

[00:13:06] Moving on to the next topic the Ministry of Electronics and Information Technology is planning to introduce amendments to the IT Act of 2021 That will require platforms using AI algorithms or large language models to ensure that they're free from any bias

[00:13:20] These amendments will prohibit the use of biased datasets and mandate platforms to follow these guidelines Apart from the safeguards of preventing bias in AI and language models, IT rules May also bring new Regulations to tackle deep fake synthetic content and explicit instructions for platforms on loan apps

[00:13:38] Said one of the persons who is aware of this development Now really interesting point that comes up here is that Today's large language models have been trained on you know human generated content, which is available online But now as more and more AI generated content comes

[00:13:56] Comes up it's gonna start feeding the AI models gonna start feeding itself Now I do not know how that will play out in the real life scenario

[00:14:03] Yeah, that's a good point that you bring up. I think obviously these models will have to recognize you know machine generated data and human generated data for starters, right? But data becomes so much more important, right? I mean I

[00:14:19] Don't know if internet as it has existed thus far where pretty much everyone can scrape any information they want off the web Will you know exist going further right because if I'm able to train you know a model on let's say tweeters

[00:14:37] Data, right which is humongous right. I mean they have got no so many Penta by it's whatever giga flops whatever they call whatever amount of data right You know, I mean my model gets that much more better, right?

[00:14:53] And and so I mean Twitter may say that you know they may start charging people for that actually that if you have to like sort of use my data for you know training or

[00:15:03] I mean you might you might need to pay me a subscription fee or something or they may even forbid that kind of a thing right? I mean because each of these folks, I mean all the large folks are developing their own AI right Elon has grog

[00:15:17] Right, I don't know I haven't I mean it's it's right there calling out to me on the side panel, but for somebody is an omin just it's been too freaked out to sort of like click and like explore

[00:15:29] But it's it's something to consider you know, I mean one is their whole data aspect for sure, right? Who gets to use some of these data and how and second this this problem of defects in and what not I mean look right now everything is fun and games

[00:15:46] Right, you saw those melody memes right where Mouniji is singing to You know the Italian Prime Minister Meloni in multiple different ways and yeah we're all laughing at that stuff but I can get really serious as well right I mean and it can you know

[00:16:05] Extend beyond all these celebrities to someone you know you know so I think regulation obviously is required But how the hell we're going to manage to sort of define some of these things is just beyond me. I mean I have no answer to that

[00:16:22] Define but also tackle because there will be you know those people who break the law Some of them say that you just have to go back to your first principles and look at you know some of the fundamental free speech laws that you know have

[00:16:34] Been formulated across the world and just hold them to that and some of them say that you know no, I mean you know You all have to evolve and and so on and so forth. So I don't know

[00:16:47] I don't really know the answer to this I mean maybe we should get like someone who can talk on your regulation on the podcast And you know really probe them on something like this. This is a good topic. Yeah.

[00:16:57] We'll also last year when you know Sam Orpand visited India he read he downped the possibility of India coming up with its own LLMs But there's a very Heated of LLM race going on in a country

[00:17:11] There's crude room, which is a multi-language AI model in 22 Indian languages and it outperform GPT 4 in Indic languages Then we have India's first Hindi LLM which is built on matters AI architecture. It's called open hathi

[00:17:24] We have Bharat GPT that empires developers with multi-lingual virtual assistant in 12 plus languages Zoho has built a smaller AI model for specific domain problems. There's in this project which is techmintras open source LLM

[00:17:38] We discuss the partnership between reliance and Nvidia and Tata and Nvidia to develop foundation in LLM models And also upscale AI talent in the country and of course we have the likes of Bhashini AI for Bharat project one

[00:17:51] So there's a lot of exciting things happening within the AI domain within the country And the multiple reports that claim that India's talent pool is the best suited to take the AI development forward I'm really excited about the second order effects of some of this right

[00:18:08] I mean which is that people who will use some of these LLMs to build more practical applications for the likes of you and me And that could be very India-specific as well because they are trained on India datasets and you know

[00:18:23] We're building for Indian solutions basically so so that could be interesting. I would say Yeah, I mean India is one fourth the one fifth of the entire world's population right And we also contribute the largest number of languages. So we've been interesting

[00:18:37] So in 2023 Indians downloaded a total out 25.96 billion apps on it How many less than 26 billion is that? So welcome to the math class today. 400,000. All right. Plus 5 million. We'll be back after a short break Okay, so while almost 26 billion dollars 26 billion is a large number

[00:19:08] This is still 2 billion less than what we did in 2020. We download 28 billion apps last in 2020 Indian app shows earned a total of $1 and 15 million Collectively which is a notable increase yet India ranks 25th in the global earnings

[00:19:26] Google of course retained his position as the most popular app in Google in 233 accumulating a total of 449 million downloads But while all of these things have been going in the forefront, Phone pay lasted challenge Google placed over in India with the announcement of its in this app store

[00:19:42] It offers Indian Android developers a free, free alternative for distribution apps I think yeah this year might just see some sort of traction in that Yeah, so I'm going to stick my an account and say this whole Google play and app store

[00:19:57] Do you probably will kind of break in the next couple of years Right, I mean or I think that whole contractual pricing arrangement will start to like you know change change in more ways than one Right, I mean you're already seeing that there lost that epic

[00:20:15] You know brought against Google right and and you know Google is right now. I mean Talking to a pick to basically like enter into some sort of a financial arrangement to still be on the play store

[00:20:26] Right, and so I mean anyone who has some sort of leverage and cloud will start renegotiating with the likes of Google and Apple if they haven't already right

[00:20:35] Because at whole 30% you know margin is a lot right. I mean even if you take SAS, SAS at you know 60 70 percent gross margins I mean 30 percent significant what about some of the you know other businesses that

[00:20:49] You know that that make like 30 or 40 percent gross margin in the first place, right? I mean it's it's insane you can't run a business on that sort of a economics. So yeah, I think something will definitely give way in the next couple of years

[00:21:04] I would say my hunch is that in the near term or in the midterm Apple and Google will start becoming deal makers Interesting to see how this will play out

[00:21:15] Well in a bold move, I'm as increasing global reliance on AI, with the Pradesh has set its site on constructing India's very first AI city in Lucknow The UP Electronics Corporation has released an UI which is an express of interest

[00:21:30] Seeking proposals for the design development and operation of an AI city They've invited you listed developers to participate and submit proposals for it

[00:21:39] And for this project the government has already set aside 40 acres of land and is also announced financial incentives including a one time keeper support and 100 percent stamp duty exemption

[00:21:50] Now Lucknow is already a host to a centers of excellence, specializing in fields such as AI, Mettech, showcasing extensive integration of AI technologies And the state is also planning to become a one trillion dollar state GDP A state by the next four to five years

[00:22:07] But how do you restrict your thing this is an AI city? Well, I mean it depends on the amount of money they're going to spend And of course, I mean see the what do you say? The larger significance of this is that focus on AI, right?

[00:22:23] I mean if and when we have this sort of an AI city or whatever, don't expect robots to be roaming around and serving you, try and whatnot But really the larger goal or the objective is to get people to focus on AI

[00:22:37] And to that and I think it could be an interesting move, let's see how it sort of plays out Well, this first AI city in India kind of reminds me of the line or new one that has been built Just a trillion dollars short

[00:22:52] So yeah, let's talk about the first fundraises of 2024 Food and beverage chain, we are a hospitality, raise 10 million dollars from access bank, grew house, using inclusive credit and be ventures and angel investors Dairy brand country delight, raise 20 million dollars from Tamasak, severe capital and venture partners

[00:23:12] Captain fresh, raise 30.25 million dollars from Nikonthi's e-foods and Shakti's invest With free raised 11.24 million dollars from S-BEN investments, target global, niporn x-res front and x-lord technology's fund

[00:23:26] So not off to a bad start but of course we're still not seeing the sort of stellar fund, either we saw in 2021, 2021, 2021, 2021, 2021 But again I don't think that was expected Yeah, no I mean it's interesting couple of things, access bank is behind you know Indian banking represent

[00:23:41] So they're in the game and look at some of these D2C folks, Captain fresh and so on Yeah, I mean this whole food supply chain is up for disruption I would say right this farm to fork model Needs innovation for sure, right?

[00:24:00] We spoke about this in the episode we did with Mukundhan of Stelabs as well that you know the 30 or 40% of the food is wasted And that entire supply chain ecosystem is something that requires a lot of optimization

[00:24:16] Yeah, one of the most lucrative businesses in India is to start up a warehouse actually Really, you know, so are you putting up a warehouse? Not anytime soon still committed to SaaS but yeah, so good we're off to a good start I would say

[00:24:32] So for the talk of the town section I wanted to pick Jason Lemkins tweet he talks about the five best pieces of advice I ever got from my mentors

[00:24:42] And you know he talks about meeting customers always recruiting not letting go of the good ones finding a great mentor and much more Russian what do you have anything to add to this?

[00:24:53] I love Jason's tweets and blogs and whatnot, I mean I think he is amazing he's a grand daddy of SaaS I would say right and always has very practical wisdom

[00:25:04] You know that you know what he says is weighted by his own personal experience or maybe I mean what he's seen in the market So yeah all those five things he mentions are absolute gold right

[00:25:16] There's a tendency in difficult times to got off sort of creep into a shell not talk to anyone and so on No, you should do the absolute opposite go and meet all of your customers especially the ones who are using your product a lot

[00:25:30] Talk to them understand from them and be more relevant to them Don't let the good ones go which is that you know people and roles have to evolve Make sure that you know you care for their careers and so on and so forth

[00:25:45] Make them adapt as well and plenty of others. I mean he explains this stuff better than me So I would definitely urge you guys to check out Jason's tweet and also check out Saster as well

[00:25:58] I know a lot of you all already know saster, but yeah for the three or four people who might not have heard of saster I mean do check out Jason Lemkin and Saster they produce amazing amazing content This is not as one supposed of course not

[00:26:11] Awesome, so after a great start in the first week of 2024 Hopefully the year will pick up right a lot of new learnings lot of new announcements to be made So make sure you're following the start of pop it on a favorite podcast platform and also on social media

[00:26:27] If you want this updates to be delivered state into your WhatsApp inbox You'll find a link in the description below So that's it. We'll be back with more exciting updates next week Yeah back to your regular programming