Overinvestment in technology a double-edged sword: Gururaj Deshpande
Investment in technology can be a double edged sword, feels NRI tech billionaire and startup evangelist, Gururaj Deshpande. Citing the example of telecommunications, Deshpande says that at one point in time technology could never keep up with the demand. So, companies that came up with the right product enjoyed a huge margin of 80-90%. Such huge margins meant these companies could afford to invest in and so on. But seeing the success of incumbents when there's overinvestment and the technology overshoots, then it becomes a commodity.
“So, it's still very expensive to develop the technology, but the technology itself does not have that value. And the whole thing collapses and so does the market,” says Deshpande. Hence, the septuagenarian investor cautions entrepreneurs by stating when VCs get impatient and ask you to spend a lot of money very quickly, without putting enough thought into it, the entrepreneur has to balance that and make sure that he says, “No, I'm not ready for it.”
Only those founders who can navigate a competitive market and offer real value to customers will win. “Ultimately businesses don't get built unless somebody pays you X and you give them a benefit of 2x-3x or something. If that isn't clear, it's hard to build a business,” says the founder of Deshpande Startups.