CHAMATH PALIHAPITIYA knows how to grow an organisation fast. As the head of user growth at Facebook, he helped build an audience for the social networking site. But, as a venture capitalist, Sri Lanka-born Palihapitiya is going slow – one at a time. He knows scale is important for an organisation to make an impact on society. Yet, it also has to be sustainable in the long run. It is the same philosophy he has adopted to invest in India. Ezetap is the only one start-up so far which he has invested in the country. “At Facebook, a lot of our success was by being patient and just by focusing on diligently executing,” he tells Anita Babu and Ayan Pramanik. Edited excerpts:
Why is that you’ve only one start-up investment in India, Ezetap, apart from your partnership with Prime Ventures?
A lot of my perspective on this is really formed by how long I want to be in the industry. The opportunity here is like a 50-year thing. There’re so many things in India that are unbelievable – the youth, the inherent growth, the infrastructure that is being built, assisted by the growth of Aadhaar and IndiaStack (a paperless and cashless service delivery system). My thought is not why don’t we invest in Ezetap but instead, how do we build blocks to be successfully investing through 50 years. And, the first thing you need to do to be investing for 50 years is not part of business. The best way to do that is not to make a bunch of stupid investments too early. My whole thing is that right now, the most important and foundational thing I can do to help this country is to enable the expansion of credit and consumer consumption. The best way to do that was to focus on Ezetap. That’s why we continue to invest money there and they’ve built an absolutely huge company. We do not really talk around that much because we tend to be quite private about it but that company, I think, can enable a massive expansion of credit and consumer-led consumption. If it becomes the dominant component of GDP in this country, then India is on a trajectory that America was in the 1950s, 1960s, 1970s and 1980s. Once that’s done, I’ve time in the next 46 years to invest in more companies. A part of the ecosystem thinks that sometimes, you’re not rewarded for being patient. I never understood that because at Facebook, a lot of our success was by being patient and just by focusing on diligently executing. But, that’s not an elegant narrative because that doesn’t allow you to celebrate on Twitter when you’re raising money every other day. Hence, it’s an explicit decision that we’ve made that we’re going to build this company, focus here first and over the four months of time, we’ll have a lot of opportunity to invest a lot more.
Do you think greed is taking over sustainable business plans in India?
I don’t think it is greed. What we need to do is marry the entrepreneur with high-quality investors who’d understand how to build businesses. That happens only if they themselves have grown the business before. For instance, if you would like to learn a different language, you should definitely go to the person who can speak the language. That’s what we need to do, to help these entrepreneurs at the elemental level to construct better business models, really have a deep understanding and the unit economics, what’s the leverage in their business, what’s predictive, what’s reactionary and that’s the level of insight that only comes after having done it. We have helped do that at Facebook and now we have done that at many of the other billion-dollar companies, and so we just have a playbook that works. So, what comes out of that isn’t greed, it is insight.
So, is it about the lack of experience of the entrepreneurs?
I think the entrepreneurs are quite capable and the investor class is reasonable and necessary but not sufficient. We need to have investors with more operational insights and playbooks that actually work. Investors also need to have the duration of capital where they can be here for decades.
