Wednesday, September 19, 2012

India is not producing enough

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Right now, Indian economy is going through a slump, and in the last few months we have seen Indian currency taking a massive hit reducing its value against dollar by nearly 20%.  The growth projections for India's GDP have come down from earlier eight-plus percentages to six-plus percentages – some analysts have even predicted only a five-plus growth rate.  Two months ago, petrol prices were hiked by eight rupees in a single day, the highest increase in Indian history, and already another hike is now announced.   There could be an economic crisis ahead, but we are quite optimistic that this phase will be over soon and that we will go back to getting adjusted to the new and changed environment – that’s the Indian attitude towards solving all the problems – swalpa adjust maadi (adjust a little).

Some analysts attribute this sudden worsening of Indian economy to Euro crisis, while some others blame the policy-paralysis of UPA government.  Many industry heads have been clamoring for Finance Minister of India to bring reforms hoping such an action will somehow bring India back on the track.  And the UPA government has recently reacted to allow FDI into some of the sectors, which is being greeted enthusiastically by the industry body.   But the essential question remains - is the root cause for our flailing economy the lack of reforms or is there something far more fundamental that needs to be corrected?  If we take a look at Indian economy from a macro level we will notice something grossly wrong with the big picture, with the way we are headed, with the way we do things.  There is something drastically wrong with our foundations.

Most Indians are not involved in producing goods of value.  Instead, most of us are involved in trading, buying and selling stuff without actually producing anything.  Since we are not producing enough as people, we are not earning enough as a country.

Wednesday, July 14, 2010

Engineering 101

When I joined B.Tech in Electronics and Communications nearly two decades ago, I was told that whatever I learn in the college will be of little use to me in my life because we will not be using any of the stuff taught in the program.  I took that advice quite seriously.  Instantly I convinced myself that it didn’t really matter if I did not pay any attention to the classes.  I just had to pass and somehow make it through the 4 years.  The campus itself had enough reputation that it will carry me through in my life, so why waste time in studying something which is of no use to me in the long run?

The graduating seniors who had passed out came back a year later to visit us and reaffirmed the same opinion, that not much of what I learn in my B.Tech will be of any use in ‘real’ life.  Because the ‘real’ life is so different that I would end up doing something quite different.  It was true.  Most of my seniors who graduated from the college ended up in MS programs in USA but had already switched to Computer Science, while few others got into IIMs thereby leaving nearly 95% of our subjects behind, and some others got into jobs at Hindustan Lever, Infosys, HCL, etc, securing jobs in marketing or software for health, insurance, banking, never having to bother with B. Tech subjects ever again. 

I guess I was always a 'big' picture person even as a student.  My 'big' thinking suggested that the scores and marks in the B.Tech subjects will not affect my life at all.  I decided not to study more than what was required to pass the exams.  Why unnecessarily waste time on something that is irrelevant in ‘real’ life?  Instead, I spent time on other things which seemed to make sense- like painting, art, debating, and of course, making friends and falling in love.  Since I believed these other things will remain with me for the rest of my life, it made sense to invest in them. 

Tuesday, March 23, 2010

Future of wireless in India

India’s Mobile Revolution is still underway baffling even the most optimistic pundits who did not anticipate such unprecedented growth.  According to TRAI, India has more than 500 Million mobile subscribers now.  That number could be inflated because many old pre-paid connections may not be valid.   Even if we believe the number is 350 Million, it is still a very big market and it is growing strong adding 10-15 Million subscribers per month – bigger than entire mobile subscribers of some European countries.

India has delayed its 3G UMTS spectrum auctioning for many years now.  The question that I pose is whether India should even consider 3G UMTS or should we skip it altogether to move to FD-LTE?


I recommend that India should hold off 3G UMTS spectrum auctioning for another year, completely skip 3G UMTS and instead embrace FD-LTE.

Tuesday, November 17, 2009

India or China?

There are scores of articles in every major newspaper and every major magazine comparing India with China on various economic progress indicators. There are even books written about Tiger of India pitted against Dragon of China. To those who base their opinions on such reports, articles and books, it looks as though India is posing a strong completion to China, when in fact every measurable economic indicator suggests that China is clearly leading India on all fronts. Moreover the gap between these two countries is only widening with each passing year. And yet, many Indian commentators continue to complacently believe that India has some edge somewhere when in fact none exists. 

The tone of these reports and analysis comparing India with China suggest that India is actually inching towards China. That is not the case. In reality China is leaving India behind by a bigger margin every year. It is becoming tougher and tougher for India to catch up. In the last few years, Chinese have built the biggest dam on the planet, built the longest bridges, built the fastest cities, built their own planes, submarines, ships, magnetic trains, and even the highest railways while India continued to lay another layer of asphalt on its decrepit roads after each rainfall.
India is not even showing a promise of catching up. None of its policies suggest this. None of its initiatives give a glimmer of hope. Even the Indian industry is not thinking big. It is still content to play a small game.

Thursday, October 23, 2008

Bangalore- Startup City

For many months now some of us have believed that Bangalore is the most favored place for startups. Of course, we didn’t have any data to back it. When Vijay Anand of, a good friend who spends most of his energies in promoting startup ecosystem in India contested that Bangalore may not the best destination for startups, I had a different opinion on it. 

Some of us who have started out in Bangalore have a bias for Bangalore and that may have clouded our assumption that Bangalore is more suited for startups. Then, may be not! We now have some data coming from the recent TATA NEN exercise.

Wednesday, October 22, 2008

How can startups get right engineers?

Few initiatives like,,, NEN, are doing a wonderful job in educating engineering institutions in India to get exposed to the startups of India. They are taking initiatives to bring startups to the campuses so that interested students can be recruited by them. 

While talking to one of the very energetic campaigners at NEN, I started giving my opinion on how and what they should be doing. I am penning down the points from that talk. 

Startups are too busy and are not in a position to go to a campus for recruiting candidates. First, they don’t have time and they don’t have people who can spend a day on recruitments. Second, they don’t have money to travel to the campuses if they are in far off cities. Third, they will never get the kind of guys they want at the salary they are willing to give. 

Instead, as a startup, I would like to receive a document which lists all the master’s and PhD students in an institute that has a small picture of the candidate, their contact details, and a 10 line biography, highlighting their project, their interest, area, and other technical and performance information. I can then choose the candidates that are of interest to me, call them up or send them an e-mail. NEN can also create a separate list of those candidates showing interest in working for a startup so that I don’t have to bother spending time telling the candidate what it takes to work in a startup. 

Wednesday, October 15, 2008

Crisis or Opportunity?

The Wall Street as we know it doesn’t exist. This could be the onset of worst financial crisis in the last fifty years. The alarms are being sounded. It’s going to be gloomy ahead. ‘Brace yourself for the worst storm ever’. ‘It’s going to be another Great Depression’, and so on. Indians would love to believe it is going to affect them exactly the way it is affecting Americans. Flat world, isn’t it? We have believed in that myth far too long not to believe it now. 

The news pours in from every quarter. It’s impossible to get away from it – every newspaper, every magazine, and every news report suggests the same. There will an economic slowdown. There will be layoffs. Startups need to conserve cash. Already cautious VCs of India become more cautious now.

I am supposed to be gloomy too. I am supposed to make negative statements too. I am supposed to say that, ‘Yeah! It’s going to be hard; it’s going to be tough; it’s going to be bleak!’
Yet, I don’t say that. I am a startup, remember. I am already in the deepest shit-hole possible. I am used to surviving in a very hostile environment. I conserve cash like nobody else’s business. I starve and yet put on a smile. I am used to it. (It’s been four years like that. I better be used to it.)
Unlike the pundits out there, I am not pessimistic.

Tuesday, July 22, 2008

Assembly Line manufacturing from Ford

I took these notes down while watching a show on History Channel.

Henry Ford created the concept of assembly line manufacturing. The original components arrived onto a single line platform to make a complete car at the end of the line. This was a revolutionary way of manufacturing introduced to increase productivity on an unprecedented scale. However, the monotonous nature of the job took a toll on the workers. Henry Ford compensated for it by increasing the wages, setting a standard for America giving $5 an hour and introducing 8 hours a day. Eventually, the workers at his factory were richer than average Americans where they could actually afford the cars they assembled. Here are some highlights:

  • One car was produced every 10 seconds.
  • It took only 4 days to assemble a car from raw materials to the finished product.
  • Henry Ford became the first “self made” billionaire of the mankind.
  • Most other industries quickly adopted his assembly line manufacturing.
  • During his time, USA produced 40% of manufactured output in the world.
  • During WWII, the 32 million car American industry shifted to making war equipment.
  • The assembly line production allowed women and African-Americans to enter jobs spurring hate crimes.
  • During WWII, USA produced 90,000 bombers, quarter million tanks and jeeps- faster and cheaper than any other country in the world.
  • At the end of WWII, USA productivity was 8 times that of Japan.
  • However, Ford’s assembly line manufacturing had some deficiencies. Switching from Model T to Model A required one-quarter billion US dollars. Meanwhile, GM was able to make changes faster because they had smaller assembly lines.

Assembly Line work takes a toll at Ford

  • There was emphasis on Quantity over Quality.
  • Extreme fatigue for Workers.
  • Mechanization went too far, human element was missing.
  • Toyota introduced lean production. Eventually, Japan made more cars than USA.

Embraced by Toyota

  • 1950, EG Toyota spent 3 months at Rouge Complex (Detroit). Henry Ford shared his assembly line technique with everyone. At that time, Toyota was doing 1000 cars a month. Ford was making 1000 cars a day.
  • Toyota created lean manufacturing allowing workers to define their job giving scope for creativity. Every worker became an inspector. Productivity actually increased.
  • Toyota expected its workers to be motivated, skilled and innovative – they developed their unique style called Kai Zan.

Friday, April 04, 2008

Notions in India on Startups

There is a prevailing notion in Indian startups that the minute you get heavily invested by a VC, you are successful. The fact that some VC has deemed your business worthy of investing is a good enough reason to feel that you are successful as a business.

Now, that you are invested, you feel a bit special. Since you are no longer scouting for money like other entrepreneurs you think you are now a serious company. That feeling is good enough to put a stop to all that hanging around with other pauper entrepreneurs. That also means putting a stop to attending the Barcamps, MoMo, Headstart events, etc.

I attended a NASSCOM event on products and innovations. In one of the panels showcasing successful product startups, they also invited social networking and other dotcoms. I was sitting there wondering – what is the common element in all these startups? Some of them were not innovative and some were not even making products. Why are they considered successful? The only thing that was common was that they all got funding recently by some big name VC in the order of few millions.

The fact that you got invested is a good enough reason to believe you are already successful. Even the VCs, the media and observers will believe that.

So what happens once you get invested?

There is another prevailing notion that once you get invested, somehow all your financial problems are solved. The new startups which get heavily invested start looking for a swanky office with nice carpets, interiors, woodwork, cabins and cubes. They go back to getting cushy salaries with luxurious perks. Overnight, you are no longer a poor boy. In fact, it’s like getting married to the only daughter of the Sultan of Brunei. You travel luxury class, stay at five star hotels, get into all kinds of forums, wear suits, and rub shoulders with biggies. You can now go about thinking about that new apartment, that new swanky car, and that investment into real estate that you have kept on hold when starting the startup. Now you go to work as if it’s a regular job, filling excel sheets, project plans, as you did before the startup. The hunger is already gone and now it’s replaced by satiety, too soon too fast.

I see a dangerous trend in Indian startups. I am not comfortable with it.

Startups in India see their first round of heavy investment as a major achievement in itself. They see it as an end in itself. They see it as a major milestone after which all problems are solved. This particular single-focus goal is detrimental to its long term prospects as a business. Usually the startups go through a process of exhaustion and starvation and the thought of a gush of money is a welcoming prospect, so much so that, their entire focus is now shifted to raising that money instead of concentrating on other business goals. Once that investment is made, you back to your old style of working.

I know of few companies in Bangalore which are setting very bad examples. These companies have ‘successfully’ raised many rounds of funding and yet, there is no product release or source of income. Most of the time is spent in partying and celebrating little achievements which have no consequence in business.

In a city of very few successful product making companies, to have a few bad apples will have negative effect on prospects of future investments. Unlike Silicon Valley which spawns thousands of startups which are VC backed, India produces very few. And if out of those very few we start seeing bad examples that sets a negative outlook on future prospects for Indian product startups.

Some VCs who witness these trends, instead of correcting them, are actually casting a blind eye, and are believing themselves into a delusion that everything is going alright, when in fact it is not. They cover up the inadequacies of their startups and keep promoting them in all forums and events as if they are best companies on the planet. The first round VCs think their startup is successful if it is in a position to raise the second round. And second round investors in turn believe it is a successful company if it raises the third round, and so on. Nobody is bothering to check if these companies are actually creating value as a business, in terms of market share, revenues and profit margins.

This trend of blowing up the VC money may work well in Silicon Valley where there are thousands of companies being started every year, and few bad apples will not make a big difference. In India, where there is dearth of startups and where a paltry number of companies get invested, this trend does not bode well.

A startup should have the same hunger even after they raise their round of heavy investment. That hunger should keep them going after pursuing the markets, getting the cash into the company. They should not squander the money. Instead they should continue to use the art of managing the cash flow wisely as they did prior to their investments. They should not let go of this innate strength all in one episode.

Indian startups need to set successful examples of using India as a cost-effective way to launch global brands of high quality products.

Monday, January 21, 2008

What is your primary objective as a startup?

In my conversations with many entrepreneurs during the events at and, I have observed few things that I want to discuss here.

Should startups get disappointed if they do not get invested?

One top name investment banker once told me, ‘you are not an exception (referring to our state of not getting funded by a VC). Instead, you are the norm’. He added, ‘Silicon Valley (and few other areas, such as Boston) is in fact an exception. Most of the business in the world, Vietnam, Brazil, Russia, etc, start this way.’

I keep telling myself that ‘nobody will come to your aid. You are on your own. If there is no ecosystem, then create one. Don’t complain.’

There’s nothing romantic about running a startup. It is filled with many hard choices, misgivings, struggles, which you may or may not like. But as long as you are enjoying what you are doing, keep doing it.

While you are out there, struggling with the realities that are somehow so different from what people write about entrepreneurship and startups, please ask yourself the following questions.

As a founder, what is the number one objective for you right now?

1. Is it making the product and proving the technology?

2. Is it making the revenues to somehow survive?

3. Is it making your startup attractive to get funding by a VC?

4. Is it making a company that has a viable business?

I ask these questions because there is a danger that you may get caught up in the day-to-day struggle to miss out on the big picture.

These are my learnings as a startup IN INDIA. I stress on ‘in India’, because we are NOT Silicon Valley. And no matter what people, analysts or the media says, we are not one, and we are not going to become one right away (but the hope remains).

1. Is it making the product and proving the technology?

There is a chance that you may start believing that making the product (that you set out to build) is the ultimate objective. You start thinking, all you have to do is make this product, and everything else will fall in place.

Not always.

What if the product you set out to build takes five years, and by then the market is gone? What if the product you make costs you $2000 to make, but the customer is ready to pay only $200 to buy it? What if the technology that you think is so hot, is not something the world wants?

I see a great danger when you make this option – ‘making the product and proving the technology’ the primary objective. When you hit crossroads, you will not know what to do. [I agree that this is ONE OF the major objectives but it SHOULD NOT be the primary objective.]

As a startup, one of the essential and inherent strengths is your flexibility. You are flexible to change your business plan at any time, and that too quite quickly without incurring major losses. This flexibility should not be confused with shifting focus. With changing market situations, customer interactions, and other events that happen in the world, you should mould your business plan, and if needed abandon the original plan to quickly embrace another one while being consistent with the original intent.

Example, if your dream is to connect everyone on the planet with internet and phone connectivity, you may give up one technology to embrace another one, abandon one model of selling to embrace another, without diluting the original vision.

2. Is it making the revenues to somehow survive?

It’s very easy to make revenues. Think about it. You can become a coolie in a train station and earn money. It’s so easy to make money, if you are willing to work. You have to ask yourself, ‘is that how you want to make money in this startup?’

Not really.

If all you want is to make revenues, there are many quicker and easier ways. While going through the journey, you will go through many patches that are quite grueling, taxing you with many problems, financial and emotional. Many new avenues may come up which promise you quicker and easier money. Would you take up those new opportunities to get those much-needed revenues? Would you do it just because someone is paying you to do something else (which is not your original intent)?

You have to be clear on what you set out to do. That will help you in making decisions when alternative avenues arise. Some people think that you should do anything to make money – because you are in the ‘business of business’. I strongly differ with such views. What will take you far on the long and torturous path of entrepreneurship is your commitment to the original lofty goals that you set out on. Few others may have a different opinion on this – but I strongly believe that you should carry through your convictions before settling down on anything alternative. That way, your team will stick with you; some of those angel investors and VCs who have been watching you will come forward; that way your potential customers who are waiting for your product will have more confidence in you to trial your product.

[I am talking about perseverance, not stubbornness. Will write on that in future]

3. Is it making your startup attractive to get funding by a VC?

Would you run after certain milestones just to please a potential VC to get a funding? Would you get on board an executive who in your opinion adds no value to your company but would please a potential investor? Would you run after markets that you do not find suitable for your company just to please potential investors?

Not really.

This is the worst objective to have. You should achieve milestones for other important reasons than just to please a potential investor or VC. While you continue on your journey, you need to create value for the company, and for that you start achieving certain milestones. Those milestones are vital for you, your team and your company. They should not be specially designed to suit the likes and dislikes of your potential VCs or investors. They may have told you that they would invest in you if you achieve certain milestones. But what if you put all your energies in that direction only to find they no long show interest in your company? Is that milestone really on the path of your intended journey or was it introduced just to please a potential VC?

Your investor is a shareholder who will walk with you in your journey. He is a companion – sometimes a painful one – which is good because he will guide you to go in the direction that makes sense to all of you. However, his investment is not your goal or your destination.

You go with an investor and take his money when you reach an agreement on how you want to take this company forward. If you don’t agree, then you part ways as gentlemen do and still keep in touch. But you should be clear on what you want to achieve as a company and business before you start saying, ‘Yes’ to everything a potential investor wants.

[But once you are married to each other, you are both stakeholders in the company and hence you confer with your investors on what strategy you want to embrace. And once decided, whether you like it or not, you stick to it.]

4. Is it making a company that has a viable business?

While your vision is something grander and loftier, such as positively influencing every person on the planet, you should strive to create a full-fledged organization that makes a viable business. This must be your primary objective during the startup stage. As long as you know where you are going, and why you are going, and keep checking if you are going in the right direction, you will most probably make the right decisions.

You should try to create a viable business organization- it’s like a flotilla of aircraft carrier and surrounding warships, with planes, helicopters, etc, which makes it a self-contained armed force on the move. It has a mission and a goal- that are quite often loftier and bigger than any individual or single person’s dream or ambition. That mission and vision has to be permeated to all of your team members so everyone knows why we are going through these rough seas for months and years with no land in sight.

You need to put energies to hold the team together as a close-knit organization, keep the dream live, giving the team its much-needed small milestones to celebrate, adding value continuously to make yourself attractive for investments that come as fuel, courting customers and working closely with them to generate much-needed revenues, slowly growing making long strides in short periods, but at all times, trying to create that full-fledged company that is creating a viable business with a potential to scale and take on bigger markets, all the while keeping your eyes fixed on that vision to positively influence every person on the planet.

As long as you are clear in your priorities, you will take the right decisions when you hit crossroads, unflinchingly, without any trace of doubt.


Changing landscape

I am observing a major change happening in the last two years. I see that more and more people are getting onto the bandwagon of entrepreneurship, especially the young and first-generation entrepreneurs, and I see this as a good sign.

Is it because I have started to notice them or is it really the phenomenon sweeping across the nation [of course, confined to few cities only]? MoMo, Barcamp, and, all started in the last two years. These events have created a forum and platform for many young techies to meet and exchange ideas, and in some cases, collaborate. The new entrepreneurs are getting to know the realities. They are getting to know the hardships, and yet the passion amongst them is only increasing. The number of startups is proliferating in India. The quality of the ideas is improving. There is a stronger sense of commitments from the teams, and many Indians are leaving their secure jobs, which is a good sign. [I do believe that we need many more. This is not enough.]

Even NASSCOM, the official spokesman of services industry in India, is lending its hand to promote product startups, with dedicated funds on the way.

Missing Angels

What is missing is the angel investors and their ability to take risks. I don’t believe the existing network of angels in India is effective. They have to do it differently, with different set of rules that are more applicable to Indian context. Many startups need angel investment – because they do not qualify for VC investments in the seed stage. And most VCs are still not equipped to handle seed and early stage. They will continue to invest in growth stage.

The founders should go back to their families and friends and pitch to them to get the initial capital. What they need is a little guidance on how to structure a deal with such friends and family investors. When there is nobody to invest, what do you do? Investing Other People Money (OPM) is not an option. You put all your money first. And then you go to those people who trust you and they happen to be friends and family. Pitch to them, and take investments, build your product, get that initial traction, and then may be, may be, you will get invested by those who do not know you, otherwise, go to the revenue stage working closely with some confidant customers. You can’t keep hoping that institutional investors would invest in you. There is a good probability they won’t.

Government could do something

My only wish to the government of India is – please make roads wider please. These cities are choking us. I don’t want to see ex-entrepreneurs who have made it big leave these cities forever. They form an extremely important element of the ecosystem. and

I was at (in Chennai) on Friday. Vijay Anand asked me to speak on the topic “Startups: The Worst Case Scenario”. He wanted me to tell the entrepreneurs how ‘unromantic’ a journey of a startup can be. I had to address some of those myths and induce some dose of reality to wanna-be entrepreneurs. I realized that there were many entrepreneurs in the audience who had gone through the same journey and have the same experiences and observations about entrepreneurship as I did. I guess, what I am being asked to do is – ‘be the bad guy, spill the guts!’

I had to rush back to Bangalore that night because we showcased our product next day at (Bangalore). Being a strong proponent of developing the ecosystem here in Bangalore, I couldn’t miss this event.

Vijay Anand and his has already attracted lot of attention in entrepreneurial world with a strong focus on India. intends to become one of the catalysts in promoting the much-missed ecosystem in India and Vijay is doing a tremendous job.

While the first three events were held in Chennai, Vijay wants to move this event around to other cities in India and even explore the neighboring countries around India. Bangalore, which according to me, is one of the best places for a technology startup with well-developed ecosystem (only in comparison to other cities of India) just could not sit idle. It had to spring its own event. And I believe the more the merrier. We have a long way to go before we can say ‘We have too many such events’., which is organized by volunteers of Bangalore (which is the hallmark of Bangalore), spearheaded by Kallol, Aditya, Keshav, Arpit, et al has held its first session (along with an ACM event) at IISc, Bangalore.

There are some finer differences between the two events, and I am quite sure they serve their purposes.

The things I liked about The demos have become a serious affair drawing great attention. Also, the fact that nobody knows who got selected to demo makes it an interesting exercise. I like the short presentations they have. Vijay keeps the ecosystem together. He does not forget the old participants and he engages them and contributes to keep building the ecosystem.

The best thing about is that it was held in Bangalore. It was high time. With such a great ecosystem, it had to happen sometime. I don’t think any city in India can beat Bangalore in terms of quality of its participants, panelists, etc. Though this event coincided with other major events, still drew the bigwigs of the industry. The panelists were experienced and are veterans of the industry. The atmosphere was electric as ever. The VC networking session in the evening was excellent. That’s what entrepreneurs want. Organizers ensured the media met those who demonstrated their products.

It was unfortunate that both events took place on the same dates. I wish it had happened differently. But I realize that the organizers of both events had their constraints, on when they can organize, and they could not change their dates. I look forward to next set of events where they do not coincide and where we will have much closer interactions and sharing of notes between the organizers.

Tuesday, December 04, 2007

Low Risk Low Gain India

According to a recent report [1], though the investments into India have increased substantially, a little of it actually reaches the early stage companies.

0ver 90% of the money is invested in late-stage initiatives by mature firms. Even the remainder mostly finances new firms replicating proven business ideas. As a result, very few innovative startups are funded. This will have a negative ripple effect on the quality of late stage opportunities in later years.

While US, UK and Israel spend nearly 30% of their investments into seed and early stage (29% in US, 39% in UK and 32% in Israel), India spends only 6.9%. China is better - it spends 12.5% of its investments in seed and early stage companies.


1. Accessing Early-Stage Risk Capital in India, Rafiq Dossani, Stanford University, Asawari Desai, TiE Inc, Shorenstein, APARC, Standford, and TiE.

Monday, November 26, 2007

Ground realities from a technology product company in India

You may be one of those believers who think creating technology product companies in India is the way to go. You may believe its time for making such companies in India. You may believe that India has satisfied the minimum set of criterion to launch such companies. Yet, you face many obstacles; you have to put up with many disappointments, and brush off many discouragements to realize it. As a technology product company you have to take many bets. And they happen to be big bets if you are chasing bigger dreams.

As an entrepreneur of a technology-product company, you start out thinking one day you will translate your idea into reality. You believe you will create something that will have huge market for itself because of certain attributes you bring in to that idea. You start out thinking that someday you will create enough value, enough traction with customers, and will be poised to take on bigger markets. In that journey you will include the role of VCs because at some point of time you need the necessary monies to scale up to make a significant difference. You hope that someday the VCs will see this potential in your company to invest in your company. You hope that they may want to share the risks with you. You believe that if you achieve those important milestones and show them what you believed in was indeed true they will come to invest in you.

Here’s the reality. If you think they will invest in you when you productize your idea and make prototypes which actually work, then you are wrong. If you think they will invest in you when you get some partners to sign up and use your technology and product, then you are wrong. If you think they will invest in you when you get some customers to actually deploy your units in the market, then you are wrong. You need to stop deluding yourself. If you think they will invest in you when you show a huge interest in your product from your customers, and the only thing you need is money to translate those orders into a multi-million dollar business, then you are wrong. Stop hallucinating. They won’t invest in you.

Here I write some of the things acting against us right now (and to an extent, acting against many technology product companies in India).

We are young and also first-generation entrepreneurs

We are not ex-entrepreneurs who have already done it; we are not the grey-haired veterans with big titles either. We don’t think our age counts for our experience. We believe our actual experiences of having gone through the grit and grind of making a product in this unfriendly atmosphere counts for it. Our experience of forming alliances and partnerships with various bigwigs, to actually pull it off, counts for it. Our experience of knowing the customers’ needs, and then fulfilling them in the price points that is attractive to them counts for it. Our experience of holding a team of 20+ for over three years paying each 1/3 of salary counts for it. But for some reason that has no value. Did I also add that we don’t have degrees from IITs and IIMs?

We are ‘actually’ a technology product company

Many people just want to be called ‘technology’ companies but they are not. Even VCs know that. But everyone just pretends. Since everybody wants to be associated with that word, and it adds glamour, they just throw in that word. Many people just want to be called a ‘product’ company but they are not. Many VCs who speak incessantly on how they are going to promote and fund technology product companies end up investing in online travel portals, marriage sites, networking sites, and hotels. According to us, marriage sites and hotels are NOT ‘technology product’ companies.

We are a three-year old company

We have survived as a startup in India for over three years now, on our own. We have developed a product, launched it, deployed it, and we are now selling it, on our own. We have held together team of 20+ team for these three years, on our own. We make revenues on which we run all our operations. You would expect that such things will be seen as our strengths. The reality is quite different. Exactly those things are seen as our weaknesses. VCs ask, ‘How come you are not invested for over three years now?’ strongly suggesting, ‘Definitely, there is something wrong with you guys’.

Indian VCs firms are not VCs

VCs are characterized by the bets they take. Most VC firms, even those from Silicon Valley who set up offices here, become completely risk-averse when in India. They are not chasing startups but are funding growth-stage companies. They are not chasing technology product companies, but they are funding the run-of-the-mill, already-tried, clich├ęd ideas borrowed from Silicon Valley adapted to India. Once, during a discussion in Barcamp in Bangalore, a lady asked, ‘what does it take to make product-based companies in India?’ I answered, ‘Balls!’ And if someone were to ask me, ‘what does it take to invest in technology-product-companies in India?’ I would respond, ‘Balls!’ Most VC firms in India can be categorized as Private-equity players and not Venture capital funds.

Indian VCs do not look at our business

We are not Mobile VAS, we are not Mobile gaming, we are not Mobile search, we are not Mobile payment. We are a wireless infrastructure company which promises to provide broadband internet to millions. It’s a long haul. It is risky. It has many unknowns. And we don’t generate revenue quickly. Unfortunately, most VC partners in India do not come from technology product domain or anywhere close. Those who do are not in India. When you talk to VC firms in US, they ask you to talk to partners or other VC firms in India. So, it’s back to the square one.

When even a novice with a fresh high school degree can foresee revenues from the day one from a services company, it doesn’t make sense to invest in a company that takes three years to make the first buck. When it is far lucrative and safer to invest in real estate and hotels in India, it just doesn’t make sense to invest in a technology-product company. That’s the reality.

VCs find Indian entrepreneurs clueless

Many VCs find Indian entrepreneurs clueless. There’s great deal of truth to it.

But I also find many VCs in India equally clueless. VCs think Indian entrepreneurs have no idea where the market is going. They believe that Indian entrepreneurs need ‘hand-holding, mentoring, coaching’, and they come up with funny ways to promote this idea. Soon the Indian entrepreneurs start finding more people who want to coach them than people who want to sign checks.

Once I was asked to list the top three things I needed, I said, ‘Money, Money, Money’. Yes, that’s the truth. When I don’t have money even to survive, all these talks about ‘mentoring and coaching’ sound completely ridiculous.

VCs don’t build businesses. It’s entrepreneurs who do. A top-name VC partner based in Silicon Valley once told me – ‘After achieving success as an entrepreneur I started to believe I cracked the formula to success. Then, I tried the next venture to realize that I didn’t have a clue. Suddenly, a young guy comes up with a ridiculous idea and next thing you know it is a huge success. That humbles you down’.

A note on entrepreneurship in India

The state of entrepreneurship in India is quite different. In India it was always done by businessmen who already had some money and access to capital. And those few first generation entrepreneurs who actually succeeded, they did so in services model where there is always a hope for revenues from day one.

In Silicon Valley, the VCs already had examples to look for. They had the experiences of failed and successful companies to guide them. They had many veterans and ex-entrepreneurs from technology companies joining them to bring in the experience. Most Indian VC firms have people who are successful in services business or dotcoms. Nobody comes out of technology product making or anything remotely close to it.

I find the test of Indian entrepreneurship more grueling and the experiences quite valuable. We are the people working on the ground for three years now, meeting the customers, meeting folks who are shaping the market right at the forefront. We learn from the market and know the pulse. We are taking bets on the upcoming technology, making innovations to suit the price points of our customers, evolving our business plans when necessary to suit changing markets. And each of our decisions impacts the fate of our business – always on the brink of demise. When you survive for three years, you have already ingrained much strength that comes handy in the long run. There is an inherent strength that will go long way - that needs to be recognized.

Purpose of this article

We are not complaining. We don’t believe VCs should invest in us just because we believe we should be invested. We don’t have such expectations. We don’t think we lost out just because VCs have not invested in us as yet. I think the struggle gets a little longer, that’s all. We know we will do it, either way- with or without VC money.

It is just that I see too many reports, too many blogs, too many articles written about the extremely optimistic side of funding scene in India. They are mostly rosy, effusive, and mind-bogglingly unrealistic. Such hype allows for people to form false opinions and have unnecessary expectations. I wanted to present the real side of the story here, right from the frontline.

Just look at the recent VC investments in India. Nobody is actually investing in any technology product companies. Just look at each VC firm and see what their investments are. And if you are smart enough, you will see through chaff to realize that a company listed in technology space is just another me-too dotcom company that has used lot of jargon to cover up their ordinariness.

Reading these reports on funding scene in India is like reading reports about how India’s economy is booming, how its Sensex is rising, how India’s infrastructure is being funded, and so on. The reality is very different for most of us living in India. We continue to live in the same crowded streets, with the filth dumped next to our homes. We continue to drive in the same traffic where traveling 5 km takes more than an hour. Nothing has changed for us down here. All these reports do not mean much unless those funds eventually come down to make our lives a little better decongesting that traffic and cleaning up our streets.

Similarly, nothing has changed for us on the ‘investment-into-product-companies’ front either. All these reports of so much investments coming into India, so many VCs opening their shops in India, so many funds being allocated for investments in technology space, etc, do not mean anything. In reality, none of it has trickled down to us. Our life continues to be the same. Our struggle continues to be the same.

We are on our own.

Friday, October 19, 2007

Would Indian technology product companies succeed?

It is not a tried and tested model, but I believe that Indian technology product companies would succeed on a great scale (only if pursued beyond a threshold). There are very few examples, and I am just waiting for some of these companies to do good so that analysts and authors start writing stories about Indian technology product making companies on why it makes sense to invest in such companies in India.

We have already proven ourselves to be really efficient when it comes to IT-services businesses.

Arun Sarin, CEO of Vodafone, believes there is lot to learn from India. He is telling his managers, ‘go get me the secret of their low-cost business model.’ He does not think that this low-cost is just because of low labor costs in India. He believes it contributes to only one-third. ‘Two-thirds is just How They Do Business,’ Arun Sarin says. Comparing the mobile business model of Europe with India, one finds the Indian telecom companies to be ‘lean, mean and hugely cheaper, both in pricing and cost’.

Now, can I extrapolate this to technology product making companies as well? To be fair, I shouldn’t. How can one just extend the trends of a services business to some other industry?

As I said earlier, it is not a proven model as yet. But I am looking at few examples. Tejas Networks of Bangalore is one such example. Though it would not necessarily come into the category of ‘lean, mean’ but it is definitely cheaper, both in pricing and cost. It has started in a typical Silicon Valley model – funded by a big name Angel Investor who brought in many institutional VC firms based in US, founded by techies who translated a brilliant idea into a robust business model. Tejas should be going for IPO soon. If it is a huge success, it will benefit many other tech startups in India.

I work for a startup which started on a little different model - a ‘garage startup’ model where the founders put in all their savings and wealth, and even wealth of family and friends, and roped in some angel investors to make a product. The company is now making revenues and has its products deployed in markets in Europe. The cost and pricing is not low just because of low-labor cost, but is inherently low because of innovative methods embraced during the development activity itself. Working on a shoestring budget, the engineers were pushed into embracing low cost options in all phases of development. Innovation need not come only out of super rich and heavily funded labs of IBM. It can come out of a tech startup founded on dusty road in Bangalore which works on extremely low cash flow because of dire necessity. As they said long ago, necessity is the mother of invention. They were right. The products from this company while being of high quality are just one-quarter of the lowest product in the market and this low-price is not artificial – it applies even for low volumes and with high margins.

I have a belief that such technology startups can be made out of India and few years from now, it will be a tested and proven model. But for that to happen, one has to go through the grit and grind of ‘surviving and succeeding’ in India, which can turn out to be a ‘test by fire’ itself. When one survives and succeeds this test, they can succeed anywhere. I am just waiting for that new revolution to happen.