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.