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.


Rajiv said...

The struggle is the important part I think. Once our struggle yields results, and we see great successes, things will become easier.

Mahesh said...

pow(Very,(1/0)) Fantastic Post Sujai. :)

My fav Quote: "If you want to go Fast, go Alone. If you want to go Far, go Together."

I have been reading your blog since from long couple of months back. I been in telecom industry. It is so awesome doamin i ever worked.

Keep Inspiring. :)

sam_the_ram said...

It is like this. If you get funds from VCs it is all the better, but bottom line, if you are willing to go on your own, there is nothing like it.

Lot of guys write blogs or other things about how the funding scene is great in India. Question to be asked --- how many walk the talk ?

I agree with you that VCs find it easier to fund a make my trip or minglebox in India.

Finally, if you have real customer traction, you know the business better than many VCs would! That is a fact. As your confidence grows more, you can even take loans etc to fund your business; isnt it ?


Rams said...

Depressing ...

I was working for a VC funded startup in BLR till recently. I quit for various reasons. But the main motivation for doing so was the realization that it was all about making the right noises and not about solving problems. It's all about Ivy league guys making deals in smoke-filled rooms. It's not about technology - It's about making all the right technical noises - open source, (Insert some hot current technical area here), etc. The VC-Ivy Leaguer network is almost like the military-industrial complex. Churning out stuff that nobody wants and making sure that an artificial demand is created for it. They are experts at making right kinds of noises, presentations, connections etc. I notice with interest your observation about not having any IIT/IIM folks on board - Whoops, there goes your chances of getting any funding. It's kind of tough even with the right pedigree.It's all about running a mom-and-pop shop without any kind of accountability - VC's will rarely ever visit you and there is very little oversight of the Ivy leaguers who typically tend to run such organisations. They can do whatever they want including showing moolah spent on home repairs as office expenses. It's all about doing every monkey trick in the book to boost your valuation - You don't have a single paying customer, but you have tons of partnerships advertised prominently on your front page. Why ? Higher the valuation, the more that goes into the pockets of the feudal US returned boss, when the company gets sold.

I know of an NRI who sold his chennai based startup to a another bay area based startup. He definitely benefited from it - but his employees' lot never improved. The two startups that I have worked for, I have observed tremendous abuse of the funds and total lack of fair-mindedness when it comes to sharing the loot with the developers. If I were a US based VC who is reasonably clued in, I would be suspicious too. Sure, in that process, lots of honest efforts like yours get trampled as well, which is a pity.

I clicked the link to this post, read the introduction and realised that I had seen your office and staff at Indira Nagar - My previous employer was located close by. Techies from your company used to frequent the Mallu guys shop near Dr.Shastri's clinic for chai/smoking.

Raseel said...

Great post !!
What I am IMMENSELY interested in now, is how you gathered all the "Balls" required to get started with no funding.
I wanna know your startup story

Yusuf Motiwala said...

Great post Sujai

and congratulation about your deployment at France.

Kamla Bhatt said...

Refreshing to read a post from an entrepreneur, who is trying to create a product company in India. It is by no means an easy task in a country that has yet to develop an eco-system to help such companies. Money is in tight supply and getting people to come and work for startups is a unique challeng in India as I continue to discover to my amazement.

As you rightly point out as first time and first generation entrepreneur you have a lot of climbing to do in an unchartered territory. Now, combine the uncertainity of raising money and it is a pretty daunting task.

You have echoed a thought that I have observed: VCs in India act more like PEs. They are investing in companies that need growth capital. Where is the venture in venture capitalists? I guess they are few and far in-between and they are most likely looking for an assured return. Add in the fact too that many VCs are discovering these new opportunities and wondering how to invest.

It is quite puzzling at times when you look at how VC funding takes place in India and I have often wondered about it. I suspect one of the challenges stems from an UI perspective. Let me explain. VCs in India are having a challenging time understandign the UI of a young, unproven Indian entrepreneur and entrepreneurs are having a challenging time understanding the VC UI.

There needs to be more of an open dialog and engagement between the two communities I suspect. VCs in India need to realize that their constituents are these budding startups that might yield the next Google or next Facebook. The VC community needs to exhibit more of their "venture" spirit in India.

I would be curious to hear what you all have to say.


Kamla Bhatt

Lalit said...

Refreshing post, Sujai. I agree that it is important for the first generation entrepreneurs to open eyes of rest of the dreamy eyed junta out there. Congrats on the success of Sloka !!

Dr.A.S.Rao said...

Interesting post.The challenge for product start-ups is real. How essential it is for product start-ups to be IP (patent) based?

Akivolam said...

Hi, I am a journalist and came across your interesting blog.. Would like to get in touch with you as I am interested in getting your opinion for a feature I am working on. hope to hear from you Sujai.


Anonymous said...

Very interesting post and I agree with many things. We have a hitech product startup, Vegayan Systems, in the networking field. My own experiences are along similar lines. Where I differ is, the IIT or Ivy-league part. We have full IIT pedigree, Ivy-league visibility (1st in TiE-DFJ and 1st in TiE-Canaan events), that does not make it any easier.

Anonymous said...

Great Insight ... Someone should put this un-edited in the newspaper.

Naren said...

Nice story, How very true.

We run a security product company and my past experience with VCs is the same.

As rightly pointed out Most of the VSs are without Balls!.

Hope some newspapers carry this article, unedited. That would deter VCs with Balls to stop bragging about their investments.


Malovika said...

I am a journalist from a business newspaper, and very keen to contact those interested in talking about this, starting with you Sujai. This is my second attempt through this blog to contact such product companies that have felt let down by the VCs. Pls do mail me back at

Anonymous said...

In India startup product companies - technology or otherwise - need capital. Period. Why would a VC invest in a product company ? VCs are not interested in your fight to create and sustain market, educate customers, retain customers, retain employees at a time where the biggies pay three times you can, innovate using ever changing tech platforms etc. It is seems like a bottomless sink into which resources vanish and the few customers you get are not enough to sustain costs. They are only too aware of these risks.

Sujai K said...

I sent you few e-mails at the address you provided. I am not sure if you received any of them - I did not get a reply so far.

Anonymous said...

I have worked with multiple product startups in India, in the good and the bad days (for funding), as a VC, entrepreneur, and venture mentor. This is 2007 and there are probably 200+ guys who have already walked the path that you are walking now.

You seem to be quite frustrated however I am sure you will pull through. The key is to focus on building the business and treat the VC things as an optional, nice to have interest on the side.

For all we know, after getting a VC deal, you (or other entrepreneurs) may not actually take it because the terms may be lousy.

Your observations about "VC"s in India are right, however we can't expect them to change (can we expect anyone to change? We can only change ourselves!). The VCs are compelled to act as growth investors because there are SO MANY de-risked growth stories available in today's India growing at 9%. They would look like fools to their LPs if they did not take advantage of these low-risk high-return opportunities instead of true early stage startups. I also agree with your observations on where VC funds are being spent by startups.

We need to treat all VCs, PEs, hedge funds, etc operating in India as a giant investor pool and not distinguish among them.

Getting capital from the most legitimate source, customers, is always the toughest, but also the best thing to do.

techpreneur said...

you can't be more accurate in describing the pains we go thru. Bottom line is this, that VC/ Angels etc do not want to stretch and understand the (technology) idea. It should fall squarely into their definition of 'web', 'technology'.

Heiii But if you give them a time-tested model of 'body-shopping' with a fancy new name and/or any buzzword, they are willing to get into the game. Essentially, in India, all investors are playing me-too game. They are not evaluating an idea on it's merits.

I have been trying to build a platform using Computational Linguistics and Machine learning technologies, to solve a real simple problem in real-life. Every discussion takes me to a blank wall coz am getting compared with Networking sites and/or portals and their business models. Am tired (soon will be frustrated) of telling that these are NOT TechNology companies, they use technology.

.................... (so much to go...stopping here)

Cheers - Sri

Anonymous said...

Getting VC funding just by merit is very uncommon even in US in high technology areas, it will be mostly through your connections.
Your pain is because you are in telecom domain, to be specific in telecom infrastruture domain, with an unproven technology (wimax) in a country like India. Investment required to scale up to become another Lucent or Ericsson is huge and chances of success of becoming like them very less. Sorry to say, but all the decks are against you when VC evaluates your company. How can somebody throw money at a company from India developing an infrastructure product where the barrier to entry is so high. Wimax itself has its own technical, political problems. Also there is not much money that can be made by implementing a standard that some others have specified.

Satish said...

hi sujai,
can you go to the public seeking funds for equity, Dhirubhai also faced the same..his quest to reach out to the people snowballed into the investor revolution.

I'm sure if you can setup an online application/bidding process for Private placement of your equity it would surely be a hit.

And yes it pays to be an early starter..

Banibrata Dutta said...

Last few posts from 'Anonymous' appear to project the VC side of the story. However, it'd have been good if it weren't anonymous, and the comments could't taken a dialogue form.

However, a real eye-opener blog, and one that definitely puts one on their guard -- especially as you say, the dreamy eyed entrepreneurs or wannabes !

BTW Sujai, have you explored or considered the FE/BE option? Front-End offices in a country which in your opinion would offer a more mature VC community with a true technology+product focus (esply in telecom)? With some key management positions there, it might be make the going easier.

GeekBeyondRedemption said...


Everything you say is absolutely true. As the anon said, there's so much of a supposedly de-risked 9% growth story available that a 'risky' product startup wil have trouble generating funds.

Understanding customers, selling, making real partnership doesn't matter to these VCs. They're always looking for something which we don't have.

We're going to have to go through one cycle of life by fire, to give life to the next cycle. Hope the future VCs who are in our currently struggling 'tech product companies' in India, are able to understand realities better.

Best wishes for Sloka's success!

Tariq Hyder said...

Great post. We are close to 4 years old, completely self funded, compete with goliaths and profit making (yes really, if you exclude my personal debts) but nevertheless, its an exhilarating

As a first generation entrepreneur myself going through similar
"money" issues, I am completely in sync with your thoughts. I am glad to come across someone who shares my hope and my frustration! All the best!!