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Sanjib.Acharya
I would like to know how many of those ideas did Catamaran consider worth ...
‘Ideas’ could be India’s next growth industry
Sufia Tippu
10/10/2010 1:46 AM EDT
Enter the VCs
“I feel the only way to abolish poverty is to embrace entrepreneurship and create lots of jobs with high disposable income. If I can encourage entrepreneurs and youngsters to do that, it would be wonderful,” said Murthy. Among the organizations in which his firm has invested is SKS Microfinance, which funds cottage industries launched by poor rural women.
A number of well-known funds have set up shop in India, but entrepreneurs looking for angels are often disappointed.
“Indian startups and entrepreneurs have to work with a very different environment, and we recognize that out here in [Silicon] Valley,” said Sun Microsystems co-founder Vinod Khosla, who later became a general partner at VC firm Kleiner, Perkins, Caufield & Byers and today is a partner at Khosla Ventures. “To do business in India, you have to be a little creative and innovative to thrive. But I am still quite positive on India. The way to grow an economy is through entrepreneurship and capitalism, and India seems to have figured out the right formula.
“Clearly, there are still a lot of issues. Starting a business in India is still harder than it needs to be. But I believe fundamentally that the major energy breakthroughs will have to compete at ‘Chindia’ prices, because you have 2.5 billion people [in China and India] trying to raise themselves from poverty to a Western standard of living.”
Organizations such as The Indus Entrepreneurs; the National Entrepreneurship Network, a Wadhani Foundation project; Nasscom; the India Semiconductor Association; the National Innovation Foundation; and the Rural Innovation Network offer networking opportunities for Indian entrepreneurs. But most of the business founders here who manage to hold their heads above water are able to do so only with financial help from friends and relatives.
“It’s all about connecting with the right VC and getting someone to vouch for you; otherwise things just don’t happen,” said Partha Ray, who with partner T. Rai tried and failed to secure funding for a semiconductor project. Today, Ray and Rai are back at their office jobs, but both hope to give entrepreneurship another go in the future.
MindTree Consulting (now MindTree Ltd.) co-founder S. Janakiraman suspects the VC and private-equity firms that got burned as a result of the recent global economic meltdown pulled back in India just as they did elsewhere. But Janakiraman expects “the investment climate for startups to change for the better as firms see a few success stories from startups making it big in India.”
Nasscom, the primary trade organization for India’s software services industry, estimates that there are 652 early-stage IT companies in the country. VC Sharad Sharma at the Indian Angel Network said the numbers are rising as the startup environment grows more hospitable “due to several factors: better availability of angel/seed capital, the opening up of the domestic market and the ability to penetrate the SMB [small- and midsized-business] market in the West using software-as-a-service business models.”
But India is a huge country with enormous needs, and the VC pool is just not deep enough to float every worthy business plan. Seedfund partner Bharati Jacob said it’s not even possible to go through all the plans the fund receives.
One hurdle for startups seeking funding is India’s asset-based economy. “For a working capital loan from an Indian bank, you have to show asset-based collateral; they don’t value the intellectual property or capitalization of R&D that you have,” said Sandalwood’s Kondamoori, who has spent more than 25 years in the Silicon Valley investment community and says he is always on the lookout for promising startups in India and China. “It’s different in the U.S., which is an earnings-based economy; the valuations [of U.S. companies] are very high based on earnings. A lot of this kind of metrics—measuring and building valuation in companies—needs to come into Indian management teams. Anyone I speak to in India always talks about revenue and top-line growth; they don’t concentrate on net margins.”
Kondamoori believes such metrics will fall into place as more Indian companies start listing on the established global exchanges, as reservations booking service Makemytrip did in April with its Nasdaq IPO.
“Right now, there is no saturation in the [Indian] marketplace for any product or service,” he said. “Take the telecom sector, for instance . . . today every telecom operator is interested in merely putting up towers and attracting subscribers, and the way they go after the subscribers [by making incremental, cent-by-cent cuts in charges for calls] is taking its toll; they are losing money all the way. There is so much one can do in the telecom space if you really want to innovate, but everyone is too busy grabbing their share of subscribers . . . I think once saturation takes place, then innovation will definitely come in.”
Alok Mittal, a partner at Canaan Partners, noted that while India has engineering talent in spades, that’s not enough to build successful startups. “You need product managers who are able to chart out the road map and carry it through. And you need customers who would like to buy tech innovation from India—and right now, we don’t see customers rushing to buy products from startups. This, in turn, affects the availability of capital” for Indian tech startups.
The dearth of global customers for Indian innovations reflects Indian companies’ inability thus far to get the hang of global marketing, said Ravindran Govindan, executive chairman of Singapore-based Mercatus Capital. “Most of the [Indian] companies I meet with have global products, but they are not able to brand the product well and market it. When VCs like us do manage to connect with some good companies, we are able to accelerate the growth tenfold,” Govindan said.
Indian companies are self-sufficient and steeped in the culture—perhaps to a fault, as they can be provincial in outlook, said Govindan. “They carry the culture into the market, and it’s extremely difficult to break through. When you enter a foreign market, it is just not about opening an office there; it’s about knowing how to talk, how to engage people in relevant conversation, how to negotiate shrewdly and, most important, how to sell. I feel this where India is really lacking.”
On the other hand, the eastward expansion of technology markets is bringing the global marketplace to Indian companies’ doorstep, noted Raj Khare, co-founder of media convergence startup SureWaves. “The center of gravity is shifting to emerging markets such as India and China. Earlier, the [volume] markets were in the Western world, and it was not really possible for someone to sit here and say that he or she was going to innovate for someone living in San Francisco. But now it’s much easier, and entrepreneurs feel it’s a risk worth taking.”
Those startups that do succeed here are often led by seasoned professionals. “I had three very important things checked off: I had a fair idea of what I wanted to do in my company, I had a team that I trusted to be able to do that and I had done this startup thing before,” noted Narasimhan (Kishore) Mandyam, co-founder of cloud computing startup Impelcrm (formerly PK4 Software Technologies), which sells the Impel CRM contact management SaaS. “The initial challenge was to convince people in India that a cloud offering made sense. When we realized, very quickly, that it was an evangelical sale, we switched the emphasis to marketing Impel CMS to people [who were already sold on the cloud concept]. Although that’s a smaller number, any number in India is big.”
A final piece of the puzzle for India’s tech entrepreneurs is the cooperation and support of the country’s government.
Kondamoori believes tax exemptions on the portion of profits poured back into R&D would stimulate “innovation, IP [creation] and long-term sustainability.” Couple that with global reach and global ambition, he said, and “it’s just a matter of time” before India is known as an innovation hub.
Said Mercatus’ Govindan, “I see a spark in India, and if this country if given the right platform—government support, an organized initiative—innovation will take off.
“This is the future wealth [of India] . . . the wealth of ideas.”
“I feel the only way to abolish poverty is to embrace entrepreneurship and create lots of jobs with high disposable income. If I can encourage entrepreneurs and youngsters to do that, it would be wonderful,” said Murthy. Among the organizations in which his firm has invested is SKS Microfinance, which funds cottage industries launched by poor rural women.
A number of well-known funds have set up shop in India, but entrepreneurs looking for angels are often disappointed.
“Indian startups and entrepreneurs have to work with a very different environment, and we recognize that out here in [Silicon] Valley,” said Sun Microsystems co-founder Vinod Khosla, who later became a general partner at VC firm Kleiner, Perkins, Caufield & Byers and today is a partner at Khosla Ventures. “To do business in India, you have to be a little creative and innovative to thrive. But I am still quite positive on India. The way to grow an economy is through entrepreneurship and capitalism, and India seems to have figured out the right formula.
“Clearly, there are still a lot of issues. Starting a business in India is still harder than it needs to be. But I believe fundamentally that the major energy breakthroughs will have to compete at ‘Chindia’ prices, because you have 2.5 billion people [in China and India] trying to raise themselves from poverty to a Western standard of living.”
Organizations such as The Indus Entrepreneurs; the National Entrepreneurship Network, a Wadhani Foundation project; Nasscom; the India Semiconductor Association; the National Innovation Foundation; and the Rural Innovation Network offer networking opportunities for Indian entrepreneurs. But most of the business founders here who manage to hold their heads above water are able to do so only with financial help from friends and relatives.
“It’s all about connecting with the right VC and getting someone to vouch for you; otherwise things just don’t happen,” said Partha Ray, who with partner T. Rai tried and failed to secure funding for a semiconductor project. Today, Ray and Rai are back at their office jobs, but both hope to give entrepreneurship another go in the future.
MindTree Consulting (now MindTree Ltd.) co-founder S. Janakiraman suspects the VC and private-equity firms that got burned as a result of the recent global economic meltdown pulled back in India just as they did elsewhere. But Janakiraman expects “the investment climate for startups to change for the better as firms see a few success stories from startups making it big in India.”
Nasscom, the primary trade organization for India’s software services industry, estimates that there are 652 early-stage IT companies in the country. VC Sharad Sharma at the Indian Angel Network said the numbers are rising as the startup environment grows more hospitable “due to several factors: better availability of angel/seed capital, the opening up of the domestic market and the ability to penetrate the SMB [small- and midsized-business] market in the West using software-as-a-service business models.”
But India is a huge country with enormous needs, and the VC pool is just not deep enough to float every worthy business plan. Seedfund partner Bharati Jacob said it’s not even possible to go through all the plans the fund receives.
One hurdle for startups seeking funding is India’s asset-based economy. “For a working capital loan from an Indian bank, you have to show asset-based collateral; they don’t value the intellectual property or capitalization of R&D that you have,” said Sandalwood’s Kondamoori, who has spent more than 25 years in the Silicon Valley investment community and says he is always on the lookout for promising startups in India and China. “It’s different in the U.S., which is an earnings-based economy; the valuations [of U.S. companies] are very high based on earnings. A lot of this kind of metrics—measuring and building valuation in companies—needs to come into Indian management teams. Anyone I speak to in India always talks about revenue and top-line growth; they don’t concentrate on net margins.”
Kondamoori believes such metrics will fall into place as more Indian companies start listing on the established global exchanges, as reservations booking service Makemytrip did in April with its Nasdaq IPO.
“Right now, there is no saturation in the [Indian] marketplace for any product or service,” he said. “Take the telecom sector, for instance . . . today every telecom operator is interested in merely putting up towers and attracting subscribers, and the way they go after the subscribers [by making incremental, cent-by-cent cuts in charges for calls] is taking its toll; they are losing money all the way. There is so much one can do in the telecom space if you really want to innovate, but everyone is too busy grabbing their share of subscribers . . . I think once saturation takes place, then innovation will definitely come in.”
Alok Mittal, a partner at Canaan Partners, noted that while India has engineering talent in spades, that’s not enough to build successful startups. “You need product managers who are able to chart out the road map and carry it through. And you need customers who would like to buy tech innovation from India—and right now, we don’t see customers rushing to buy products from startups. This, in turn, affects the availability of capital” for Indian tech startups.
The dearth of global customers for Indian innovations reflects Indian companies’ inability thus far to get the hang of global marketing, said Ravindran Govindan, executive chairman of Singapore-based Mercatus Capital. “Most of the [Indian] companies I meet with have global products, but they are not able to brand the product well and market it. When VCs like us do manage to connect with some good companies, we are able to accelerate the growth tenfold,” Govindan said.
Indian companies are self-sufficient and steeped in the culture—perhaps to a fault, as they can be provincial in outlook, said Govindan. “They carry the culture into the market, and it’s extremely difficult to break through. When you enter a foreign market, it is just not about opening an office there; it’s about knowing how to talk, how to engage people in relevant conversation, how to negotiate shrewdly and, most important, how to sell. I feel this where India is really lacking.”
On the other hand, the eastward expansion of technology markets is bringing the global marketplace to Indian companies’ doorstep, noted Raj Khare, co-founder of media convergence startup SureWaves. “The center of gravity is shifting to emerging markets such as India and China. Earlier, the [volume] markets were in the Western world, and it was not really possible for someone to sit here and say that he or she was going to innovate for someone living in San Francisco. But now it’s much easier, and entrepreneurs feel it’s a risk worth taking.”
Those startups that do succeed here are often led by seasoned professionals. “I had three very important things checked off: I had a fair idea of what I wanted to do in my company, I had a team that I trusted to be able to do that and I had done this startup thing before,” noted Narasimhan (Kishore) Mandyam, co-founder of cloud computing startup Impelcrm (formerly PK4 Software Technologies), which sells the Impel CRM contact management SaaS. “The initial challenge was to convince people in India that a cloud offering made sense. When we realized, very quickly, that it was an evangelical sale, we switched the emphasis to marketing Impel CMS to people [who were already sold on the cloud concept]. Although that’s a smaller number, any number in India is big.”
A final piece of the puzzle for India’s tech entrepreneurs is the cooperation and support of the country’s government.
Kondamoori believes tax exemptions on the portion of profits poured back into R&D would stimulate “innovation, IP [creation] and long-term sustainability.” Couple that with global reach and global ambition, he said, and “it’s just a matter of time” before India is known as an innovation hub.
Said Mercatus’ Govindan, “I see a spark in India, and if this country if given the right platform—government support, an organized initiative—innovation will take off.
“This is the future wealth [of India] . . . the wealth of ideas.”
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| "To do business in India, you have to be a little creative and innovative to thrive," says Vinod Khosla of Khosla Ventures. |
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Dave.Dykstra
10/11/2010 12:45 PM EDT
It seems reasonable and only a matter of time until we see many new and innovative solutions from India. Probably there will be a mixture of ideas with some aimed at consumers in the rest of the world (US, Europe, China, Japan, etc.), and some aimed specifically at the consumer in India. This will depend on the mindset of the individual/company and their particular focus. Of course, there will be many ideas that will apply to both, although in many instances they will probably require a different implementation due to factors such as infrastructure differences, etc.
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MangoAndApple
10/11/2010 4:31 PM EDT
thoughtful article.
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Luis Sanchez
10/11/2010 5:01 PM EDT
I just had a talk with Ramesh (good guy) and he showed me how the indian government played a strong role in the empowerment of the Indian nation as the where to go for software development.
Today, the way things are in the IT industry show that it has all been brewed since years ago, "we learned programming since 8 grade..." he mentioned... perhaps if the government continues on the track to innovation, in some years from now we will surely see the creation of wealth lean to the that side of the globe. What do you think?
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Sheetal.Pandey
10/13/2010 4:43 PM EDT
Well you are correct. The government does support software growth. But I guess the diversities are too much to concentrate on few things. But with so many diversities still things are shaping up very well.
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Charles.Desassure
10/11/2010 8:48 PM EDT
Thank you for your article. Hats off to India and its engineers for wanting to be creative and branch off with their own technology. That’s good! India’s need to know that we support them and any great idea to enhance technology. If there’s a market, people will buy their product.
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kari
10/11/2010 11:24 PM EDT
Venture guys, if you want both the brain and cheap intelligent labor force to realize your financial dreams, just go over the Himalayas to realize your dream. This is the high time to invest there.
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hm
10/12/2010 12:26 AM EDT
Indian firms may be very effective in modifying and adapting to the proven ideas from developed countries. However, we are yet to see many major conceptual products or basic ideas from India. Second aspect is quality and reliability of this new ideas and concept in successful products. It takes very hard work and long time to create quality product from basic conceptual idea. We are yet to see them from India. India has very hard work to do make their name in world market for new ideas.
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Chak K
10/12/2010 12:26 AM EDT
"70 percent of the population of 1.2 billion still scrapes by on half a dollar a day" looks hard to belive, especially considering that more than 20% of population is in tier1 and tier2 cities. Is this information latest? Can you quote the source?
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hareesh_asic
10/12/2010 12:29 AM EDT
Thank you for your article. i agree with Mr.Kondamoori. The Innoations in high-end technologies like VLSI are remain unrealized due to the lack of Manufacturing units.
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prabhakar_deosthali
10/12/2010 1:49 AM EDT
Just imitating west cannot bring out the real innovations from Indian minds. For centuries the Indian mind set has been following west be it a new technology, literature, art, theater or movies. Even in IT where Indian manpower has now spread across the world, it is only helping those American, German or Japanese companies in developing their innovative ideas into products. So the India IT industry has become service-centric and not product centric. All those design houses in Bangalore and hyderabad and Pune are also helping those giants like Oracle, Microsoft, TI, Intel to convert their original ideas into products. The day will written with golden letters when Indians will develop original products out of their own innovative ideas which could be in a radically different application domain, not just a cheap PC but may be a radically different medicines to fight all these new viral diseases. not just a super computer doing the same binary arithmetic faster but may be a new mathematical model .For these Indian minds need to go deep into their own age old knowledge base hidden in Vedas and such other literature and use their innovative minds to marry the old with the technology available from west
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Dr Raman
10/12/2010 5:27 AM EDT
Innovations in India are not a new phenomenon and, it only lacks due recognition. Despite 800 years of oppressive foreign rule, India progressed very well in the last 63 years since Independence and is not a minor achievement. However, the mistake India is doing now is to repeat the same mistakes that west has done in the past. All the developed countries are on the forefront damaging the environment despite having few environmental policies, now India & China are also trying to harm the environment more in the name of development. They must tread a different path in terms of technology (eco-friendly), economic model (not greedy capitalism) and Social model (based on moral values).
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Janakiram
10/12/2010 6:44 AM EDT
I agree with Dr.Raman. There is immense potential in India for innovation. Need of the hour is to focus more on sustainable, both locally & internationally relevant innovation. These need to be followed up with due recognition by Industry leaders and the Government.
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nicolas.mokhoff
10/12/2010 7:33 AM EDT
It's a great update on India's development of a home-grown hi-tech industry. I wonder what the percentage of Indian engineers and entrepreneurs who received their education in the West then went back to innovative and invest in their home country. And what has been the success rate for these ex-pats. Also, are there enough university research centers in India to sustain a permanent flow of hi-tech innovations.
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CHATLIT
10/12/2010 10:31 AM EDT
This has reference to Jayant Deosthali and hm's comments.Truly,the answer lies in Indians identifying conveniences peculiar to Indian habits and finding solutions.Indians prefer to be secretive and perhaps there are several good ideas are left in somebody's computer memory.Somehow Indians at Policy making levels tend to get carried away by the products which claim to be state of art with slick presentations and are of utility to a miniscule section of society.
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elctrnx_lyf
10/12/2010 1:06 PM EDT
@Nic_Mchoff --- There is not even 10% of engineers coming back to India after completeing their master degree in west. This is mainly due to majority of people in India are brought up with poor facilities around them and made to think to have a better luxurious life as the only ambition. Certainly there will be people with good ambitions and they will thin little more than me too attitude and many enterprenures.
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elctrnx_lyf
10/12/2010 1:07 PM EDT
cond ... will be there to take risk and think the future.
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iniewski
10/12/2010 3:23 PM EDT
I will be a little contrarian here...why bother with innovation when you can make billions by copying and doing stuff cheaper??? Worked for Taiwan, now is working for China...Kris
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Sheetal.Pandey
10/13/2010 4:47 PM EDT
well then one can be only one part of the business. When you innovate, you bring more business options.
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goafrit
10/12/2010 4:16 PM EDT
India has the brains and as Economist said this week, they will overtake China. That nation has good the education right, innovation will follow.
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goafrit
10/12/2010 4:26 PM EDT
Developing nations like India must find a spot on this planet by moving into technology areas where they can differentiate. Frugal engineering, alternative sources of energy where local raw materials are available, etc, will make all the differences. Going to compete with IBM on the fastest computer will not work. Great article.
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Sheetal.Pandey
10/13/2010 4:50 PM EDT
Almost all mutinational comapnies have there presence in India. Due to the growing market. But I guess India has to work with diversities issues and make development the only goal. Which is easier to say but difficult to achieve. But yes the article brings out the innovations in minds of young Indians. And surely there are many more but could not see the light because they cannot reach the mainstream media.
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Sanjib.Acharya
10/23/2010 2:40 PM EDT
I would like to know how many of those ideas did Catamaran consider worth investing in? Great to know about "lot of confidence and enthusiasm" to generate ideas. I had a feeling that in India many brilliant students don't get a chance to choose their career based on what they love to do, but rather it depends on what opportunity they get. There are lots of opportunities in IT. I've seen many students good in electronics choosing IT as their career not because they love IT as their profession, but because they got recruited by one of many IT farms visiting their institute. I think better ideas could get generated by the engineers who love their domain of work. India is doing good in IT but I doubt about other sectors including electronics. Indian Govt. needs to help supporting those sectors. Also India must have better infrastructure (better manufacturing facilities) to support implementation of good ideas.
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videoguru
11/23/2010 2:32 AM EST
Your article is without merit
Who does your legal due diligence on Sandalwood Partners and Bob Kondamoori
the fella is a fake with "NO FUND" in India, check with the SEBI here and has duped investors millions in India. His CFO (Ajay Jalan) and him are embroiled in an internal rape charge here in Bangalore, India
make your queries and do not believe a word this crook has to say
http://www.deccanherald.com/content/94600/company-cfo-rapes-woman-two.html
previously duped investor
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