Category Archives: India

Entrepreneurship, India, Venture Capital

Who are the “early adopter” Venture Capitalists in India

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Like you, I assumed that all VC’s are risk takers. I mean as an asset class if you have to provide the highest returns over the long term, I would suspect you have to take big risks to get big returns. The average Indian bank has been giving around 8% annual returns on FD (source), real estate returns about 13%, and gold loan providers will give you close to 15% I am told. So, VC as an investment class should offer higher returns given how ill-liquid they are and how risky they tend to be.

So, how do you really measure if a VC is an early adopter versus a late adopter? (lets keep it simple and only put them into 2 categories).

My thinking is the only way you can do that is to look at their investments (portfolio companies) and find out the categories of companies they invested in. Then find out if any other VC’s invested in another company in that category after the “first” VC did. There are other ways to do that, like ask entrepreneurs who responded the fastest when they were looking for funds, but those dont evaluate who puts their money where their mouth is.

Why is this question useful to answer?

For entrepreneurs who are innovating in a new area, this list of early adopters will help you determine who you should go to first versus who should you expect will fund a possible competitor.

Lets define our methodology and assumptions:

1. We will look at all their websites and make a list of the Indian VC portfolio. Fortunately we have that list of over 50 VC’s in India.

Flaw: Many dont update their website as frequently so there may be a 20% (or higher) error, but I have tried to be comprehensive.

2. We will then categorize their investment into 5 buckets – Media and content, eCommerce, Business to Business, Mobile and other (Education, Healthcare, etc). This is important so we know not only which VC’s are early adopters but we can also try to find that out by sector.

3. Then we will look at the announcement dates of their funded companies from press releases, Unpluggd, YourStory, ET and VCCircle. We will give them 2 points for every investment done in a sector before any other VC did.

Flaw: Most (I suspect over 50%) of companies report their funding 3-6 months after they have raised the money, so this will be a large flaw, but lets do the analysis anyway.

4. Finally look at stage of investment. If a VC puts money in the series A, I would give them two points in the early adopter bucket. If, however they participated in series B or later, they get one point in the late adopter bucket.

First let me give you the results (not in any order other than early adopters vs. late adopters).

Early adopters VC’s.

  • Accel (eCommerce, B2B) – 78 points
  • Indo US Venture Partners (B2B) – 56 points
  • Saif partners (Mobile, eCommerce), but they are late adopters in B2B – 49 points
  • Venture East (B2B) – 45 points
  • Sequoia (Media) – 46 points
  • Seedfund (Scored enough, but dont have a clear winning category) 42 points

In the middle

  • Blume ventures – 40 points
  • Nexus Venture partners – 36 points
  • Helion – 36 points
  • Ojas ventures – 34 points

Later adopter VC’s – all scored less than 30

  • Bessemer Venture Partners
  • DFJ
  • Cannan partners
  • India Innovation fund
  • Inventus Capital
  • Footprint ventures
  • IDG ventures
  • India Internet Fund
  • Lightspeed partners (but have done well in Education)
  • Norwest
  • Sherpalo

What I hope this list will do?

1. Make Indian VC’s think about being innovation catalysts rather than ambulance chasers. I understand you have a responsibility to provide returns, but you also have a responsibility to grow the Indian startup ecosystem. Might I suggest a 5-10% of your portfolio towards risky, “first time this is going to happen” investments?

2. Make Indian company founders announce their funding. Unlike the US, here entrepreneurs are loathe to do so. I can understand the competitive pressures, but not doing any announcement is just lame.

3. Educate Indian entrepreneurs on their target VC list. Depending on the opportunity you are trying to pursue, please target the right VC firm. The only thing you have (and dont have) on your side is time. Use it judiciously.

P.S. I have confidence in the methodology but I would be the first to admit its neither comprehensive nor scientific. If you are an eager MBA / Engineer / analyst and would like to help make this methodology and analysis more robust, I’d love your help. You can take all the credit. In fact, I can convince many publications to give you credit for the work if you desire and if you keep it updated every 3-6 months.

P.P.S. If you are a VC and not in the early adopter list, or you are not happy with the analysis I’d also welcome your associate’s help in making this analysis robust.

Angel investing, Entrepreneurship, India, Venture Capital

How to get a job as a Venture capitalist

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I get an email or two a week from folks wanting to be a Venture Capitalist. Usually its to ask for introductions to a VC firm or to forward their resume. Most of these folks have a technical background and some have an MBA. Since most people sending the email dont ask me how they could really get a job at a VC firm, I thought I’d outline that for them.

There are broadly 3 operating roles in a VC firm – General Partner (GP), Associate / Principal (AP) and Operating partner (OP). There are other roles such as Venture partner, but those are fairly rare. Limited Partners LP’s) are not part of a VC’s fund’s operating roles, they are investors in a VC fund.

Most VC firms have between 2-5 GP’s, and 2-5 AP’s and 1-2 OP’s. (source: PDF)

GP’s take the most risk, since they raise the fund from institutional investors so they tend to get the highest salaries and profits the firm makes from the investments. To be a GP you should have enough capability to raise funds (the most important aspect) and deploy those funds to provide a better return (which is: invest in startups and ensure they have great exit). Most GP’s (over 60%) I know have a degree from a top notch school (think Harvard MBA, Stanford MBA or in India IIT and IIM). Please see list of VC firms (below) in India. My analysis of GP’s in those firms indicates unless you have been an entrepreneur before with a successful exit OR from a IIT / IIM, with over 10+ years of experience OR you can raise money from other investors, your chances of being a GP are very low (less than 10%). Unless you can raise money to be a fund on your own, you will have to spend 10+ years being an AP and then graduate to being a GP.

AP’s are usually junior folks, and of the ~120+ AP’s in the list of firms below, more than 69, (> 50%) are from IIT, IIM, McKinsey backgrounds. So if you are a fresh grad or someone with 2-5 years of experience, and not from a top school, your chances of getting into a VC firm as an AP are not high. Its not impossible, but there are only 400+ firms in India and so a max of about 1500 AP positions, which means a best case of about 700 (<50%) positions. The good news is over the last 5-10 years the % of IIT, IIM grads as AP’s has dropped from over 80% to less than 60%.

Operating partners are usually CFO’s or Legal advisors, so your technology background wont qualify you for a role there. More likely a legal degree or a CPA / CA certification is required.

So how do you get a job as a VC if you are not from a top school or you dont have ability to raise money?

1. Be an entrepreneur first: Most VC’s who are not from top schools end up being one because they made money for the VC firm that invested in them. If you are an entrepreneur and you raise money from a VC firm, and then have a successful exit, the chances of you becoming a VC improve dramatically. Surprisingly, even if you dont have a successful exit, your chances of getting into a VC firm improve many fold. If you had a successful exit however, you can possibly raise your own fund, and write your own ticket.

2. Help rich investors make money: As I point out before a key part of being a VC is the ability to raise money. Most folks who I get emails from are like me (15 years ago). I did not have the network to raise funds at that time and neither did I have a lot of money myself to start a VC fund. Raising money from other rich people involves them trusting and knowing you (they are friends, family, etc.) OR you having made money for them before. I suspect like me, most of the folks emailing me dont have very rich uncles and aunts, so the best strategy is to help rich folks get richer. This might include introducing them to startups which need investment and then exit to make your investors a profit, or making money for them via the stock market and generating enough returns to both satisfy them and to make a tidy sum for yourself.

3. Work yourself into that role: VC’s dont recruit by going to campus interviews or by posting on job boards. If they do, be vary, and run away. Most good VC’s I know only hire from their network or trust a executive search firm to help them get the right AP candidates. Get to know and help executive search (Kornferry or Stanton Chase) recruiters get other candidates (for other roles) and keep your name on their radar. They might come to you when a VC job comes up.

The other approach is to network with VC’s so they will let you know when their firm has an opening for an AP. To be on their radar, help them source and talk to great entrepreneurs and send them good quality companies to invest in. Alternately if you have an uncle or aunt at a VC firm, you can get that AP role fairly easily.

Of course the easiest way to be a VC is to bankroll the fund with your own money, if you have that much money, then this post is largely useless for you.

List of VC firms (sorted by no particular order), where I have a connection, so if you want an intro, I can help you.

DFJ http://www.dfj.com/cgi-bin/cgi-networkportfolio/search.cgi
IUVP http://www.iuvp.com/portfolio.htm
Bessemer Venture Partners http://www.bvp.com/Portfolio/Default.aspx
Saif Partners http://www.saifpartners.com/portfolio
Cannan Partners http://www.canaan.com/home/companies/india/
Venture East http://www.ventureast.net/Portfolio.html
India Innovation Fund http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id=53252
Nexus Venture Partners http://www.nexusvp.com/companies.asp
Inventus Capital http://www.inventuscap.com/portfolio.html
Helion http://www.helionvc.com/portfolio.htm
Footprint Ventures http://www.footprintventures.com/portfolio.htm
IDG ventures http://www.idgvcindia.com/global_portfolio.htm
Ojas Ventures http://www.ojasventures.com/portfolio.html
Naukri InfoEdge http://www.infoedge.in/ir-financial-fys.asp
Accel http://accel.com/company/sector.php?sector_view=122100
Nirvana Ventures http://www.nirvanaventureadvisors.com/
Everstone Capital http://www.everstonecapital.com/
Epiphany Ventures http://epiphanyventures.in/team.asp
Seed Fund http://seedfund.in/investees/
Silicon Valley Bank http://www.svb.com/india/
India Internet Fund http://www.indiainternetfund.com
New Silk Route http://nsrpartners.com/portfolio/sector
Sequoia http://www.sequoiacap.com/india/early
Lightspeed Partners http://www.lightspeedvp.com/Portfolio/Default.aspx?i=1&t=0
Greylock http://www.greylock.com/portfolio/portfolio/
Benchmark http://www.benchmark.com/companies/
KPCB http://www.kpcb.com/portfolio/portfolio.php?communication
General Atlantic http://www.generalatlantic.com/en/companies/region/4
Ascent Capital http://www.ascentcapital.in/
Reliance Venture Asset Management http://www.relianceventure.com/portfolio.html
Intel Capital http://www.intel.com/about/companyinfo/capital/portfolio/index.htm?country=india
IFCI VC Funds http://www.ifciventure.com/Success%20Stories
Matrix Partners India http://www.matrixpartners.in/portfolio.php?category_id=8
Kitven http://www.kitven.com/port.htm
Rajasthan Venture Fund http://www.rvcf.org/portfolio.html
Norwest Venture Partners http://www.nvp.com/NVP%20India.aspx
Clearstone Venture Partners http://www.clearstone.in/content/html/portfolio-location.htm
ePlanet Capital http://www.eplanetventures.com/team
Artiman Ventures http://www.artimanventures.com/team.html
Indavest http://www.indavest.com/portfolio.html
Sherpalo http://www.sherpalo.com/portfolio/index.php
Catamaran Ventures http://www.catamaranventures.com/
Battery Ventures http://www.battery.com/portfolio/international.html
Qualcomm http://www.qualcommventures.com/team
Blume Ventures http://blumeventures.com/
Mayfield Fund http://www.mayfield.com/
Andreessen Horowitz http://a16z.com/
First Round Capital http://www.firstround.com/
Union Square ventures http://www.usv.com/
Khosla Ventures http://www.khoslaventures.com/khosla/default.html
India

Flipkart Forbes story: Most startups are like toddlers, cute for 15-30 min, but messy and noisy otherwise

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I love kids. I have 4 of them. They are so sweet and fun when guests come home that most folks claim I have it easy.

They dont know the half of it.

If you have ever been with toddlers (or even been a baby-sitter once, you’ll relate to this), you know they can be “Oh so cute for 15 min in front of strangers and give you hours of tantrums later.

Startups are the same.

Great on the outside, messy in the inside.

Well behaved when people are visiting, painful to deal with when the guests leave.

Quite as a mouse when grandparents are baby-sitting, but tear the house apart otherwise.

Then when everyone else realizes they are being kids, they express shock. That’s the story with Flipkart’s Forbes piece.

Flipkart is a 5-year-old company.

Do they have culture issues? Possibly.

Do they have growing pains? Definitely.

Are they trying to figure out what they want to be when they grow up? Sure.

Will they go through more pain before they grow up into “role model” that everyone expects them to be? Absolutely.

I have only heard the podcast and am still to read the entire piece.

Here’s what I believe the story will have <Begin conjecture>

1. Flipkart has management challenges in scaling up and has alienated a few folks who were not part of the original team.

– Happens. Is that a call for the company to “go under” – not sure.

2. Flipkart is obsessed with great customer service, so their prices are higher. Competition provides better pricing.

– Lame. If you have a business model that’s predicated on better service and hence you command a premium price, there are customers who will come. May not justify their valuation, because growth might stall, but there’s a market for great customer service – FOREVER.

3. Flipkart has nose-bleed valuation and some VC’s are shying away from paying those valuations.

– Lame. I dont know a single VC who likes large valuations. This is an absolutely useless point.

<End conjecture>

Do I think the journalist did a poor job?

Nope, he’s just chasing PageHitsVille.

Post my facebook discussion with Rashmi:

4. Flipkart’s acquisition of Letsbuy was driven by the VC’s and was a total waste.

– Sure. Total waste is your point of view, but I called the synergies a few months ago. It was smart for Flipkart to get the customers and more importantly the relationships and the purchasing power from larger numbers.

Community, Entrepreneurship, India

Bangalore Startups Group and the Big data meetup

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I attended an awesome mixer and startup meeting late afternoon yesterday put together by Bangalore startups.  Umashankar, Rashmi and Subhendu had organized a technical Big data developer exchange.

First off, just having over 100+ developers in a room (with a VC to boot- Rajesh from Ojas) was great. There were multiple levels of maturity about big data and Hadoop in particular (Zookeeper, Pig scripts, etc.) but this was an awesome start to more technical meetups. I think the format was in beta but it was good to see the energy in the room.

I am a big fan of the unconference in particular, so for developer meetups, this is one of the best formats is my perspective. This one in particular would have been best suited for it.

There were 3 talks – one by Karan from Microsoft, another from Vara & Khadim of Search enabler and 3rd by Vikranth of Data Weave. All three were excellent, hands-on perspective from developers, by developers and for developers.

I personally thought Vara stood out. The most impressive part of the presentation was the confidence that there are folks in India doing excellent work on niche (but growing) and arcane areas, some of it very cutting edge. Vara actually builds his own servers (from cheap components), and has built a suite of tools to automate their imaging, provisioning and maintenance built on open source components. I thought they could offer that as a service to Indian entrepreneurs because even though Amazon is easy, its a tad expensive for Indian startups. Their infrastructure is at least 30% less expensive than Amazon was their perspective and best suited for companies hosting for Indian and neighboring markets.

Their stack had Lucene and Nutch (for crawling and indexing), pig scripts and Zookeeper on top of HDFS. There were over 30 open source tools they have used for the infrastructure management.

My biggest takeaway was that many of these folks are not too far away from contributing back to FOSS community. When I talked to many of the developers to find out why contribution to FOSS was low from India, their personal experience was the lack of confidence that their “code was not up to the mark”.

I think there’s an excellent opportunity for this team or another to build confidence by hosting and running FOSS contribution hackathons. If anyone’s up to it, I’d love to contribute with space, food or some freebies.

Entrepreneurship, India

What happens when your co-founder decides “Its time to move on”

6 Comments

Its that dreaded 6 month itch. Or the 12 month itch, or 18th – whatever. Its an itch all right. Your cofounder and you have been toiling away at your startup for what seems like ages now. Its not going all that well (if you compare yourself to others) and you both know it. You both get a sense that something’s missing. Or something’s not just right. Then she drops the bomb “I’m thinking of going to look for something else to do”. Or she’s going to pursue her MBA instead of working. Or worse, work at a big company with a large paycheck and some “stability”. Or his mom wants him to get married and his prospective father-in-law does not like the idea of a “startup” – “Go and get a real job at a big company, if you wish to marry my daughter”, he says.

I am going to assume you are both equal partners in all things (i.e. you both own the same amount of the company, and came up with the idea together).

So what happens next? Let me tell you the emotions I went though.

First, its okay to cry. I have personally done that a couple of times.

Then I dreamt revenge. Its okay if he leaves, I will make this so big, he’ll regret he left me in the first place. He’ll come begging back to me in 1 year asking for a job as a programmer in my company and I’ll ask him to come to interview with people who work for the people who work for me. I’ll claim we are a “big” company now and decisions to hire programmers are left to lower level people. “I only focus on strategy and vision and having lunch with my investors”, would be my email back to him.

Then I woke up.

I questioned everything. Why was I starting this company? What was the vision? Was it still valid? I started to create my own FUD. Was I a good co founder? Was the idea bad? Will customers now trust me? Will anyone else want to work with me? Is a startup even worth all the pain and suffering?

I spoke with most of the people involved with our startup – potential investors, some people we had interviewed, some customers, seeking their advice.

My first reaction was to tell them that my cofounder left for some bizarre reason. I told them he had to move out of town (which he did, but not for the reasons I mentioned) and so we decided to part (I did not want to leave Silicon Valley, you see). Most everyone saw through that.

Then all I said was “He thought this was not worth doing and it was hard on him and his family”. Which was the truth.

What I got back was surprising – “Get back on the saddle, and start to ride”. Or as some say “This too shall pass”.

Everyone pitched in with new ideas, different ways to solve the problem we initially set to solve. One prospect even gave me a consulting agreement, because he knew I was going through a rough patch.

So what happens when you co-founder decides to leave?

Lots, and then again nothing much. Many things change and most things remain the same.

If you really want to succeed with your startup, most external events will not matter. Most successful startups were born during periods of recession.

Regardless of whether you have a co-founder or not, the fundamentals remain – Is this a big pain / problem? Is there a better way that you can solve it? Are lots of people willing to give you lots of money to solve that problem? Is there a way you can take small steps towards solving that problem?

Go on, be a force of good.

Angel investing, Entrepreneurship, India, Sales

The “two speed” state of Indian market adoption

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I have been watching / following 7 startups (3 in eCommerce, 2 in SaaS and 2 in consumer Internet) that target the Indian market over the last 14-18 months. All the entrepreneurs approached me with an intent to get seed funding so I had a chance to go over their traction, progress and future projections.

I have formulated a theory of market adoption of products / high technology products in India which I have tested with these and other companies and also with several venture investors.

For background please read “Diffusion of innovations” by Everett Rogers and Crossing the chasm by Geoffrey Moore. Don’t worry, I have only linked to their Wikipedia page, so it wont cost you anything.

Diffusion of innovations

At the top of the consumption (and monthly income) pyramid in India are what economists and marketing people call the SEC A and B class who have enough disposable income to spend on innovative new products. For the purposes of this blog post I am going to use 10 Mill (SEC A) + 20 Million (SEC B) households as the target.

The Innovators (less than 1 % of the population or 12 Million individuals) in India (entrepreneurs mostly) who conceive and develop these products for the Indian market and the early adopters (less than 5% of population or approx 60 Million individuals) together make up the entire “early adopter” category. Unfortunately less than 30% of them have both the interest, and the desire to be early adopters of technology.

Indian markets do not follow traditional diffusion characteristics when first innovators buy, then early adopters, then the early majority, and then the late majority and finally the laggards.

My theory on how diffusion of innovations works in the Indian context is as follows.

In India there are only 2 market adopters – those that are early and those that are not.

Abhijeet calls it the “low hanging fruit” and then everyone else.

So lets look at the implications of this observation / theory.

So what does that mean for entrepreneurs?

You will see a “headfake” of adoption and then a taper off.

E.g. The B2B SaaS company will quickly (within 3-6 months) get 10+ customers and over 30 in the pipeline, only to find the next 50 and the next 100 or the next 1000 are either non-existent or will come in 3-6 years.

E.g. The eCommerce company will see 1 -3 Million “registered” users and 1000’s of transactions within 12 months and find that the next 1000, 5000 and 10,000 transactions take 4-5 times as long.

E.g. You will see an initial 20,000 users for your mobile application for social TV extremely quick (within 3-6 months) and the next 50,000 or 100,000 take you the next 3-6 years.

I have seen these numbers play out again and again to know there are exceptions but those are rare.

These numbers are also dramatically different than those of companies targeting US or other markets.

When should you (as the entrepreneur) raise money?

You should raise it at the peak of inflated expectations. I.e. After you have some traction, which the investors think will be long lasting, steady and rapid. You will get the best valuation for the company at that time. Once your investor has some “skin in the game”, they are in to get their money back and then some, so they will do all it takes to make you successful.

 

Trough of disillusionment

What does this mean for investors?

The best time to invest is either very early (starting to build a company, idea and team stage) OR at the trough of disillusionment stage.

If they are early, you will get the bump from the initial adoption, so the value of the company increases many fold before the next round (which you should help the company raise at the peak of inflated expectations.

If you are post the trough, then you benefit from a growth stage.

What makes you go over the trough to the slope of enlightenment?

In my experience:

TIME

Nothing else.

You may think I am being facetious, but I am serious.

This may be a cultural thing, but in India, over time if you have the ability, patience and willingness to survive, you will reach the plateau of productivity.

Anecdotal evidence over several sales transactions also suggests to me that once people in India see you around for 2-3 years, they think “Okay, this company / person is for real. We should give her / the product a shot”.

Big thanks to Abhijeet and Shekhar for helping me with their data points to reinforce my theory.

India

Book review: Making breakthrough innovation happen by Porus Munshi

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I had a chance to meet author Porus Munshi at the SAP Innovation meetup with the CMO of SAP, Jonathan Becher. Big thanks to my friend, Amarinder for inviting me to be a part of that event.

Porus Munshi book

Its a breezy 234 page read with 11 stories from Indian companies that innovated on product (ITC eChoupal), marketing (Dainik Bhaskar) and process (Aravind Hospitals).

To make “orbit changing” innovation happen his recommendation is to set a BHAG (Big Hairy Audacious Goal) and question every assumption. The second part is to come up with an “insight” that brings the innovation to life.

E.g. The BHAG for Aravind hospitals was to “Eliminate unnecessary blindness worldwide”. This requires operating on 24 Million people. Any eye surgeon can operate on 10-15 a day, so that’s a lot of eye specialists required.

The insight the obtained was from McDonalds where the entire “process” was streamlined as a manufacturing assembly unit with no compromises on quality.

So Aravind hospitals redefined the operating process and made it similar to an assembly line, which enables their doctors to operate on 3 times the number of patients possible, with no compromise on quality.

There are many other stories including innovations at city of Surat, Trichy police, Cavin Kare, etc.

I finished the book in under 3 hours, so its not a textbook, but more like a case study compilation.

If you are in Bangalore and want the book to read (you can pass it on to someone else after you finish), drop me an email and I can have it delivered. Or if you want to pick it up, my office is at Cunningham Road.

Entrepreneurship, India

The startup ecosystem in India is schizopherenic

6 Comments

Okay now that I have your attention with that ridiculous headline, let me define a few things first.

Schizophrenia is a complex mental disorder that makes it difficult to:

  • Tell the difference between real and unreal experiences
  • Think logically
  • Have normal emotional responses,
  • Behave normally in social situations

Lets try and list all the players in this ecosystem. I have provided this list sorted by the importance of the player to the ecosystem (obviously this is my opinion and hence biased).

1. Entrepreneurs – the heart and soul of the ecosystem

2. Talent for the entrepreneurs (meaning people to hire)

3. The early adopters (Both consumer and businesses)

4. Investors – Angels and Venture Capitalists

5. Incubators and Accelerators

6. Universities & research institutions

7.  Advisors, mentors, coaches

8. Startup communities, media and events organizations

9. Service providers – lawyers, accountants, etc.

10. Larger companies for partnerships, distribution and marketing

11. (Dare I say) Government – yes for things such as incorporation, taxes, etc.

12. Cheerleaders and poster girls (or pinup guys if you like).

13. Successful startups and successful / failed entrepreneurs

14. Associations, government liaisons and trade organizations

15. Interested public

Do I have an exhaustive list? Probably not, but this is a good enough start.

Every player has something unique they bring to the table and has a perspective on what’s good and bad about our Indian startup ecosystem.

Even if we mostly stick to the technology space, we say one thing and do the exact opposite.

No wonder most entrepreneurs get confused.

1. We want more innovative product companies but we end up funding mostly me-too eCommerce companies.

2. We want to build the next facebook and Google and yet most entrepreneurs have a “consulting / services” company on the side to make money.

3. We want to work on cutting-edge technologies, but end up picking yesterday’s tech stack since “there’s a lack of talent’.

4. We want to encourage the government to participate, but end up bad-mouthing them at every event (One panel member even suggested they were out to kill startups).

5. We want to have a clean incorporation, but still choose the cheapest service provider to incorporate the company (a lawyer even told me yesterday, he has to turn down 2 companies a week who want his services for free).

6. We want to be first to try a new piece of technology but are unwilling to pay to be an early adopter.

7. We want to encourage more entrepreneurs to participate in an incubator, but keep ridiculous anti-dilution clauses to maximize upside.

I could go on, but you get my point.

Is this an India thing alone? No, I have seen many of the same in Silicon Valley as well.

But at the center of the valley is an entrepreneur with an idea who wants to change something and everyone else is rooting for her.

In India I dont believe we quite know who’s at the center. We make rock stars of our VC’s, large company CEO’s and Government officials.

So if you are part of this ecosystem I would request you to please keep only one question in mind when you have to make choices:

” Will this help more entrepreneurs get excited about starting a company in India?”.

Then please do the right thing and don’t just say the right thing.

Entrepreneurship, India, Sales

An early trend that I am noticing in B2B startups in India

20 Comments

Something interesting is starting to happen among the B2B companies that are starting / getting funded in India. Companies that have a larger price point (> $1000 per month for e.g.) are all either a) moving to the US (company founder, key employee) or b) they are hiring larger inside sales (telesales) teams and teaching them how to sell outside India. There are exceptions (Visual Website Optimizer) but I am seeing more companies moving to US to seek faster adoption in the early stages.

By B2B (Business to Business) I mean companies that sell to other businesses, either small or large. There are enough documented issues selling in India to businesses, some of which include:

1. An extreme focus on cost by Indian businesses, which results in much lower (or non-existent) profit margins.

2. The inability to find good, trained sales professionals

3. The “request” by many “decision makers” to be paid a kickback, which if not paid, results in unpredictable sales cycles

There have been many company founders (OrangeScape, InterviewStreet, Mobstac, etc.), who all started in India, sold to their first few business customers here in India, but have now either moved to the US or are focusing on the US market alone.

Besides the fact that early adopter companies are largely there in the US, many or all of the issues listed above tend to go away bringing mostly issues of upfront investment on sales resources as the primary barrier to a US only distribution strategy.

So what does this mean for new entrepreneurs looking to start B2B ventures in India?

1. Dont. Seriously. Find easier and more fun things to do than sell to Indian businesses (This is a personal opinion alone).

2. If you still insist on doing that, get an awesome sales director / manager from a kick-ass company to head up your sales efforts sooner rather than later and help create a detailed training plan to hire, train and manage new sales professionals.

3. Look to partner and ride an existing distribution channel that exists. Tally has an excellent list of re-sellers / partners who you might want to talk with.

One last thought – Entrepreneurship is hard. Dont make it harder by choosing a distribution strategy that’s even harder.

 

India

What a delayed flight told me about newspaper consumption in India

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BIAL Airport

Last week I was to head out to Coimbatore on a early 8 am flight from Bangalore. Dense fog and over scheduling of takeoffs meant the flight I was supposed to be on was delayed by 2 hours. That’s a recipe for disaster at Bangalore airport. Its relatively small seating space, fairly crowded food court and non existent power plugs, meant I had to resort to crowd-watching.

The airport (besides hotels I think in India) is probably one of the last places that still offers free newspapers. Tons of them actually. There are about 5 newsstands that offer over 15 dailies, tabloids and financial broadsheets for no price at all. Its a fascinating study in “Say one thing, do another” that’s typical of most of us.

There are 3-4 racks in each stand and each rack displays 5 newspapers – Times of India (TOI), Financial Times, Business Standard, Deccan Herald, DNA (Daily News and Analysis) Deccan Chronicle, Hindu, Hindu Business Line, Mint, Financial Chronicle, Mid-Day, Bangalore Mirror and 2 Kannada dailies were on display at the Bangalore airport last week.

The refined, cultured and educated Indian apparently thinks of TOI as a sensational tabloid at best. At least that’s what the digitarie would have you believe.

The average person picks up 2 newspapers (hey, its free, why not? seemed to be the norm). There were a few that picked up 3 or more, but that’s the “long flight to Delhi, individual.

Older men (over 30+), (who were most of the travelers), invariably took a copy of TOI and Mint, which were the first two that each stand ran out off. DNA and Deccan Chronicle were the next that were finished. Finally Financial Times and Business Standard were no more on the stand, followed by several copies of The Hindu and other newspapers.

Surprisingly many folks who came by the stand after all the copies of TOI ran out, preferred to go and pick up a used copy of the Times than pick up any of the others. Eventually (in about 40 minutes) the whole set of newspapers ran out.

I asked the person that does stock them and he claimed the stand gets refreshed every 1 hour in the morning from 630 am to 930 and relatively less frequently after that.

The Times is the #1 English broadsheet in India & Bangalore, so that’s to be expected, but the Mint and the Hindu surprised me. I expected Financial times to disappear faster than Mint for sure and I also thought the Hindu was fairly popular in the South. Turns out Deccan Chronicle is only popular in Hyderabad and the Hindu in Chennai.

Personally I dont get a physical copy of the newspaper daily and most of my reading is done online with Google news. I have customized it to ignore Politics, Entertainment, Health.

What do you read in the morning daily?